4.3  Availability Payment Concessions

As shown in Table 4.2, a total of nine availability payment P3 concessions have reached financial close in the U.S. The availability payment approach was pioneered in the state of Florida in the mid-2000s with the Port of Miami Tunnel. Due to the complexity and high level of risk associated with the tunnel, the Florida Department of Transportation (FDOT) was keen on procuring the project on a P3 basis. However, it would not be politically feasible to toll the crossing. As a result, FDOT made the decision to use its own funding to make annual payments to a private partner that would design, build, finance, operate and maintain the project and have the private partner raise the necessary financing by leveraging the state's availability payments.

The availability payment DBFOM P3 approach has proven popular with private sector developers as it involves considerably less financial risk compared to real toll concessions. As state financial commitments, availability payment financings essentially leverage the faith and credit of state governments. However, there is the added risk associated with state legislatures obligating monies to DOTs in future budget cycles, and the risk involved with funding the availability payments in state DOT budgets. In addition to non-toll projects, public sector sponsors have also used the availability payment approach to procure toll projects that do not generate adequate amounts of revenue to cover their costs, or in cases where the sponsor wants to retain control of toll rates. Project sponsors use traditional federal and state sources to fund availability payments. These can be supplemented with toll proceeds from projects procured on an availability payment basis, or other state and local transportation funding sources.

Five of the nine availability payment P3 projects in the U.S. remain under construction at the time of this writing. The remaining four have been open to service for less than three years. The following sections provide brief histories of these projects followed by a synthesis of the collective experience to date in the U.S. with availability payment concessions.

Table 4-2: Availability Payment Concessions Through December 2016