ITE Journal February 2018 - 16

| op/ed
THE P3 PARADOX
By Daniel G. Haake, AICP, CMILT
When the Trump Administration announced
plans for its $1 trillion infrastructure package,
public/private partnerships (P3s) were at
its core. The proposal suggested that $200
billion of federal investment would in turn
stimulate $800 billion in private investment.
The reaction of the transportation community was varied. Large metropolitan areas
stood to benefit the most. Their large "mega"
projects were the most likely to generate a
revenue stream required by P3s. Conversely,
rural and smaller metropolitan areas are
much less likely to develop successful P3
projects.
In September, following push-back from
rural governors and an untimely failure of
a large P3 project in Indiana put into place
by then Governor Pence, President Trump
announced that these partnerships would
no longer be a major part of his initiative.
There is a certain level of controversy surrounding P3s. Why are not more roads
privately built? And what makes for a successful partnership?

History

shutterstock/SFIO CRACHO

Private companies built many of our nation's
early roads. These companies employed user

fees to recoup their capital costs and make a
profit. In the 1840s, these private companies
began to shift from building gravel to planks
roads. Plank roads cost about one-third the
price of a gravel road and constructed to
last eight years. However, the planks broke
down much more quickly. This blunder
along with increased competition from railroads led many of these private companies
to bankruptcy. The government was left to
take control and assume the liability of maintaining these once private roads. Thus, began
a precedent that remains today: that road
building is largely a government function.

So Why P3s?
The most obvious benefit of P3s is to provide
the public-sector access to private capital,
thereby allowing agencies to leverage public
dollars to build projects beyond the capacity of their traditional funding program. For
example, the Virginia Department of Transportation (VDOT) estimates that for every
public dollar invested in P3s, they attract $7
in private investment. This effectively allows
states to build "mega" type projects much
sooner than they would have otherwise.
Additionally, using these private dollars and
innovation, project development itself can
greatly accelerate.
For highways, P3 projects traditionally tend
to fall within three categories:

Existing Facilities
These projects monetize the "captured" value
of an existing highway. For example, the
Indiana Toll Road was leased to a private concessionaire for a one-time payment of $3.8
billion to the state's coffers. While the state
still owns the physical facility, the one-time
payment allows the concessionaire to collect
tolls if they are compliant with the contract
terms, which includes maintenance, operations, and long-term expansion requirements
and targets.
New Facilities
In 1984, the Dulles Toll Road was built
to connect I-495 to the Dulles Airport in
Northern Virginia. While the project was
successful in achieving its goal to reduce
congestion, land values near the facility
skyrocketed. Local land owners beyond
Dulles Airport realized they could benefit
by extending the toll road into their city.
After successfully lobbying for changes in
state law to enable privately developed toll
roads, the new facility, the Dulles Greenway
was completed in 1995. The project's initial
bonds were securitized against the facility
itself and the debt service paid through toll
collection.
Rehabilitation/Expansion of
Existing Facilities
Generally, these projects involve the development of or conversion of existing High
Occupancy Vehicle (HOV) lanes to High
Occupancy Toll (HOT) Lanes. For example,
the newly constructed HOT lanes on I-495
and I-95 were constructed by a private
concessionaire in exchange for collecting a
variable priced toll based on congestion.

The Catch
While P3s may sound like a silver bullet for
the nation's transportation funding shortfall, it is important to recognize that these
partnerships do not create new money. No
matter the structure, a revenue source must
16

Februar y 2018

ite jo u rn al



Table of Contents for the Digital Edition of ITE Journal February 2018

President’s Message
Director’s Message
People in the Profession
News
Op/Ed: Why the Uptick in Toll Roads?
Op/Ed: The P3 Paradox
Where in the World?
Calendar
2018 ITE Collegiate Traffic Bowl Kicks Off
Technical Programs Division Spotlight
Member to Member: Gary F. Duncan
Member to Member: Kate Whitfield, P.Eng., MCIP, RPP
New Products
Industry News
Breaking Barriers to Bike Share: Lessons on Bike Share Equity
The Value of Vanpooling as a Strategic, Cost-effective, and Sustainable Transportation Option
Delivering Impactful Projects Quickly and Effectively
Trip and Parking Generation for Shopping Centers in Jordan
Professional Services Directory
ITE Journal February 2018 - 1
ITE Journal February 2018 - 2
ITE Journal February 2018 - 3
ITE Journal February 2018 - President’s Message
ITE Journal February 2018 - 5
ITE Journal February 2018 - Director’s Message
ITE Journal February 2018 - 7
ITE Journal February 2018 - People in the Profession
ITE Journal February 2018 - 9
ITE Journal February 2018 - News
ITE Journal February 2018 - 11
ITE Journal February 2018 - 12
ITE Journal February 2018 - 13
ITE Journal February 2018 - Op/Ed: Why the Uptick in Toll Roads?
ITE Journal February 2018 - 15
ITE Journal February 2018 - Op/Ed: The P3 Paradox
ITE Journal February 2018 - 17
ITE Journal February 2018 - 18
ITE Journal February 2018 - 19
ITE Journal February 2018 - Calendar
ITE Journal February 2018 - 21
ITE Journal February 2018 - 2018 ITE Collegiate Traffic Bowl Kicks Off
ITE Journal February 2018 - Technical Programs Division Spotlight
ITE Journal February 2018 - Member to Member: Gary F. Duncan
ITE Journal February 2018 - 25
ITE Journal February 2018 - Member to Member: Kate Whitfield, P.Eng., MCIP, RPP
ITE Journal February 2018 - 27
ITE Journal February 2018 - Industry News
ITE Journal February 2018 - 29
ITE Journal February 2018 - 30
ITE Journal February 2018 - Breaking Barriers to Bike Share: Lessons on Bike Share Equity
ITE Journal February 2018 - 32
ITE Journal February 2018 - 33
ITE Journal February 2018 - 34
ITE Journal February 2018 - 35
ITE Journal February 2018 - The Value of Vanpooling as a Strategic, Cost-effective, and Sustainable Transportation Option
ITE Journal February 2018 - 37
ITE Journal February 2018 - 38
ITE Journal February 2018 - 39
ITE Journal February 2018 - Delivering Impactful Projects Quickly and Effectively
ITE Journal February 2018 - 41
ITE Journal February 2018 - 42
ITE Journal February 2018 - 43
ITE Journal February 2018 - 44
ITE Journal February 2018 - Trip and Parking Generation for Shopping Centers in Jordan
ITE Journal February 2018 - 46
ITE Journal February 2018 - 47
ITE Journal February 2018 - 48
ITE Journal February 2018 - 49
ITE Journal February 2018 - Professional Services Directory
ITE Journal February 2018 - 51
ITE Journal February 2018 - 52
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