PPP arrangements require revenue sources or rights to support their capital, operating, financing, and transaction expenses and to provide a return on equity investments. The host countries employ a variety of mechanisms to provide such funding: real tolls, shadow tolls, and direct- payment mechanisms. Real tolls are relatively well understood; users pay a fee to use an asset. Shadow tolls and direct-payment mechanisms are less so. Often, shadow tolls are viewed as payments from a public entity to a contractor based on the volume of asset users. In Portugal and Spain, however, a shadow toll is comprised of a service payment, which is linked to traffic volume, and an availability payment, which is linked to the level of service provided. The simple notion of a direct-payment mechanism was presented in the United Kingdom as the fee the public entity pays the contractor. The payment mechanism is comprised of several components, but the availability of service is the principal one.5 Another potential mechanism is ancillary revenues that might be derived from commercial development or land use arrangements along a roadway, such as service stations, restaurants, or utility corridors.
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5 In early PPP arrangements in the United Kingdom, shadow tolls based only on volume of service were commonly used; the United Kingdom has evolved to use payment mechanisms based heavily on availability of service. Hence, this overall approach to payment is often referred to as "availability payment."