SWUTC Research Project Description
Public vs. Private Financing of Transportation Systems
University: University of Texas at Austin
Principal Investigator:
C. Michael Walton
Department of Civil and Environmental Engineering
(512) 471-4636
Project Monitor:
Mr. Ricardo Sanchez
Technical Director North America, Cintra US
7700 Chevy Chase Drive
Chase Park One-Suite 500
Austin, TX 78752
Funding Source: USDOT and State of Texas General Revenue Funds
Total Project Cost: $79,285
Project Number: 600451-00072
Date Started: 5/1/12
Estimated Completion Date: 6/30/13
Project Summary
Project Abstract:
It has become increasingly important for industry leaders to consider the impacts of infrastructure privatization as a method for roadway and transportation systems development as the nation’s infrastructure ages and becomes increasingly in need of repair or reconstruction. This comes at a time when governments face shortfalls in needed funds for repair, maintenance and new roadway or transportation systems development.
Popular debate alludes to the idea that privatization will allow the nation to cover funding gaps, increase efficiency and provide other benefits to users and tax payers. Privatization of transportation systems has already begun with notable key projects in the US and various venues throughout the world and this project will draw on what has been learned from these projects domestic or international.
This study will address both direct and indirect costs associated with one procurement method versus the other and specifically address the fallacy of comparing cost of procurement as the financial cost for a private investor defined by its return on invested capital, with the cost for the tax payer defined by the cost of public debt.
Project Objectives:
This study will research, in-depth, the effects on tax payers and users of both public and privately created roadway infrastructure, base on comparable information. Comparison criterion include the following, and as the project progresses, comparison criterion may be added or refined in order to best reflect the nature of the infrastructure development process.
- Effects for Tax Payers
- Additional government debt and its contribution to tax payer risk
- Cost of Infrastructure
- Efficiency in initial scope of the project (supply optimized to demand)
- Design and construction processes and question of higher risk of overruns in one sector versus the other
- The private sector’s life cycle cost approach and its potential to reduce costs in the long term
- Risk of forced public financing in the case that projects don’t perform
- Effect on public risk rating and the potential negative impact on overall cost of State debt
- Risk of increased tolls on non-related facilities as a result of combination of under-performance and public entity issuing system-wide debt
- Mechanism to obtain the right of way property needed to build roadways or other transportation systems
- Opportunity cost of foregoing other projects by using limited public sector capital
- Opportunities for increased efficiency in operations and maintenance realized when the private sector manages a toll road demonstrated through case studies in the US
- Revenue steam to the state resulting from tax to be paid by the private developer over time
- Effects for Users
- Accountability: to what extent is the private accountable for its actions and to what extent is the government relieved of the same accountabilities
- Level of service comparison on similar facilities
- Risk of delays in roadway construction in one sector versus the other
- Quicker implementation of newer technologies (i.e., open road tolling) in one sector versus the other
- Risk of toll increases in the case that traffic is not meeting performance expectations
- The impact that concession agreements have knowing that these agreements provide clear structure of toll rate escalation methods and typically not subject to whim of current political and fiscal situations
Task Descriptions:
Task 1: Literature Review
- Introduce graduate student in Transportation Systems Management to project and provide necessary background and discussion
- Develop list of sub-topic areas within project scope (e.g., financing, regulation, expertise, etc.) and assign topic to graduate students
- Students perform in-depth literature review on topic area
- Literature reviews due
Task 2: Transportation System Infrastructure Typology Definitions and Categorization
- Define transportation infrastructure typology and categorize projects
- Find and provide examples of project types<span >
Task 3: Case Studies
- Student case study selection and approval
- Interviews and presentations with industry leaders to provide direction for case studies
- Class case study drafts/status update
- Class presentation of case studies
- Final written document
- External board review of written document
Task 4: Review and In-depth Economic Analysis
- Refinement of class document based on external board review feedback
- Researcher will provide more in-depth economic analysis to discover to what extent is one procurement method better than the other, building on document from Transportation Systems Management class
- Internal review of document in development and final revision of draft
Task 5: Finalize the Document
Implementation of Research Outcomes:
The use of public-private partnerships (PPPs) for transportation infrastructure delivery has increased in the U.S. However, concerns about and opposition to these agreements exist due to a variety of factors. This research explored the perceptions that a variety of PPP stakeholders have about PPP usage to deliver transportation infrastructure in the U.S., including stakeholders from fields at times overlooked in PPP literature but that are key to these transactions, such as professionals in legal, banking and finance, and concessionaire organizations. The results of a survey taken by 101 professionals, with responses classified based on different aspects of the respondents’ backgrounds are presented in the final report. Results indicate that stakeholders’ perceptions about benefits, barriers, and valuation of PPPs vary—at times greatly—depending upon the respondent’s work type, location, and especially whether they had previous experience with PPPs. While this is not surprising, in some cases, such variations in perceptions were unexpected in both type and magnitude. It is understandable that some misperceptions still exist among PPP stakeholders due to various reasons, yet some responses showed deep misunderstandings, fears, or unrealistic expectations about PPPs. The fact that respondents were targeted because of their assumed familiarity with these transactions is worrisome and it indicates the need to educate decision-makers, staff, and the general public about what PPPs really are, why they are needed, and what they can and cannot do.
Products developed by this research:
Poster Presentation: To the 93rd Annual Meeting of the Transportation Research Board, January 2014.
Impacts/Benefits of Implementation:
This project was based on a survey that obtained opinions from a sample of professionals larger than in similar surveys. Besides, the sample was comprised of respondents from diverse backgrounds that included professionals in fields important to the project’s topic, but whose opinions are not typically included in this type of surveys. Because of those two factors, the report’s findings extend the knowledge base about Public-Private Partnerships for transportation infrastructure in the U.S.
Industry professionals that participated in the survey portion of this study have requested the results of the study. With the distribution of this report, the study findings and conclusions could serve to improve public knowledge and attitudes, as well as changing behavior, practices for the development of future PPP agreements, decision-making and/or policies towards Public-Private Partnerships in the U.S.
Web Links:
Final Technical Report