Among all the different PPP project delivery structures discussed in this digest, the long-term leases of the Chicago Skyway and Indiana Toll Road have received the most attention from the general public. Often criticized as the "privatization" of a public asset, the Chicago and Indiana deals involved the long-term lease of an existing road to a private concessionaire for a specified period of time.16 Under such a lease arrangement, the concessionaire agrees to pay an up-front, lump-sum fee17 to the public agency in exchange for the right to collect revenues generated by the facility over the life of the contract (typically 25 to 99 years). The concessionaire agrees to operate and maintain the facility during the term of the lease and may also agree to implement technological innovations (such as electronic tolling) or other capital improvements to the facility. The potential benefits of a long-term lease include the public agency's ability to obtain a significant up-front payment; the transfer of the political risk of increasing user fees to the private sector; the allocation of most project, financial, operational, and other risks to the private concessionaire; and the ability to implement private-sector efficiencies and technology in operations and maintenance for the benefit of the road users. Many of these potential benefits are also the aspects of such arrangements that have been criticized for failing to protect the public interest, as discussed elsewhere in this report.
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16 See Susan Chandler, You Pay a Lot More: What Happens When the City Leases Public Assets to Private Investors, Chicago Tribune, Sept. 7, 2008, available at http://www.chicagotribune.com/business/chi-sun-infrastructure-sale-chicsep07,0,6786305.story.
17 Compensation could also be in the form of revenue sharing.