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Public Private Partnerships
Ryan A. HoffMay 15, 2007
FHWA Northern Borders
Conference
Chicago, IllinoisMay 15, 2007
Indiana Perspective
Our Industry
Capital Intensive
$75 Billion in 2005
Insatiable appetite for $
Often Taken for Granted?
VMT: 100% 1980-2004
Ton-miles Freight: 50% 1990-2003
NAFTA Surface Trade: 80% 1994-2004
US Population: 30% 1980-2004
# Registered Drivers: 39% 1980- 2005
# Vehicles: 55% 1980-2005
Setting the Stage - Nationally
VMT: VMT: 1100%00% 1980-2004 1980-2004
Ton-miles Freight: Ton-miles Freight: 50%50% 1990-2003 1990-2003
NAFTA Surface Trade: NAFTA Surface Trade: 80%80% 1994-2004 1994-2004
US Population: US Population: 30%30% 1980-2004 1980-2004
# Registered Drivers: # Registered Drivers: 39% 1980- 2005 39% 1980- 2005
# Vehicles: # Vehicles: 55% 1980-2005 55% 1980-2005
Setting the Stage - Nationally
Traditional Funding
Motor Fuel Taxation– Department of Treasury:
18.4¢/gal of gasoline 24.4¢/gal of diesel 8.0¢/gal of gasohol
– Department of Revenue: 18.0¢/gal of gasoline 16.0¢/gal of diesel
– Gasoline Range: Georgia low at 7¢ Wisconsin high at 28.5¢
Funding History
US Department of Treasury:– Last increase: 1993.
Indiana Department of Revenue:– Last Increase: 2003.
3.0¢/gal of gasoline but only 1¢ went to Highway Fund
– Before 2003:Last Increase: 1984 1988: 1¢/gal of diesel 1983: 1¢/gal of gasoline
Remedies?
Timely Fuel Tax Increases/Indexing?
Pay by the mile???– GPS– Annual plate registration with true-
up at title transfer
Other fees (ie. Taxes, Permits, Tolls)?
Public Private Partnerships
Public Private Partnerships
A Delivery Model which:
– Allows Private investment in the public sector– Allocates risk and responsibility in new ways– Uses other peoples’ money, other peoples’ equity– Provides opportunities otherwise unavailable
The Common Thread
Flow of Money, andThe Allocation and Assumption of RiskDrives the Relationship…
.. all defined in a long term lease agreement!
Major Risk Elements
$$$
$$$
Risks Removed
$
$
Long
Ter
mO
&M
, E
tc.
Con
stru
ctio
n
RO
W
Env
ironm
enta
lP
erm
ittin
g
Legi
slat
ive
App
rova
l
Con
trol
ling
Age
ncie
s
Pre
limin
ary
Fea
sibi
lity
Tra
ffic
&
Rev
enue
Project Value
Indiana’s Experience
Indiana Toll Road (Asset Lease)– I80/I90 Northern Indiana. 152 Miles from OH to IL.– 75 year term, $3.8B up-front payment to Indiana– Modernized toll rates established prior to closing– Rate escalation limited over term– Concessionaire’s ability to isolate risk
50 years of operating history Limited Construction Risk
– Benefit: Fully funded 10 year transportation plan
Indiana’s Experience
Interstate 69 Indianapolis to Evansville(Once considered as P3, now a freeway)
• NEPA Tier I: non-tolled version issued 2004• Revised to include tolling option
• Advisors engaged to assist in RFP development• Decided to revert to the freeway model• NEPA Law suit filed 10-2-2006• Tier 2 permitting process underway• Construction to begin June 2008• $700M “in the bank”
Indiana’s Experience
Illiana Expressway Joint project with IDOT 70 Mile beltway around
Chicago & NW Indiana Congestion Relief Economic Development Development efforts on portion East of I65 suspended
3/24/07 due to public opposition
Indiana’s Experience
Indiana Commerce Connector 85 mile - partial outer beltway Up to 75,000 vehicles/day Economic development Congestion relief Development efforts
suspended 3/24/07 due to public opposition
What We’ve Learned - Mechanics
Do not underestimate effort required to create a P3 project
The path from point A to point B looks perfectly straight from 30,000 feet
A multi-disciplined approach. Seek help.
Financial decisions trump technical merits
What We’ve Learned – Political
Do not assume authority is forthcoming
Education is key to, but not a guarantee of, success
Project by project approvals difficult to obtain
Project must be a solution to an identifiable problem
Solid project information essential to convince public and decision makers of need and benefits
What We’ve Learned - Public
Respect the Internet. Grass roots resistance mounts quickly.
There is no limit to what the opposition will say in order to support their case.
Supporters are intimidated at large public meetings.
Opponents will offer any and all project alternatives to discredit your proposals.
Elected and local leaders’ support often bends under constituent pressure.
Indiana – Supporting Information
Information = Knowledge = Power
Compile information and project estimates before unveiling your proposal
Research in support of new highways
Prepare to Debate - Never assume the obvious
Interrelationship between economy & highways obvious to industry, but not to motoring public
Indiana – Economic Development
– 2005-2006: IEDC closed on 327 new deals
– Represents $11B of new investment in Indiana
– 37,000 new jobs
– 80% located in counties with Interstate access
– Top 15 projects totaled $5.8B. Communities within 20 mi of Interstate received $5.0B of that investment
Interstates as Economic Catalysts
Counties with Interstate access (51/41):
– 2004 Per capita personal income 12% higher– 85% with PCPI over $30,000 have access– Median household income 10% higher– Assessed property value grew 4X faster– Property value increased 2,000% or more– Sales tax revenue 6x greater growth– Poverty lower– Unemployment lower
Indiana – Growth Projections
By 2025, Central Indiana will add 300 sq. mi. of new urban area
In 20 years, population in Central Indiana will increase by the equivalent of three counties
Traffic has doubled on many of our major highways and Interstates
Public Private Partnerships
Contact:Ryan A. Hoff
Legislative DirectorIndiana Department of Transportation
(317) [email protected]
FHWA Northern Borders
Conference
Chicago, IllinoisMay 15, 2007