Public Private Partnerships

1. Public Private Partnerships Indiana Perspective FHWA Northern Borders Conference Chicago, Illinois May 15, 2007 Ryan A. Hoff May 15, 2007

2. Our Industry • Capital Intensive • $75 Billion in 2005 • Insatiable appetite for $ • Often Taken for Granted?

3. Setting the Stage - Nationally • VMT: 100% 1980-2004 • Ton-miles Freight: 50% 1990-2003 • NAFTA Surface Trade: 80% 1994-2004 • US Population: 30% 1980-2004 • # Registered Drivers:  39% 1980- 2005 • # Vehicles:  55% 1980-2005

4. Setting the Stage - Nationally VMT: 100% 1980-2004 Ton-miles Freight: 50% 1990-2003 NAFTA Surface Trade: 80% 1994-2004 US Population: 30% 1980-2004 # Registered Drivers:  39% 1980- 2005 # Vehicles:  55% 1980-2005 Highway Inventory Increased... only 3%!

5. Traditional Funding • Motor Fuel Taxation • Department of Treasury: • 18.4¢/gal of gasoline • 24.4¢/gal of diesel • 8.0¢/gal of gasohol • Department of Revenue: • 18.0¢/gal of gasoline • 16.0¢/gal of diesel • Gasoline Range: • Georgia low at 7¢ • Wisconsin high at 28.5¢

6. Funding History • US Department of Treasury: • Last increase: 1993. • Indiana Department of Revenue: • Last Increase: 2003. • 3.0¢/gal of gasoline but only 1¢ went to Highway Fund • Before 2003:Last Increase: 1984 • 1988: 1¢/gal of diesel • 1983: 1¢/gal of gasoline

7. Remedies? • Timely Fuel Tax Increases/Indexing? • Pay by the mile??? • GPS • Annual plate registration with true-up at title transfer • Other fees (ie. Taxes, Permits, Tolls)? • Public Private Partnerships

8. Public Private Partnerships • A Delivery Model which: • Allows Private investment in the public sector • Allocates risk and responsibility in new ways • Uses other peoples’ money, other peoples’ equity • Provides opportunities otherwise unavailable

9. The Common Thread Flow of Money, and The Allocation and Assumption of Risk Drives the Relationship… .. all defined in a long term lease agreement!

10. Major Risk Elements $ $ $ $ Project Value $ $ $ $ Controlling Agencies Preliminary Feasibility Legislative Approval Environmental Permitting ROW Construction Long Term O&M, Etc. Traffic & Revenue Risks Removed

11. Indiana’s Experience • Indiana Toll Road (Asset Lease) • I80/I90 Northern Indiana. 152 Miles from OH to IL. • 75 year term, $3.8B up-front payment to Indiana • Modernized toll rates established prior to closing • Rate escalation limited over term • Concessionaire’s ability to isolate risk • 50 years of operating history • Limited Construction Risk • Benefit: Fully funded 10 year transportation plan

12. Indiana’s Experience Interstate 69 Indianapolis to Evansville (Once considered as P3, now a freeway) • NEPA Tier I: non-tolled version issued 2004 • Revised to include tolling option • Advisors engaged to assist in RFP development • Decided to revert to the freeway model • NEPA Law suit filed 10-2-2006 • Tier 2 permitting process underway • Construction to begin June 2008 • $700M “in the bank”

13. Indiana’s Experience • Illiana Expressway • Joint project with IDOT • 70 Mile beltway around Chicago & NW Indiana • Congestion Relief • Economic Development • Development efforts on portion East of I65 suspended 3/24/07 due to public opposition

14. Indiana’s Experience • Indiana Commerce Connector • 85 mile - partial outer beltway • Up to 75,000 vehicles/day • Economic development • Congestion relief • Development efforts suspended 3/24/07 due to public opposition

15. What We’ve Learned - Mechanics • Do not underestimate effort required to create a P3 project • The path from point A to point B looks perfectly straight from 30,000 feet • A multi-disciplined approach. Seek help. • Financial decisions trump technical merits

16. What We’ve Learned – Political • Do not assume authority is forthcoming • Education is key to, but not a guarantee of, success • Project by project approvals difficult to obtain • Project must be a solution to an identifiable problem • Solid project information essential to convince public and decision makers of need and benefits

17. What We’ve Learned - Public • Respect the Internet. Grass roots resistance mounts quickly. • There is no limit to what the opposition will say in order to support their case. • Supporters are intimidated at large public meetings. • Opponents will offer any and all project alternatives to discredit your proposals. • Elected and local leaders’ support often bends under constituent pressure.

18. Indiana – Supporting Information • Information = Knowledge = Power • Compile information and project estimates before unveiling your proposal • Research in support of new highways • Prepare to Debate - Never assume the obvious • Interrelationship between economy & highways obvious to industry, but not to motoring public

19. Indiana – Economic Development • 2005-2006: IEDC closed on 327 new deals • Represents $11B of new investment in Indiana • 37,000 new jobs • 80% located in counties with Interstate access • Top 15 projects totaled $5.8B. Communities within 20 mi of Interstate received $5.0B of that investment

20. Interstates as Economic Catalysts • Counties with Interstate access (51/41): • 2004 Per capita personal income 12% higher • 85% with PCPI over $30,000 have access • Median household income 10% higher • Assessed property value grew 4X faster • Property value increased 2,000% or more • Sales tax revenue 6x greater growth • Poverty lower • Unemployment lower

21. Indiana – Growth Projections • By 2025, Central Indiana will add 300 sq. mi. of new urban area • In 20 years, population in Central Indiana will increase by the equivalent of three counties • Traffic has doubled on many of our major highways and Interstates

22. Public Private Partnerships FHWA Northern Borders Conference Chicago, Illinois May 15, 2007 Contact: Ryan A. Hoff Legislative Director Indiana Department of Transportation (317) 232-5475 rhoff@indot.in.gov