In June 2012, several years past the expiration of the last federal surface transportation legislation (SAFETEA-LU), Congress enacted its successor, a two-year bill called Moving Ahead for America in the 21st Century (MAP-21). For the first time since 1956, the federal program did not provide a significant increase in funding. In fact, due to ongoing increases in vehicle fuel economy (miles per gallon) and slight decreases in vehicle miles of travel (VMT), revenue from highway user taxes was insufficient to keep highway and transit funding at previous levels. When the House was unwilling to pass a proposed bill that would limit spending to the likely amount yielded by those fuel taxes, Congress cobbled together enough general-fund subsidy to keep spending levels from declining.
MAP-21 streamlined and consolidated a number of federal highway programs, included modest environmental streamlining, and made some advances for tolling and public-private partnerships, thereby giving state departments of transportation (DOTs) some additional tools to cope with flat (rather than increased) federal grants.
II. Tolling Changes
Ever since the ISTEA legislation of 1991, the former outright ban on tolling federal-aid highways has been chipped away. Prior to MAP-21, tolling could be used on such highways except on the Interstate system, but only if the state DOT negotiated a tolling agreement with the U.S. Department of Transportation (USDOT). In addition, four toll pilot programs allowed limited use of tolling to test variable pricing (the Value Pricing Pilot program-15 states), to develop new express toll lanes (the Express Lanes Demonstration program-up to 15 projects), to build new Interstate routes (up to three projects in three different states), and to reconstruct aging Interstates (also three projects in three different states). In addition, High-Occupancy Vehicle (HOV) lanes could be converted to High-Occupancy Toll (HOT) lanes on Interstates and any other expressways.
MAP-21 mainstreamed the right of states to toll, by no longer requiring a federal tolling agreement. Accordingly, it abolished three of the four pilot programs going forward, retaining only the Value Pricing program. Tolling on Interstates is permitted as long as the number of non-tolled general purpose lanes is not reduced. Another new provision appears to grant greater ability to convert HOV lanes to express toll lanes, but conflicts with an existing, more restrictive provision of the law. Instead of expanding the Interstate reconstruction toll pilot program from the three current slots (held by Missouri, North Carolina and Virginia) as urged by several coalitions and many state DOTs, states are left with the difficult alternative of reconstructing a worn-out Interstate with tolls only on new lanes. That would limit what could be financed via toll revenue to only a fraction of the cost of reconstruction. New or replacement bridges and tunnels on Interstates can be financed with tolls on all lanes. Tolling advocates hope to try again when MAP-21 expires, with a new version of the bipartisan Carper/Kirk/Warner Senate amendment that would have authorized all states to use toll finance to reconstruct worn-out Interstates.
III. Public-Private Partnerships (PPPs)
Advocates of public-private partnerships won two out of three battles on this subject, defeating a string of anti-PPP amendments in the Senate and gaining a large expansion of the Transportation Infrastructure Finance and Innovation Act (TIFIA) subordinated loan program, but failing to gain an expansion of tax-exempt private activity bond (PAB) authorization.
Soon-to-retire Sen. Jeff Bingaman (D, NM) got several anti-P3 amendments into Senate bill S.1813, which passed in March. Two would have reduced the attractiveness to investors of leasing existing toll roads, by forbidding them (uniquely, compared with all other businesses) from using accelerated depreciation and prohibiting the use of PABs to finance such acquisitions. The third amendment aimed to reduce states’ gains from such leases by subtracting the miles of privatized highways from a state’s total in the formula for allocating federal highway money. Thanks to an all-out effort by the private sector, the American Road & Transportation Builders Association (ARTBA), and many state DOTs, these measures were deleted by the House-Senate conference that yielded MAP-21.
The big win for PPPs in MAP-21 was a large expansion of the TIFIA program, which provides subordinated loans for surface transportation projects with dedicated revenue streams. Budget authority for TIFIA was increased from the former level of $122 million per year to $750 million in FY 2013 and $1 billion in FY 2014. Since budget authority covers only the expected cost of the loan program to the government, loan amounts are typically ten times the budget authority-hence, TIFIA can make loans totaling $10 billion in FY 2014. The maximum size of a TIFIA loan was increased from 33% of project budget to 49%, but indications are that most loans will be at 33% or less, to aid the maximum number of projects. (At 49%, the program could support projects worth $20 billion in 2014, compared with projects worth $30 billion at 33%.) MAP-21 deletes the non-statutory “livability” and “sustainability” criteria that had been used as part of the selection process in recent years, and allows project proponents to submit requests at any time. By early December 2012, new loan requests under MAP-21 had been submitted to the TIFIA office at the Federal Highway Administration (FHWA) to help finance eight PPP projects worth $7 billion. Loans requested under the previous legislation are being processed for five PPP projects worth $4 billion. (Thirty of the projects seeking TIFIA loans are not PPPs.)
TIFIA provides subordinated debt and requires that a project’s primary financing receive an investment-grade rating. In SAFETEA-LU, Congress authorized up to $15 billion in tax-exempt Private Activity Bonds (PABs) for such purposes. Unfortunately, MAP-21 did not expand this amount, which is likely to be used up during the measure’s two-year duration. It also did not exempt interest on such PABs from the Alternative Minimum Tax (AMT), as airport and highway groups had urged. Hence, when no more PABs are available for PPP projects, taxable debt will have to be used, increasing those projects’ cost of capital and the user fees or state appropriations used to pay off the debt.
Table 1: U.S. Surface Transportation Scorecard (1990-2012)
|Contract Amount ($ millions)||Project Name||Owner||Private Risk||Notice to Proceed||Sponsors (DB Component)|
|3,850||Indiana Toll Road, IN*||Indiana Finance Authority||75-year lease||June-06||CintraConcessions/Macquarie|
|2,800||I-635 LBJ Managed Lanes, TX*||Texas DOT||DBFOM (toll)||Jun-10||Cintra/Meridiam ($2.1 bn Ferrovial Agroman)|
|2,100||Midtown Tunnel, VA||Virginia DOT||DBFOM (toll)||Apr-12||Skanska/Maquarie ($1.47 bn Skanska/Kiewi/Weeks)|
|2,100||Denver Eagle P3 Rail, CO*||Denver RTD||DBFOM (ap)||Aug-10||Fluor/Laing/Uberior ($1.27 bn Fluor/BBRI)|
|2,047||North Tarrant Express, TX*||Texas DOT||DBFOM (toll)||Dec-09||Cintra/Meridiam ($1.46 bn Ferrovial)|
|1,998||I-495 HOT Lanes, VA*||Virginia DOT||DBFOM (toll)||Jul-08||Transurban/Fluor ($1.4 bn Fluor/Lane)|
|1,830||Chicago Skyway, IL*||City of Chicago||99-yr lease||Jan-05||Cintra Concessions/Macquarie|
|1,814||I-595 Managed Lanes, FL*||Florida DOT||DBFOM (ap)||Feb-09||ACS Infrast. ($1.2 bn Dragados/EarthTech)|
|1,674||Hudson-Bergen Lt. Rail, NJ||NJ Transit||DB/Equip+O&M||Oct-96||Wash. Group/Itochu ($1.15 bn Perini/Slattery)|
|1,358||SH 130 Segments 5-6, TX*||Texas DOT||DBFOM (toll)||Mar-08||Cintra/Zachary|
|1,080||PR-22, PR||PR Highways||40-yr lease||Sep-11||Albertis/CS Global Infrastructure Partners II|
|1,040||Grand Parkway, TX||Texas DOT||DBOM||Oct-12||Zachry-Odebrecht|
|998||RiverLINE Light Rail, NJ||NJ Transit||DB/Equip+O&M||Jun-99||Bechtel/Conti/Foster/Bombardier|
|980||Jamaican-JFK Airtrain, NY||Port Auth. NY/NJ||DB/Equip+O&M||Sep-99||Skanska/Bombardier ($980m Slattery/Perini)|
|940||I-95 Express HOT Lanes, VA||Virginia DOT||DBFOM (toll)||Aug-12||Transurban/Flour ($618m Fluor/Lane|
|914||Port of Miami Tunnel, FL*||Florida DOT||DBFOM (ap)||Oct-09||Meridiam ($607m Boygues/Jacobs)|
|773||SR 125 So. + Connectors, CA*||San Diego Expressway L.P.||DBFOM (toll)||May-03||Macquarie ($653m Washington/Fluor)|
|689||JF Terminal 4, NY*||Port Auth. NY/NJ||DBFOM||May-97||Schipol/LCOR ($689m Fluor/Morse Diesel)|
|611||Pocahontas Parkway Lease, VA*||Virginia DOT||99-year lease||Jun-06||Transurban ($45m Fluor/WGI)|
|603||Northwest Parkway Lease, CO*||Northwest Parkway Authority||99-year lease||May-07||BRISA/CCR|
|431||IROX I-75, FL||Florida DOT||DBF||Jun-07||Anderson Columbia Co., and Ajax Paving|
|390||I-4 Conector||Florida DOT||BF||Dec-09||PCL/Archer Western + Atkins|
|385||Route 3 North, MA||Mass. Highways||DBF/Maint.||Aug-00||Modern Construction/Roy Jorgenson|
|365||Presidio Parkway, CA||CalTrans||DBFOM (ap)||Oct-12||ACS/Meridiam ($245m Flatiron/Kiewit)|
|350||Dallas Greenway Toll Road, VA*||TRIP II||DBFOM (toll)||Sep-93||TRIP II ($150 m Brown & Root)|
|343||Las Vegas Monrail, NV||L.V. Monorail LLC||DB/Equip+O&M||Oct-00||Bombardier/Granite|
|295||US 550, NM||New Mexico SH&TD||D/CM/Warranty||Sep-98||Koch Materials ($295m CH2M Hill/Flatiron)|
|236||Rt. 288, VA||Virginia DOT||DB/Warranty||Dec-00||Koch/APAC/CH2M Hill|
|211||I-95 Widening, FL||Florida DOT||DBF||Dec-07||Community Asphalt|
|177||Palmetto Exp. Widening, FL||Florida DOT||DBF||Aug-08||Condotte-DeMoya j.v.|
|140||I-485 Charlotte Loop, NC||North Carolina DOT||DBF||Jun-10||Blythe Construction/Wilbur Smith Assoc.|
|130||CPTC 91 Express Lanes, CA*||CalTrans||DBFOM (toll)||Jul-93||Level 3/Cofiroute/Granite (sold 01-03)|
|121||95 Express Lanes||Florida DOT||DBF||Jan-08||FCC/MCM|
|111||US-1 Improvements, FL||Florida DOT||DBF||Nov-07||Community Asphalt|
|100||So. Norfolk Jordan Bridge*||Cheseapeake VA||BOO||Jan-11||Figg/American Infra. ($75m Lane Const./Figg)|
|90||Loop 101 HOT lanes||Arizona DOT||DBq||Jan-11||Kiewit/Sundit +Parsons/URS|
|85||Camino Colombia Bypass, TX*||Texas DOT||DBFOM (toll)||Jun-99||Granite/Sundit|
|82||Hathaway Bridge, FL||Florida DOT||DB/Warranty||Jun-00||Granite|
Source: Public Works Financing, November 2012
Notes: Project cost for leased assets represents discounted present value of excess cash flow.
* = developer financed