Like any undertaking, private concessions can be executed well or badly. The days of state-granted "charters" are, hopefully, over. Competitive bids are needed to assure that full value is captured for the public and to minimize the chances of inside dealing. The history of the Brooklyn Bridge needs to be remembered.
1. Illinois and Missouri Departments of Transportation seek bids from qualified and experienced concessionaires for the project.
2. Set an aggressive timetable for project movement.
3. Hire experienced legal and financial advisors who have a track record of experience and success in managing such a process.
4. Commission a professional traffic and revenue study.
5. Publicize broadly a request for expressions of interest from all qualified and experienced companies, including international companies.
6. Ask qualified candidates to propose by a given date (perhaps 120 days).
7. Select concessionaire based on experience, capability and value offered to the states.
The concession contract is often up to 100 years.
The longer the term the investors can collect tolls, the higher the bids are likely to be, other things being equal. One key factor to note is that a concession term longer than the useful life of the project is required in order for investors to capture the tax value associated with the asset's depreciation.
The toll concessionaire has to describe an equitable and effective way of handling bridge improvements.
There are many ways to control tolls. The most common concession agreements allow increased toll rates on an annual basis in line with inflation. Others provide for toll setting by a state utilities regulatory body. Others have complex formulae, which usually include inflation and various other factors such as productivity. Some contracts are premised under the notion that no toll rate controls are needed since motorists will not be attracted to the road in sufficient numbers if the toll rates are too high, and that market competition is the best price setter.
Most contracts require traffic, revenue and other audited financial accounts to be published annually. Some require the operator's books to be open to inspection. Obviously, any concession contracts involving profit sharing need audited open accounts.