This section presents the Commission's recommendations on private-sector financial participation in surface transportation infrastructure investment. The Commission recognizes the potential positive role that private-sector participation can play. But it also cautions that this should not be seen as a panacea for the nation's transportation funding deficit. The ultimate goal of federal policy in this area, therefore, should be to foster a balanced approach that facilitates partnerships with the private sector, subject to appropriate protections.
Specifically, federal policy should:
• Encourage private-sector investment where it can play a valuable role in providing capital, accelerating delivery, and supporting user fee-based funding approaches and tax-based availability payment structures to help meet the country's capacity needs (in particular urban congestion challenges)
• Ensure that appropriate governmental controls are in place to protect the public interest in all respects; federal policy in this area should recognize the respective purviews of federal and state governments and preserve and support the ability of state decision makers to impose appropriate restrictions on these arrangements
The Commission recognizes that although there is a broad range of potential opportunities for private-sector participation in surface transportation project development, financing, and operation, the overall impact on the national funding challenge is limited. It also recognizes that discussions of the appropriate mix of incentives and controls can become quite muddied when all forms are considered as one monolithic approach. The Commission therefore recommends making clear distinctions among applications when considering policy proposals.
In general, there are two distinct categories of private-sector participation (note that this does not reflect the full range of private-sector involvement in delivering and operating transportation assets but instead focuses on the aspect of direct financial investment in facilities):
• Concession arrangements to develop new transportation assets or significantly expand the capacity of existing assets, commonly referred to as "greenfield" projects
• Long-term leases of existing tolled or non-tolled highway facilities, public transportation assets, or other existing surface transportation facilities, often termed "asset monetizations" or "brownfield" projects (within this category, there may be instances where it is appropriate to consider existing tolled facilities and existing non-tolled facilities as distinct subcategories for the purposes of establishing appropriate controls)
II-11. Congress should adopt a narrow set of carefully targeted parameters for private-sector financial participation in the development of new capacity or the leasing of existing capacity on "federal / national system" facilities (however Congress chooses to define such a system)-regardless of whether or not federal funds are used.
The Commission believes federal regulation of public-private partnerships should be limited in scope, in order to protect essential federal interests, and that primary oversight responsibility should reside with the states. Public-private partnerships generally occur at the state (or local) level, and many state governments already have experience with mitigating the potential concerns in their own states, including dealing with the complex set of state-specific procurement laws. The federal government therefore may wish to focus on specific federal interests and provide the appropriate technical assistance to state and local governments.
To this end, the Commission recommends that federally imposed statutory requirements should maintain or adopt the following narrow set of restrictions on private-sector financial participation:
• Interstate facilities must be designed, constructed, operated, and maintained to ensure Interstate quality performance; for non-Interstate facilities, other federal performance objectives should be met, as appropriate.
• Facilities on the federal system cannot be closed to traffic by the concessionaire except for a narrow set of permissible purposes, including required maintenance, and the state shall be allowed to open tolled facilities for necessary evacuations or other national emergency purposes.
• The following restrictions on the use of proceeds received by the state or local project sponsor should be imposed:
• If a material amount of federal funding is involved in the project either directly or through the provision of credit assistance, use of proceeds received by the state or local project sponsor from long-term concessions or other arrangements should be limited to qualified surface transportation investments (including capital improvements to highways and public transportation).
• If no material federal funds are involved but the facility is part of the federal system, state and local concession proceeds should be required to be used for surface transportation infrastructure purposes defined more broadly (including not only highway and public transportation capital improvements but also other surface transportation purposes that serve to enhance the national network).
• If no material federal funds are involved and the project is not part of the federal system, the federal government should not impose any limitation on the use of proceeds but rather should leave that decision to the state or local government. In defining what constitutes a "material amount of federal funds," Congress may wish to consider a test such as federal investment (including credit support) of at least 10 percent of the capital cost of any new capacity or reconstruction project and/or at least 20 percent of the capital cost of the original facility if such federal investment occurred within the last 30 years).
II-12. Congress should generally support the states' primary role in overseeing private-sector arrangements and, to this end, should encourage the development of appropriate technical assistance and dissemination of best practices information.
The Commission offers its views regarding the issue of government oversight of private sector financial participation in Chapter 7, recognizing that the primary responsibility for such oversight is in the purview of state and local governments. This discussion includes consideration of appropriate standards for public disclosure to ensure transparency, "value for money" type analyses to ensure the best value is achieved, potential limitations on the length of individual concession arrangements to protect the public interest, and other key governmental oversight provisions. Recommendation III-3 specifically relates to the federal government's potential role in supporting the development of "best practices" assistance and guidance on the important issues of transparency and reporting.