ACCESSING PRIVATE CAPITAL
FOR TRANSPORTATION INFRASTRUCTURE
PROJECTS
Transportation
Infrastructure
Finance OVERVIEW AND KEY
Workshop PLANNING FACTORS
Chicago, Illinois
April 29, 2008 David Seltzer, Principal
Capital Investment Needs and Funding
Gap (by Mode)
Annual
Modal “Needs” * $30 B $155 B $15 B $10 B
100%
80%
60%
40%
20%
0%
Transit Highways Airports Freight Rail
private public funding gap
2 * Annual Capex Requirements stated in 2007 $, as estimated by NCHRP, FHWA, ACI & AASHTO.
How Best to Fill the Funding Gap?
Identify New Revenue Streams
Total Monetize Existing Revenues
“Needs” (Leverage)
Either
Reduce Costs…
Funding
Gap
Funding
Resources
…Or Increase
Save on Construction Costs Resources
Accelerate Schedule
3 Reduce Financing Expense
Role of Public Private Partnerships (“P3”)
in Helping to Fill the Investment Gap?
To answer that question, we need to determine:
What do we mean by “P3” and “private capital”?
What underlying revenue stream pays the return to
investors?
What institutional structure should be used?
What are the potential sources of investment capital?
Which financing tools are best suited to the project?
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Potential Advantages of P3
Accelerated Project Completion
Operating Efficiency thru Financial Incentives
Risk Transfer to Private Sector
Innovation/Enhanced Project Management
Access to New Sources of Capital *
* (requires identifying a source of return for investors.)
5
“Private” Investment in Context
Highway Capital Spending 1993-2007
($905 Billion Total)
Tax-Backed
Muni Debt
$140 B (16%)
Concession Financing
(Taxable)
$9 B (1%)
Public Grant Funding
$697 B (77%)
User-Backed Grants &
Muni Debt
$59 B (6%)
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Categorizing P3 Activity to Date
Major Highway PPP Projects 1993-2006*
($26 Billion Total)
Design-Build with
Public Funding
Concession $4.2 B
Project Financing
$7.6 B D-B with
Innovative
Financing /
Operation $4.3 B
Tax-Exempt
Project Financing
$9.8 B
* As of September 2006
Source: Public Works Financing
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P3 approaches have been used for
transportation projects nationwide
Northwest Hiawatha Light Rail Line
Tacoma Narrows
Parkway Denver E-470 Chicago Skyway
Bridge
Lease
I-15 Reconstruction CREATE
Indiana Toll Road
Lease Jamaica
Reno Rail JFK Airtrain
Corridor
Hudson Bergen
-
Light Rail Line
Las Vegas
Monorail Camden Trenton
Light Rail Line
Alameda Corridor
Dulles
Foothill Eastern Greenway
Toll Road
Pocahontas
Parkway
San Joaquin Hills SR 125
Toll Road Toll Road
Southern Connector
AZ-17
NM 44 (US 550)
Project Location
Intermodal Projects in Green Central Texas Osceola Parkway
-
Trans Texas Turnpike
Highway Projects in Blue Corridor
Miami Intermodal
Transit Projects in Red Center
8 Selected transactions; Source: Public Works Financing
Key Project Finance Planning Factors
Identify the Revenue Stream
(Sources of Repayment or Return)
Select the Determine
Transportation
Best Institutional
Infrastructure
Financing Projects Structure
Tools
Assess Capital Sources
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1. Identify the Revenue Streams
“Private” Sources— Public Sources—
User Fees Tax & Grant Supported
Federal Funds
--General Appropriations
Direct Passenger Charges
--Custom Fees
-- Tolls
General State
-- Fares
Appropriations
Broad-Based Taxes
-- Sales Taxes
Direct Goods Charges
-- Customs Charges
-- Throughput Charges
-- Gate Fees Broad-Based User Fees
-- Motor Fuels
-- Motor Vehicles
Corporate Pledges Indirect/ Value Capture
-- Special Assessments
-- Development Impact Fees
Tax Credits / Depreciation
10 Benefits
2. Determine Optimal Institutional Structure
Based on the Bundle of Services to be Provided
D-B with Governmental Private
Traditional Innovative Tax-Exempt Concession
Project Governmental D-B with Financing or Project Project
Activity Delivery Public Funding Operation Financing Financing
Delivery Public Private Private Private Private
Public or Public or
Operation Public Public Private
Private Private
Public or
Financing Public Public Public Private
Private
Ownership Public Public Public Public Private
Examples Utah I-15; Route 3 (MA); TCA Toll Roads Dulles Greenway
Conway Bypass US 550 (NM) (CA); (VA);
(SC) Denver E-470 Chicago Skyway
Increasingly Public Increasingly Private
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3. Assess Potential Sources of Investment Capital
Private Sector Public Sector
Capital Sources Capital Sources
Strategic Equity
Tax-Oriented Equity Governmental Equity
Equity Grants & “Equity”
Financial Equity Contributed Capital
Vendor Financing Grant Funded Loans
--State Infrastructure Banks
--Section 129 Loans
Private Placements
(Banks & Lessors) State/City Funded Loans
Debt Debt
--State Revolving Funds
Public Capital Markets
–Tax-Exempt
--Taxable
Federal Credit
--TIFIA / RRIF
--Tax Credit (?)
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4. Select Appropriate Financing Mechanism
Transport
Project
Does the Project have its own Revenue Stream?
Government
Yes No Grants
User Value General Indirect
Charges Capture Taxes Fees
Is the Revenue Stream from Fees or Taxes “Bankable”?
Yes No
Private
TIFIA SIB Tax Exempt Tax Credit Pay-As-You-Go
13 Support Assistance Govt Bonds
Activity
Bonds
Financing
Issues to Consider During the Workshop
P3 encompasses a wide range of private participation in project
delivery, operation, ownership and financing.
P3 does not generate resources in and of itself;
it requires an underlying revenue stream of some sort –
user charges, federal grants, state/local taxes.
P3 can help shift risks, accelerate projects, introduce innovations
and bring efficiencies.
P3 can also help leverage revenues to generate upfront cash for
certain projects--but so can municipal bonds.
The Challenge: Matching the Project Sponsor’s objectives with the
best-suited Approach, on both financial and transportation policy
grounds.
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“Private Capital Investment” vs.
“Investment of Private Capital”
“Western” Column “Eastern” Column
Private Revenue Stream Public Revenue Stream
(User Charges) (Tax Dollars)
“Northern” Row NW–
NW– NE –
Public Capital Source
Public Investment Public Investment
• Government Grants Sandusky Interchange (OH)
SR 125 (CA)
• SIB Assistance (SIB Loan Payable from
(TIFIA Loan Payable
• Federal Credit from Tolls) State Highway Fund)
• Public Pension Funds
SE –
“Southern” Row SW – Public Investment
Private Capital Source Private Investment
• Route 44/U.S. 550 (NM)
• Tax Exempt (GARVEE Bonds)
Bonds
• SR 125 (CA) • Cooper River Bridge (SC)
• Taxable Bonds (Bank Debt and Equity) (Tax-
(Tax-Exempt Bonds
• Lease or Vendor
Financing • Pennsylvania Turnpike Payable from
(Toll Revenue Bonds???) State Sources)
• Private Equity
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