In today’s constrained fiscal environment, public-private partnerships (P3s) are becoming an increasingly important option for financing and implementing critical improvements to US surface transportation infrastructure. Design, Build, Finance, Operate, Maintain (DBFOM) and Design, Build, Finance (DBF) models can afford solutions to the financing challenges by attracting private equity investment; improving project delivery, operations and asset management; realizing construction and operational cost savings; and aligning risks and rewards. As interest in P3s grows, US transportation agencies and stakeholders evaluating the potential benefits of P3s have raised issues relating to the role of private equity in these transactions.
The objective of this synthesis project is to bridge the knowledge gap on the role of equity in surface transportation P3 projects and to document current practices relating to private equity investments in small-scale and large-scale transportation infrastructure projects.
Information to be gathered will include, but not be limited to:
œ How many state DOTs have used the P3 delivery model;
œ How many P3 projects have come to financial close;
œ How many P3 projects have been constructed and are operational;
• How state DOTs determine that a P3 model will provide the best value, as compared to conventional delivery models (e.g. cost benefit analysis, value for money study, procurement);
• Common issues and questions that affect the role of private financing;
• What rate of return has been targeted for different types of P3s (e.g. monetization of existing toll facility, new toll project, new availability payment project) and different types of projects (e.g. toll, managed lanes, transit, smaller scale projects, etc.);
• The mechanisms that state DOTs can use to ensure there is no windfall for the private sector (e.g. revenue sharing, encouraging competition, etc.);
• How the role and the amount of private equity have differed across projects and P3 delivery models;
• How the targeted equity returns for a given type of project vary by type of investor (e.g. developers, pension funds, institutional investors, etc.);How has private equity been treated as an element of P3 bidding and in concession contracts; has the provision of equity and its rate of return been an explicit criterion for evaluating P3 bids and awarding P3 concessions?
• What key issues are state DOTs facing with regard to equity investment (pros and cons)? What are some options for dealing with the negatives?
Information will be gathered through a literature review and interviews with state DOTs that have used the P3 delivery model. The report will define knowledge gaps and future research needs.
· Published reports from national and subnational agencies in Canada and the United States
· U.S. Department of Treasury reports
· FHWA P3 publications including the December 2016 “Guidebook on Financing of Highway Public-Private Partnership Projects”
· Published reports by and interviews with US and Canadian public owners who have closed P3 concession financings that include equity investment
· State P3 authorizing legislation
· Morteza Farajian “Structured Project Finance”
First Panel: October 19, 2017, Washington, DC
Teleconference with Consultant: November 17, 2017, 4:00 p.m., ET
Second Panel: June 28, 2018, Irvine, CA
Leon Corbett, Florida DOT
Jill Eicher, Bipartisan Policy Center
Morteza Farajian, Virginia DOT
Nicholas J. Farber, Colorado DOT
Eric K. Kahlig, Ohio DOT
Nizar Melehani, California DOT
David Mohler, Massachusetts DOT
Suzanne H. Sale
Benjamin Hawkinson, Federal Highway Administration
Katherine A. Petros, Federal Highway Administration
William B. Anderson, Transportation Research Board