Investments of private capital free up existing sources of revenue and debt capacity for investment in other transportation priorities. Furthermore, while it is important to recognize that the private sector has an incentive to invest in profitable facilities, this business-oriented investment model can provide significant benefits for underperforming public facilities.
There are also opportunities in PPP procurements to package multiple projects with different risk and return profiles in one concession. In these transactions, the private sector assumes responsibilities for lower return, higher risk projects in exchange for a concession for higher return, lower risk projects. This model is being employed by Mexico for various toll roads and bridges held by FARAC (Fideicomiso de Apoyo al Rescate de Autopistas Concesionadas), a federal agency created to assume control of several Mexican toll roads in the mid-1990s. FARAC expects to offer concessions for as many as 13 different packages of toll roads and bridges, and each package is expected to group highly desirable with less desirable assets. A concession for the first FARAC package, four toll roads in central Mexico with a total length of 548 kilometers, was awarded to Goldman Sachs Infrastructure Partners and Empresas ICA, S.A., a Mexican construction company, on July 18, 2007.
PPPs can also be effective on "non-profitable" routes where tolls won't cover all of the facility's costs and even on projects that do not generate any revenue. In these situations, private bidders can compete on the basis of the lowest level of subsidy they will need to carry out the project. This approach is widely used in Europe and, as indicated in Section IV, is beginning to be utilized on various projects in the United States. For example, the availability payments that will be used to finance the Missouri Safe & Sound Bridge Improvement Program, the Port of Miami Tunnel, the Oakland Airport Connector, and other projects that are in early stages of procurement, are structured to force the bidders to compete on the lowest level of subsidy that they will accept to design, construct and operate the facility.