The USDOT is the federal agency with the most impact on P3s, with an annual budget of $74 billion. It controls vast amounts of funding while reigning over regulatory controls in areas which impact P3s. The USDOT is th closest thing states and territories have to a ministry of infrastructure or an infrastructure bank-two critical institutions in countries with successful P3 cultures.
The USDOT is a rich source of P3 projects. The large agency administers federally funded surface transportation projects (i.e. highways, bridges, tunnels, rail lines, transit systems), as well as seaports, airports and pipelines. Inside USDOT, the Federal Highway Administration (FHWA), a 3,500-person division, directly oversees technical and financial assistance in the construction, improvement and maintenance of roads and bridges, the infrastructure projects most associated with existing P3 projects. FHWA helps develop the emerging P3 market by dedicating grants, personnel and know-how, while emphasizing P3s as an alternative delivery mechanism for transportation infrastructure.
Administrator Victor Mendez, the White House appointed head of the FHWA, underscores the sophistication the private sector brings to the advanced management of risk in a letter to USDOT's Office of Inspector General (OIG). Focusing on the impact risk has on P3s, Mendez addressed an OIG report, indicating that the report underestimated the impact P3s are having on infrastructure development: "A key and often decisive element not addressed by the OIG report involves the valuation of risk. Absent these specific valuations, it is impossible to draw any definitive conclusions regarding the comparative financial merits of a P3 option."
An often heard complaint from private firms wanting to further P3s as a viable delivery mechanism is the unrealistic allotment of risk the government places on private partners. Mendez sees the best way of facilitating P3s is in seeking a fair balance between public and private forces. Mendez addressed this, writing: "A comprehensive analysis of P3 financial viability must evaluate risk versus reward. Starting with the premise that the private sector will have a higher cost of capital, the public sponsor must place a dollar value on the risks a private partner would be willing to assume."13 |
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The FHWA's current and future roles in P3s are critical. One of the Administration's many responsibilities is the oversight of the 47,000 miles of the Dwight D. Eisenhower System of Interstate and Defense Highways. The red, white and blue shielded system makes up less than 2% of the entire U.S. road network but handles approximately 25% of the nation's traffic.14 Many P3 projects stem from it in the form of connector roads or managed High Occupancy Toll (HOT) lanes, one of the strongest growth areas for P3s.
Administered by the FHWA, HOT lanes are emerging as the answer to reducing gridlock in urban areas, where 45% of the roadways are congested. Commuters tend to support these toll lanes as they have been successfully relieving bottlenecks along the Interstate System's traffic- clogged corridors.15
Since 2006, the entire Indiana Toll Road, a 150-plus mile section of I-80 between Illinois and Ohio, is being managed through a public-private partnership. Still, concessionaires have unsuccessfully attempted to negotiate long-term leases of the New Jersey Turnpike, the Pennsylvania Turnpikes and Alligator Alley in Florida. Political opposition was too strong. But building upon the success of the Indiana Toll Road project, it is possible that leases on existing toll roads and the building of new ones-like the Ohio Turnpike-could return. |
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Tolling the vast stretches of the "free" Interstate System holds enormous potential for future P3 projects. Each successive federal transportation bill has opened the door wider to the possibility. Today, the FHWA's Interstate System Reconstruction and Rehabilitation Pilot Program has filled the three slots available for the public experiment. These include North Carolina's I-95, Virginia's I-95 and Missouri's I-70.16
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13 Administrator Victor M. Mendez's memorandum to Calvin L. Scovel III Inspector General, titled, "Response to the Office of Inspector General's Report titled, "Financial Analysis of Transportation-related public-private partnerships" July 21, 2011
14 Federal Highway Administration, FAQs, http://www.fhwa.dot.gov/interstate/faq.htm#question19, accessed 29 March 2013.
15 Federal Highway Administration publication, "Hot Lanes, Cool Facts," http://ops.fhwa.dot.gov/publications/fhwahop12031/fhwahop12027/fhwahop12027.pdf, accessed 29 March 2013.
16 http://www.fhwa.dot.gov/ipd/revenue/road_pricing/tolling_pricing/interstate_rr.htm