In terms of their revenue-generating abilities, infrastructure projects can be divided into three types. The first are those that are not expected to generate any revenue from the users. Examples are public schools or military barracks. The second type may generate some user revenue, but it is not sufficient to cover all the costs and ongoing public subsidies are anticipated. Most mass transit operations are an example of this, with fares often more than matched by subsidies. The third are those that are expected to be self-financing due to adequate user charges. Toll roads and bridges are the most common example, and many water systems also fall in this category.
In the United States, there is a tendency to think that PPPs can work only with projects that fall in the third, self-financing category. These projects are attractive because they can often be segregated from a larger network, and the revenue stream can be collected and managed by a distinct operating entity. However, they are not the only types of projects suitable for a PPP. Subsidized projects can be built and maintained through a PPP using the mechanism of shadow tolls or availability payments. These models are used extensively in the United Kingdom to construct or renovate and maintain roads and buildings.
Florida is also pursuing the availability payment model for several of its projects, including the construction of the Miami Port Tunnel and enhancements, including the construction of express tolled lanes, on the I-595 Corridor in Broward County. The Florida Department of Transportation (FDOT) will set and collect the tolls, and will make availability payments to the private operator based on the lanes being open to traffic and meeting the operating and maintenance standards to be specified in the contract.36
In New York, the most promising opportunities for PPPs are likely to be facilities that are not associated with large user fees that make them self-financing; rather, attention should be given to opportunities to achieve better long-term maintenance of fully or heavily subsidized facilities using arrangements that involve availability payments.
___________________________________________________________________________
36 TollRoadNews. "FL/I-595 gets competing availability concession proposals for $1.5b upgrade REVISED." 8 September 2008. Available online at http://www.tollroadsnews.com/node/3734.