• Key needs are transparency, expertise in process and transactions, and setting controls over toll rates and/or windfall profits.
• Competition provisions: most toll roads-public or private-need some degree of protection from unlimited competition in order to be able to sell their bonds, but this needs to be structured as narrowly as possible to maintain maximum public flexibility.
• Termination for convenience:
O Important to distinguish between termination due to performance issues (addressed in Termination for Cause provisions) and the objective of preventing windfall profits.
o When the underlying aim is to prevent windfall profits, stringent buyback provisions add an additional level of risk to a private party. While this can be calculated, the price tag may be so high as to risk making Texas unattractive compared to other states. A better approach is revenue-sharing to align incentives, so both parties gain from unexpected windfalls.
• Upfront payments may not be in the public's interest
o Ever-present temptation for officials to grab a big headline generating number today at the expense of long-term value
o High up-front payments can over-leverage a project and set it up for failure or renegotiation later.
o Revenue sharing mitigates these problems and is a more financially sound option