Facing the funding shortfall and the continuous demand in construction and maintenance of highways in the nation, federal, state, and local governments in the U.S. began to look for alternative highway financing strategies outside the traditional framework of public financing. Public-private partnerships (PPPs) in combination of tolls or congestion pricing have emerged as a popular financing strategy since the 1980s in Europe (Medda et al. 2007), and more recently in the US. The recent concession deals of the Chicago Skyway (99 years, $1.83 billion) and the Indiana Toll Road (75 years, $3.8 billion) escalated the public debate on the appropriateness, efficacy, efficiency, effectiveness, feasibility, fairness, and equity of public-private partnerships in financing highways, which have historically been provided by the public sector without tolls except for the limited number of turnpikes and state highways after the passage of the Federal Aid Highway Act of 1956 to build the interstate highway system.
The conditions of PPP legislation at the Federal or state level determine the feasibility and likelihood of a PPP project. Lawmakers can design legislation to limit the role of the private sector, or place much of the risk of the project upon them. The key to successful legislation is to balance the rewards and risks equally. The extent of privatization of a highway is determined via legislation in regards to how comfortable state lawmakers and taxpayers are with the concept. This report will discuss the wide range of levels of enthusiasm for PPP projects, as some legislation allows only for a fixed number of trial projects, while other legislation, particularly in Europe, allows for more complex design-build-finance-operate projects. The legislation must establish from the beginning which party will be responsible for what, how each party will be protected against risk, competition issues and environmental concern. Legislation may also provide guidelines for the type of contract to be used in the project.
Our first report on public-private partnerships-Are Public-Private Partnerships a Good Choice for U.S. Highways?-identified several important conditions that affect PPP agreements in other studies (Bult-Spiering and Dewulf 2006; Doi 2002; Lockwood, Verma, and Schneider 2000) (Table 2-1). It is still too early to evaluate many PPP projects in the US and other countries for the two main reasons. First, many of the projects have been recently initiated and have not yet reached their agreement ending dates. Second, it is likely that the conditions that lead to a successful project vary depending on a number of factors, including the economic climate, legislative barriers, policy-makers' willingness to undertake PPPs, and the prevailing cultural attitudes toward private involvement in public sector affairs (Apogee Research 1995; Mackie and Smith 2005; Sawyer 2005; Ward and Sussman 2006).
In this paper, we review past U.S. legislation to promote and/or limit PPPs on transportation projects in order to evaluate their relationship with the recent planning and implementation of highway projects through PPPs. We also carefully examine existing state legislation that address issues on economics, public finance, and governance as well as technical details of PPPs in order to provide an overview of the status of legislative settings pertinent to PPPs in the US. In the next section, we review the significance of legislative settings in facilitating PPPs. In section three, we discuss current federal legislation for PPPs in the United States, and how this legislation shapes PPP projects. In the fourth section, we define different types of PPP legislation and examine what types, allowances and limitations are in place by state. We will look at legislation governing all stages of a PPP project, from project selection through tolling management.