Since the 2004 Report, five states that did not previously authorize PPPs for transportation projects enacted authorizing legislation. The legislation passed by two of these states provides fairly broad authorization to use PPPs for roads and other toll facilities while the legislation passed by the other three states only authorizes specific projects or is limited to PPPs that are specifically approved by the legislature.
Mississippi enacted authorizing legislation in April 2007.61 Mississippi's legislation provides a good example of the types of issues that states consider when authorizing PPPs. Like most states with PPP programs, Mississippi did not limit its authorization to Design-Build projects, but extended authorization for private involvement to all major components of project delivery, authorizing concession-based PPPs for design, construction, financing, operation and maintenance of toll roads or toll bridges. To insure that PPP facilities are just as well built and maintained as public facilities, the law requires that any facilities built through PPPs must be built and maintained in accordance with the minimum highway design, construction and maintenance standards established by the contracting government entity for such facilities, and facilities are subject to inspection during the term of the concession. Failure to comply with the required standards may result in termination of the contract. When a contract terminates or expires all of the concessionaire's interests revert to the State and the collection of tolls ceases.
Mississippi's law authorizes the solicitation of proposals for PPPs from the private sector or the acceptance of unsolicited proposals. The procurement process must be competitive and the project must be awarded to the bidder offering the best value to the contracting government entity. To protect the users of the facilities from monopolistic pricing, PPPs are only authorized if other, toll-free transportation options exist and increases in toll rates are subject to government approval after public notice and hearings. The law also indicates that concessionaires may be required to share excess revenue, and the law limits the length of concessions to a maximum of 30 years. Tolls are not permitted on existing roads.
Some of these provisions are more restrictive than similar provisions in other states. For example, in other states the term of the concession may be 50 years or more, toll rates may be increased pursuant to a negotiated schedule, and PPPs may be allowed in areas where there are no competing transportation facilities. Nevertheless, as is evident from the recent legislative amendments passed in Texas and Florida (see below), determining best practices is an evolving process and is dependent on the circumstances of particular states. A state like Mississippi, which has never had toll roads, is likely to take a different approach than states like Texas and Florida which have more extensive experience with toll roads.
Utah enacted legislation in March 2006 authorizing the State to enter into PPP road projects.62 Like Mississippi, Utah's legislation provides broad authorization for private concessionaires to design, build, finance, maintain and operate toll roads and to impose and collect tolls pursuant to concession agreements. Utah may solicit proposals and accept unsolicited proposals. Utah's legislation relies on the Utah Department of Transportation ("UDOT") to negotiate several important provisions for each facility, including the private sector's profit and any revenue sharing arrangements, toll rates or other user fees, safety and policing standards, and other applicable engineering, construction, operation and maintenance standards. Concession agreements must give UDOT a right to repurchase the facility from the concessionaire at an agreed price. If the agreement is terminated, the facility must be returned to UDOT in satisfactory condition. The legislation requires UDOT to engage outside consultants and counsel to provide guidance, assist with the evaluation of risks and benefits, and help negotiate the terms of the concession agreement.
Before any concession agreement is executed (or amended or modified) it must be approved by the Utah Transportation Commission, an independent advisory committee appointed by the Governor. Also, UDOT may only toll an existing State highway with the approval of the Transportation Commission and the State legislature. To develop HOT lanes on existing State highways or to develop toll lanes on new State highways or on any added capacity, UDOT needs the approval of the Transportation Commission, but not the State legislature.
Neither Utah nor Mississippi identified any particular projects in their legislation as projects that would be developed as PPPs. Other states, rather than passing broad legislation authorizing PPPs for transportation projects generally, have passed limited legislation authorizing only specific projects to be developed or operated as PPPs.
Indiana Governor Mitch Daniels obtained statutory authority in 2006 to enter into a long-term concession for the operation and maintenance of the Indiana Toll Road after receiving binding proposals from private sector bidders. The enabling legislation also included authorization for the Indiana Department of Transportation to enter into a PPP for the construction, financing, operation and maintenance of an extension of I-69 from Indianapolis to Evansville, Indiana (the I-69 extension project has not been developed as a PPP).63 The legislation did not include authorization for any other PPP projects. In late 2006/early 2007, Governor Daniels tried to get legislation authorizing two more PPP projects, the Indiana Commerce Connector and the Illiana Expressway, but was unsuccessful. The Indiana Commerce Connector was a proposed 75-mile bypass south and east of Indianapolis and the Illiana Expressway would connect Indiana with Illinois south of Chicago.
Missouri is taking the same approach, authorizing PPPs on a project by project basis. Missouri Governor Matt Blunt signed legislation on September 5, 2007 enabling the Missouri Department of Transportation to enter into a PPP for the Safe & Sound Bridge Improvement Program.64 While not directly authorizing the bridge program, the legislation authorized the Missouri Highways and Transportation Commission to modify bonding requirements for "design-build-finance-maintain" PPP projects with a concession period expected to exceed 25 years. The bonding requirements that were modified by this legislation would have prevented the bridge program from moving forward. As noted in Section IV(B), the concessionaire for the bridge program will repair or replace more than 800 bridges in Missouri within five years and maintain these bridges in satisfactory condition for 25 years.
Missouri also passed legislation in 2006 authorizing a PPP for the proposed Mississippi River Bridge connecting St. Louis with Illinois.65 The legislation authorizes the Missouri Department of Transportation ("MoDOT") to solicit proposals or accept unsolicited proposals for the bridge. In February 2007, MoDOT announced that it had received an unsolicited proposal from Zachry American Infrastructure and ACS Infrastructure Development to design, build, finance, operate and maintain the bridge and to collect variable tolls, which would be higher for trucks and during peak congestion periods.
In March 2008, West Virginia enacted PPP enabling legislation providing authorization for private concessionaires to design, build, finance, maintain and operate toll roads and to impose and collect tolls pursuant to concession agreements.66 Each concessionaire is required to perform its responsibilities in accordance with the engineering standards applicable to other projects operated or maintained by the Division of Highways and its performance is subject to monitoring by the Division of Highways. Concession agreements must specify a reasonable maximum rate of return on the concessionaire's investment and may include a schedule of the initial user fees, if applicable. Increases in user fees must be approved by the Commissioner of the Division of Highways. The authority granted by West Virginia's legislation has certain limits, however. Concession agreements must be entered into prior to June 30, 2013 and concession agreements must be approved by the legislature through the adoption of concurrent resolutions and must be approved by the Governor.
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61 Mississippi Code, Section 65-43-3.
62 Utah Code, Section 72-6-201 (Public-Private Partnerships for Tollways Act).
63 Indiana Code, Sections 8-15, 8-15.5, 8-15.7, 8-23-7-22 through 25.
64 Missouri Code, Section 227.107.
65 Missouri Code, Sections 227.600 through .669 (Missouri Public-Private Partnership Transportation Act).
66 West Virginia Code, Section 17-27-1 through 17-27-18 (Public-Private Transportation Facilities Act).