As noted above, this report is designed to focus on the major legal issues of PPPs in the highway sector that arise under federal, state, or local law or as a result of contract negotiations among the parties to a particular transaction. There are a number of significant requirements to the implementation of highway PPPs that are not, strictly speaking, legal issues. These nonlegal issues are not the primary focus of this report but are often equally if not more important to the successful implementation of a highway PPP arrangement.
Many of the most challenging issues to such projects arise out of political and policy concerns. For example, the Indiana Toll Road lease to the Australian and Spanish consortium led by Macquarie and Cintra was strongly opposed by various segments of the Indiana electorate as a result of public concerns about foreign investment in the state's public transportation assets.77 Eventually the state legislature approved the long-term lease arrangement.78 However, the episode demonstrated the importance of getting sufficient political and public support for a proposed PPP transaction involving the long-term lease of highway assets to the private sector. The widespread perception that the public sector is relinquishing "control" of a highway asset when entering into a long-term lease or other extensive contractual agreement with the private sector, even if the private-sector entity is a U.S. company, is one of the greatest obstacles to further implementation of PPPs.
Another impediment to new toll road projects is the widespread view that the public should not have to pay tolls or other user fees to access highways that presently are not tolled. A project sponsor must be able to persuade the relevant constituencies of the anticipated benefits of tolling and pricing. As the Port of Miami project illustrates, tolling may not be appropriate in all circumstances, and alternatives such as shadow tolling or availability payments should be considered. These deliberations about pricing are issues that require substantial public outreach to explain the important role that user fees can play in expanding capacity and reducing congestion.
The State of Virginia is proposing to convert and extend existing HOV lanes on I-395 south of Washington, D.C., to high-occupancy toll (HOT) lanes through a PPP with a private consortium.79 The HOT lanes will be managed through congestion pricing. Opponents of the project are concerned about the level of access fees during peak periods (which, according to some reports, could reach as high as $1 a mile). In addition, there is concern that the HOT lanes (derisively referred to as "Lexus Lanes" based on the perception that only the wealthy will benefit from such arrangements) will negatively impact other current transit alternatives such as the practice of "slugging" a ride on the HOV lanes with a single-occupant vehicle. In addition, there are concerns that the HOV-to-HOT conversion will only worsen congestion on the free lanes and on local roads, thereby eliminating any prior environmental or congestion mitigation benefits from the HOV lanes. These types of public concerns have the ability to derail or stall a proposed PPP unless the project sponsors engage in a frank and open discussion with the public about potential advantages and disadvantages. The recent experience in Texas suggests that less than full disclosure about arrangements with private concessionaires may stir up a groundswell of opposition to such projects.
A state highway or turnpike authority, particularly in states with aging infrastructure and existing toll roads operated by the state, can be a significant source of opposition to a proposed highway PPP project. In Pennsylvania, the Pennsylvania Turnpike Commission (PTC) is staunchly opposed to the lease of the Pennsylvania Turnpike for an up-front multi-billion-dollar payment. The PTC has asserted that it can increase the value and throughput of the highway assets in the state by operating them at a lower cost and generating equal or more revenue than the private sector because it does not have a profit motive.80Moreover, the trucking industry has expressed opposition in principle to the sale or lease of toll roads, bridges, or tunnels to private entities because such transactions often involve the imposition of, or an increase in, direct user fees that must be paid by motor carriers. The American Trucking Associations (ATA) has adopted a formal policy that strongly opposes transactions such as the long-term lease of the Chicago Skyway and Indiana Toll Road.81 The ATA also has published a list of conditions that it believes must be adopted in any such transaction in order to protect the public interest. These conditions include the following:
• Proceeds from any such sale or lease should be used by the government exclusively for investing in tollfree highway facilities.
• The toll rates on "privatized" facilities should not be set at levels that allow the private operator to recover more than the actual cost of constructing, operating, and maintaining the facility plus a reasonable return on investment and debt service.
• Users of such facilities should be provided with a rebate of federal and state fuel taxes.
• The private owner or operator of any such facility should be prohibited from imposing its own restrictions or special fees on vehicle configurations (e.g., oversize/overweight vehicles) and commodities (e.g., hazardous materials).
• A sinking fund should be established to ensure that sufficient revenues are available for continued maintenance and operation of the facility.
• Noncompete clauses that prevent improvements to competing highways should not be included.
• Performance specifications should be adopted that ensure that the facility is operated and maintained adequately, provides a level of safety comparable to similar facilities, and provides for acceptable traffic flows.
• The public-sector participant should be allowed to terminate the sale or lease agreement if it determines that continuation of the arrangement is not in the public interest. In addition, an oversight committee representing all major stakeholders (including the trucking industry) should be established to monitor the operation of the facility and the need for amendment or termination of the arrangement with the private-sector participant. 82
In several respects, political, organizational, and other nonlegal issues such as those expressed by the ATA and other interest groups present challenges to further use of the highway PPP model. It is important to note, however, that these issues sometimes evolve into legal issues that end up being addressed through legislation or in contract negotiations between the public and private sectors. For example, during the debate in the Missouri General Assembly over the legislation authorizing a PPP pilot project for a new Mississippi River Bridge in St. Louis, there was concern about the possibility of giving control of an important public asset to a foreign investor that could be involved in sponsoring terrorism.83 Such fears were prompted in part by the uproar that occurred when Dubai Ports sought to buy certain U.S. port facilities. As a result of the concerns in Missouri, as described more fully below, a special provision was incorporated into the Missouri pilot project legislation to address this risk. This one example illustrates how political concerns may transform into the types of legal issues that are discussed in this report.
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77 See Associated Press article, Foreign Group Taking Over Indiana Toll Road, Apr. 16, 2006, available at http://www.azstarnet.com/news/124820.
78 The agreement can be found at http://www.in.gov/ifa/files/TRVolume_III.pdf.
79 See USDOT 2008 Update, at 200.
80 Id. at 15.
81 See ATA Press Release, American Trucking Associations Opposes Privatization of Nation's Toll Facilities (Oct. 31, 2006), available at http://www.truckline.com(membership required).
82 Id.
83 See Missouri House Bill, SCS HCSB HB 1380-Missouri Public-Private Partnerships Transportation Act, available at http://www.house.missouri.gov/content.aspx?info=/bills061/bilsum/truly/sHB1380T.htm.