“Let’s Build Infrastructure” Praises Passage Of Infrastructure Bill: “Progress Triumphs Over Politics”

Alexandria, Va.  --- Today, former four-term Oklahoma City Mayor Mick Cornett (2005-2018) and former two-term mayor of Philadelphia Mayor Michael Nutter (2008-2016), co-chairs of “Let’s Build Infrastructure,” a bipartisan coalition focused on raising awareness about public-private partnerships (P3s), issued the following statement following Friday’s passage of the bipartisan $1.2 trillion infrastructure in the House of Representatives:

“It took a while, but at long last, infrastructure week has arrived. We’re thrilled this common sense and bipartisan compromise passed the House of Representatives, and we commend lawmakers on both sides of the aisle for not allowing petty politics to derail meaningful progress. Washington is divided on almost everything else, but Americans from all walks of life will benefit from these infrastructure improvements. The private sector can play an important role shouldering some of the financial load of these projects, opening valuable new revenue streams for federal, state and local governments. Now that progress has triumphed over politics, let’s get to work on the infrastructure building.”

P3s are included as a revenue stream in the $1.2 trillion dollar Bipartisan Infrastructure Framework.

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Cornett & Nutter Pen Op-Ed for Public Works Financing: "We're At The Finish Line"

In an Op-Ed for the Public Works Financing newsletter, Let's Build Infrastructure Co-Chairs Mick Cornett, former Mayor of Oklahoma City, and Michael Nutter, former Mayor of Philadelphia, call on Congress to pass the Bipartisan Infrastructure Legislation and present it to President Biden to sign. The mayors emphasize the point that this much-needed legislation has strong bipartisan support and we can't afford to scuttle this opportunity with partisan brinkmanship.

"It’s a bad movie that has played out all too often in Washington D.C.: hard‐earned progress undone at the last minute by partisan politics. Unlike a cinematic production that ends when the credits roll, the drama in Washington D.C. has real‐life consequences, none of which are helpful for the American public.

Earlier this year, the U.S. Senate passed a bipartisan $1 trillion dollar infrastructure package. It had buy‐in and support from the leaders of both parties, as well as from the Biden White House. In the words of the New York Times, the vote was “uncommonly biparti‐ san.” Neither side was claiming complete victory, and extremes on both ends were unhappy – two tell‐tale signs of a true compromise.

Fast forward to today and the future of the legisla‐ tion is murky, caught in the crossfire between Vermont Senator Bernie Sanders and West Virginia Senator Joe Manchin and their debate over a sepa‐ rate and much larger $3.5 trillion dollar spending bill..."

Read the Op-Ed in full

Don’t let infrastructure fall victim to politics again

Over the last five years, infrastructure week has become a punchline in Washington, D.C., conversations. The lofty promises of rebuilding America’s roads, tunnels, bridges and airports went unfulfilled during the Trump administration, yet another victim of the political infighting and posturing that consumes our national political discourse these days.

Beyond the Beltway, the need for infrastructure improvements did not just go away — it only got worse. A report card issued this year from the American Society of Civil Engineers gave the United States’ infrastructure a “C-” — hardly a grade to write home about.

As former mayors, we have made hard decisions to keep cities running. We have faced tough budgets and made do with less to make public dollars go further. Simply taking your ball and going home because you do not get your political way is not an option available to the chief executive of a city.

We were heartened to see the recent breakthrough in the Senate on infrastructure legislation. Leaders from both parties negotiated in good faith and reached an agreement that was perfect to neither side but acceptable to both, a sign of a legitimate compromise. It was funded not through further tax increases, but largely through unspent funds allocated as part of COVID-19 relief.

Another funding source under the bipartisan agreement was something called “public private partnerships,” or “P3s” for short. P3s are founded on the principle that the private sector can and should play a role in infrastructure upgrades. Private companies would put up the initial capital to get these projects off the ground and would recoup their investment over time. It saves taxpayer money and incentivizes the industry, with their resources on the line, to complete the work in a timely and efficient manner.

Last year, the private sector worked together with public officials on the most consequential partnership ever: the development of three life-saving COVID-19 vaccines. If it sounds like a simple concept, it is. The list of challenges facing our nation right now is daunting. While government should lead the charge, the private sector can play a role.

Unfortunately, the future of the infrastructure bill remains uncertain. After passing the Senate, it moved to the House, where there was disagreement within the majority party over coupling it with a much larger $3.5 trillion spending package. Under a deal reached this week, it is now scheduled for a vote later in September.

We are not here to cast blame or lob partisan bombs. There’s enough of that in Washington these days. We are here to urge cooler heads to prevail. Let’s not throw the baby out with the bathwater or let this good piece of legislation become another victim of politics.

We are hopeful the infrastructure bill will move forward in the House by the Sept. 27 deadline. There is a lot for everyone to like, and it will have real, immediate and consequential effects for the better.

At long last, let’s make infrastructure week a real thing.

Mick Cornett is a Republican who served as mayor of Oklahoma City from 2005 to 2018.

Michael Nutter is a Democrat who served as mayor of Philadelphia from 2008 to 2016.

They are co-chairs of Let’s Build Infrastructure, a bipartisan coalition dedicated to advancing private investment in U.S. infrastructure projects.

Bipartisan “Let’s Build Infrastructure” Coalition Launches To Promote Public-Private Partnerships

Co-Chaired By Former Mayors Mick Cornett & Michael Nutter

Alexandria, Va.  --- As the debate over the infrastructure bill continues to dominate Capitol Hill, a bipartisan pair of former mayors today joined forces to launch “Let’s Build Infrastructure,” a coalition committed to raising awareness about utilizing public-private partnerships (P3s) to finance infrastructure projects.

Mick Cornett, the former mayor of Oklahoma City (2005-2018), and Michael Nutter, the former mayor of Philadelphia (2008-2016) will serve as co-chairs of “Let’s Build Infrastructure”, a 501(c)(4) non-profit organization.  A P3 is an agreement between a governmental entity and a private sector company to build an infrastructure project, including but not limited to roads, bridges, schools, using private capital for the project’s upfront costs.

P3s have already earned support from across the ideological spectrum. They were included in the $1.2 trillion dollar Bipartisan Infrastructure Framework agreed upon by a group of 21 Democratic and Republican senators, as well as the White House’s fact sheet of funding sources in their endorsement of the proposal. Senate Minority Leader Mitch McConnell (R-KY) has expressed optimism about the infrastructure package on the condition that it is paid for.

“Public-private partnerships take much-needed financial resources off the sidelines and put them to work rebuilding our crumbling infrastructure – they are a common-sense and bipartisan solution to a real problem that impacts everyone,” said Mayor Nutter. “There are billions of dollars sitting on the sidelines right now, dollars that help offset the price tag of the infrastructure package.  This is one pay-for that has bi-partisan support in D.C. and is used across the country.”

“As Mayors, we were always looking for creative and outside-the-box ways to stretch limited budgets,” said Mayor Cornett. “We relied on public-private partnerships to make a positive difference in the lives of our residents and grow our cities into world class metro areas. It’s not surprising the concept has earned praise from both Democrats and Republicans alike. America needs new infrastructure, and public-private partnerships are a common-sense and bipartisan funding source everyone should be able to rally around – now is the time to get it done.”

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Road to ruin: N.C. can't keep pace with troubling list of transportation needs

It’s a staggering total — $3.4 billion.

That’s how much bad roads and congestion in North Carolina costs drivers in higher vehicle ownership costs, according to a report commissioned by the N.C. Department of Transportation.

Fixing those roads — as well as repairing and replacing bridges, building new highways and any other large projects the agency has on its schedule — takes money. Lots of it.

Department spokesman Steve Abbott said that to bring every bridge in the state to “good” condition would cost $3.8 billion — roughly 71% of the department’s $5.3 billion budget for the year.

“As of now, that’s money we don’t have,” Abbott said.

The lack of funds has caused a backlog of infrastructure projects, many of which won’t be addressed for years.

“We have our wish list,” Abbott said.

So a combination of different stakeholders are coming together to try changing the funding for NCDOT.

“How do we reform this for the long term, so that we don’t have to come back every year and advocate for the projects that are being backlogged or the maintenance that’s being deferred?” said Mark Coggins, director of government affairs for the N.C. Chamber of Commerce.

The problem, as groups like the N.C. Chamber see it, is that the largest source of NCDOT’s budget comes from the motor fuel tax — 36.1 cents per gallon — and accounts for 54% of the agency’s total revenue. As inflation grows and cars get more fuel efficient, the comparative purchasing power of that tax gets smaller and smaller.

The result is that drivers who pay less for gasoline aren’t chipping in money to the Highway Fund comparable to the damage their vehicles cause the roads.

An organization called the NC FIRST Commission was created in 2019 charged with evaluating the state’s transportation investment needs. Its January report called for a shift in funding for NCDOT, away from the gas tax and toward something more equitable and sustainable, along with a $20 billion increase in funding for the department over the next 10 years.

The COVID-19 pandemic has underscored the necessity of finding a source of funding less reliant on the gas tax. As vehicle travel dropped by 38% in April 2020, the money going into the Highway Fund cratered, causing NCDOT to delay or remove approximately 700 projects.

The pandemic also exacerbated a trend of increasing e-commerce deliveries from companies like Amazon. Freight trucks used for shipping can cause the equivalent damage to roads and highways as 5,000 cars, while also increasing congestion in urban areas.

Driving, and the department’s funding, have since rebounded to close to prepandemic levels, but Abbott said the massive drop in funding made it clear why it’s so important to have a more sustainable source of revenue.

The proposed solutions to funding include short-term options such as increasing the highway use tax — the tax on purchasing vehicles that is now 3% — putting more sales tax money earned from transportation goods into the highway fund and bumping up the DMV fees on electric vehicles. Long-term solutions include implementing a mileage-based user fee for drivers and more highway tolls.

The business groups advocating for change say that having a well-funded transportation department and good infrastructure will be a key advantage to bringing economic growth to the state.

“Transportation is a competitive advantage for us because our congestion numbers — and not just during the pandemic — consistently ranked far below what we would normally be for a market of our size and growth rate,” said Joe Milazzo, the executive director of the Raleigh-based Regional Transportation Alliance.

The state is unique for the number of roads overseen. Despite only being the 10th most populated state, North Carolina has the second most state-managed roadways, some 80,000 miles. That means while North Carolina spends a large percentage of its total expenditures on transportation — about 13.3% — it’s actually spending far less money per mile of state-owned roadway than comparable states like Florida and Georgia.

The high base numbers already spent on transportation means that it may be difficult to funnel even more money into the system, despite calls for more.

“There’s competing priorities for the funding, particularly as we’re starting to pay for things out of the general fund,” said Noreen McDonald, a professor of city and regional planning at UNC-Chapel Hill.

North Carolina may get a boost to its transportation network in the near future, thanks to President Joe Biden’s $2 trillion infrastructure proposal, which would allocate $621 billion to spending on transportation infrastructure, including $115 billion for repairs and modernization. NCDOT has already identified 10 federal aid projects which are planned to be underway in the next several years.

But given that the final amount North Carolina will receive is dependent on Congress, Abbott said the department won’t be making any plans around a large influx of federal aid for the foreseeable future.

“Who knows when it’s going to come out,” Abbott said.

The fear among NCDOT and business advocacy groups is that, as construction costs rise and funding from the fuel tax starts to dwindle, North Carolina might not have the resources to stay in front of the need for major full-scale renovations. Coggins cited a statistic on a report that found that every $1 of deferred maintenance on roads and bridges will end up costing an additional $4 to $5 in needed future repairs, meaning needs delayed because of a lack of funds will only get increasingly more pressing and expensive with time.

“I don’t know that we truly know the economic impact or the consequences of inaction,” Coggins said.

Public/private partnerships fuel development of big-ticket public projects

On May 8, Colorado Springs broke ground on a historic park renovation project in the Southeast.

The Panorama Park project is the largest of its kind in Colorado Springs history, and it would not be possible without a partnership between public entities and private industry. Public/private partnerships have become a vital part of the planning and funding process for projects in the Springs. While they have long provided funding and resources for parks and community resources, they’re now being used for everything from the City for Champions projects to affordable housing.

“Public/private partnerships have become a hallmark of the Colorado Springs Parks and Recreation Cultural Services Department,” said Mayor John Suthers during the groundbreaking ceremony. “In fact, folks, they have become a hallmark of the city of Colorado Springs. We’re in the final phases of completing our City for Champions projects. The [U.S. Olympic & Paralympic Museum and Hall of Fame, the Hybl Sports Medicine and Performance Center, Weidner Field, Robson Arena at Colorado College] and soon the Air Force Visitor Center. None of that would have happened without tremendous private investment to supplement the public investment. We simply could not afford to do parks projects like this without support from the private sector.”

Public/private partnerships allow for community projects, like Panorama Park, that might otherwise be considered too expensive. “I think as we have observed in our community, there is sometimes not the level of financial support that’s needed through either city- or county-based general operating, general fund dollars,” said Mina Liebert, director of community impact for the Pikes Peak Community Foundation. “This is where the partnerships are so critical. In the case of Panorama Park, it was a couple of different primary entities that helped to bring this project forward, so obviously the city owning the property at Panorama and managing and operating the park, the Trust for Public Land, they have the Parks for People program which is really to get more accessibility to parks for more residents and community members, and then the RISE Coalition with their intention of really bringing the community to the decision-making table and being a part of the process. It’s been a great partnership all around. That’s kind of that public/private philanthropic partnership. The Trust for Public Land has helped to fundraise a good portion of the philanthropic dollars, in partnership with the city, because they can’t do things just on their own.” 

For Karen Palus, the director of Parks, Recreation and Cultural Services for Colorado Springs, such partnerships are nothing new. 

“Public/private partnerships have been integral to the Parks, Recreation and Cultural Services Department probably since its inception,” she says. “We’ve had some long-standing, amazing partners throughout the community who have really been instrumental in our success, especially during our lean times as well.”

For Palus, a shining example of such partnerships is the Garden of the Gods Visitor and Nature Center.

“Thanks to two really incredible women, Nancy Lewis and Lyda Hill, they struck the partnership to create the Garden of the Gods Visitor and Nature Center, which was initially privately held and is now held by the [Garden of the Gods] Foundation. So they built the Visitor and Nature Center, and the Visitor and Nature Center serves to help us fund operations within the Garden,” she explains. “When you visit the Garden of the Gods Visitor and Nature Center, when you purchase a trinket, or you pay to watch the movie or have a snack while you’re there, those funds do come back to help the Parks Department keep up with the Garden of the Gods Park.”

There is sometimes not the level of financial support that’s needed through either city- or county-based general operating, general fund dollars.

— Mina Liebert, Pikes Peak Community Foundation

Palus notes that public/private partnerships in the parks department run the gamut from civic organizations that support a particular park, to more ambitious projects like the Pikes Peak Summit Complex. “I think we counted — way back in the day — well over 50 different organizations and partners that we work with annually, in some form or fashion,” she says. “We have groups that are what’s called ‘friends groups,’ and some of them are 501(c)3s, so they support their particular park or interest in a variety of ways. Some of them are through financial support, some of them are through what I call ‘sweat equity’ — so they’re out there giving their time and talents to their particular parks. A great example of that is the Guardians of Palmer Park. They’re a local group and they go out and provide services to the park. They’ll do cleanups, trail work, they’ll ambassador with our different user groups, and just general upkeep and maintenance. They’ll work on specific projects like pavilion renovations and those kind of things.”

The Pikes Peak Summit Complex, which is expected to be completed this summer, is another example. “We are in the process of building our Pikes Peak visitors center at the summit, and that is a public/private venture as well, where we set out working very closely with the community developing what the new visitors center would be like,” says Palus. “We worked very closely with our partners in the federal government, closely with our partners locally that own the cog [railway] with The Broadmoor Group, as one of the operators on the cog, as well as the Army Corps of Engineers, with their training and high-altitude research lab that they have there, and the Colorado Springs Utilities. Putting together the dollars for that, we determined upfront exactly what we would be able to do and within our capacity.”

Outside of the Parks Department, the city of Colorado Springs has used partnerships to finance the City for Champions projects including Weidner Field, home of the Switchbacks FC soccer club.

“The City for Champions is really a perfect example of public/private partnership,” says Bob Cope, economic development manager for Colorado Springs. “The original [Regional Tourism Act] legislation called for communities to make applications for projects that would increase tourism in the state, and thereby creating additional state revenue, looking for a win-win. Increased economic development, increase in tourism, but also an increase in state and local tax revenues. It was always envisioned that this award would be given by the state — it was in the form of state sales tax paid, the state is rebating a portion of that state sales tax back to communities that they can put into these projects — but the idea was the amount of that state sales tax increment was never meant to cover the entire cost of these projects. It was meant to be the seed money or the catalyst for these projects going forward, so when we were successful in raising the $120.5 million [from the Regional Tourism Act], that funding, over 30 years, was allocated to the four and now five different projects. It just provided that seed money; the rest all had to come from private and other sources, and that’s exactly what happened.”

Cecilia Harry, chief economic development officer for the Colorado Springs Chamber & EDC, notes that public/private partnerships offer a mutually beneficial way for public entities and private companies to complete projects. 

“Sometimes the public sector component of it does include tools or resources to make the project go, from a financial perspective, but a lot of times the partnership component that the public sector brings to a project are things like ease of permitting, timing of permitting and that sort of thing,” she says. “It’s not always a financially tangible component, but something that helps make something happen or reduces the burden to the private party to make it happen.”

Harry also noted that public/private partnerships benefit more than just the entities involved in a particular project.

“The ripple effects of that investment, in terms of engaging local vendors, paying local vendors, engaging local workforce,” she says, “that sort of investment comes from the private sector, with their investment in the community.”

While public/private partnerships have proven successful with parks and recreational projects, their potential is still being explored. 

“Certain projects aren’t feasible,” Cope notes. “Take a look at affordable housing. The only way to create affordable housing for the homeless or the very poor is you have to subsidize it. Federal and state programs, and a limited amount of local funding can help, but it also takes a major private investment to make these projects happen. I think they’re really a critical tool in building and creating a great city. 

“All of the City for Champions projects are a great example of that. The upgraded streetscape on Vermijo [Avenue], the new pedestrian bridge in southwest downtown — a government couldn’t have done those things alone and the private sector couldn’t have done those alone.” 

Surface Transportation News: President Biden’s Jobs Plan, New Transportation Finance and Public-Private Partnership Reports

The Anti-Highway Elements of President Biden’s Infrastructure Plan

Some transportation groups remain optimistic about the $115 billion devoted to “roads and bridges” in President Joe Biden’s $2.3 trillion American Jobs Plan (AJP), but I am reluctantly concluding that, given the proposal’s overall price tag and priorities, this is more of an anti-highways proposal than an increase in needed investment in America’s aging highways.

Initial clues were provided in a March 18 Associated Press story, “Buttigieg: Biden Plan Will Usher in a New Transportation Era.” In the opening paragraph, Transportation Secretary Pete Buttigieg was quoted saying the plan offers a “once in a century opportunity to remake transportation in the United States, where cars and highways are no longer king.” Further on, Buttigieg noted that while we do need to fix aging roads and bridges, “there are some things that need to be reduced…sometimes roads need to go on a diet.” And Buttigieg added, “Sometimes we do need to add a road or widen one. Just as often, I think we need to subtract one.”

When the details of the Biden administration’s American Jobs Plan were subsequently released, we got some specifics on how the $115 billion for roads & bridges would be allocated:

• $50 billion for “fix it right” road modernization, to fix 20,000 miles of highways and roads. At an average of $2.5 million per mile; that would repave quite a few city and county roads but only a few miles of urban Interstates.

• $40 billion for a bridge investment program, somehow divided among the 10 most economically significant bridges needing replacement (most likely all megaprojects) plus 10,000 small bridges. Note that the major projects would lend themselves to toll-financed replacements, which will be off the table if the federal government hands out ‘free’ general-fund dollars for those projects.

• $5 billion for “community transportation block grants,” so far undefined, but potentially “complete streets” or local “road diets.”

• $5 billion for “transportation alternatives,” which means sidewalks, bike paths, etc., not roads or bridges.

• $10 billion for a new “carbon reduction bonus program,” undefined but it could well reward projects aimed at reducing vehicle miles of travel, as is being attempted in California.

• $5 billion to continue the existing Congestion Mitigation and Air Quality Improvement (CMAQ) Program grants for congestion reduction and air quality.

Hence, actual investment in better roads and bridges is really only $90 billion, just 4 percent of the overall infrastructure plan’s price tag, which is being widely marketed to taxpayers as a serious effort to fix America’s aging highways and bridges. And not a dime of that money would come from highway user payments.

And that’s not all that’s worrying. Under a separate heading of “Restore and Protect Thriving Communities,” the plan has $15 billion for “Highways to Neighborhoods.” That does not mean building highways to get to neighborhoods. Rather, as Jeff Davis explained in Eno Transportation Weekly, “From the sound of the fact sheet, this revolves around tearing down highways and restoring older neighborhoods, or possibly covering highways in some areas to allow more connectivity.”

Then there is the plan’s much larger spending on transit and passenger rail than on highways and bridges. The transit portion of the American Jobs Plan totals $110 billion and intercity passenger rail would get another $80 billion, totaling $190 billion. The plan’s rationale for this is that traveling on rails is environmentally friendly, compared with highways. For example, in Portland where toll-financed widening of parts of I-5 and I-205 is being planned, Aaron Brown of the “No More Freeways” group summed up this approach by telling a local reporter, “Public transportation isn’t cheap, but it actually will solve all our climate goals and congestion goals and our air pollution goals.”

Unfortunately, U.S. transit projects have never led to reduced roadway congestion, and the idea that highways are inevitably pollution generators is false, given the coming electrification of the vehicle fleet (a major emphasis of the Biden plan). As Eno’s Jeff Davis wrote after such claims were made at a recent high-speed rail hearing:

“There was much discussion of how high-speed rail would lower emissions by taking cars off the road for intercity trips over the next 50 years. [But] the key [unasked] question is, what assumptions were made about the average emissions per mile of cars on the road in 2030, 2040, and 2050? If the Biden Administration is successful in its quest to get most internal combustion engines off the roads, decades before anyone as recently as two years ago thought possible, doesn’t that mean those estimates of emissions reductions attributable to HSR are meaningless?”

My final point about the Biden administration’s American Jobs Plan not being a highways-friendly plan is that it completely ignores the 2019 Transportation Research Board Consensus Study Report, Renewing the National Commitment to the Interstate Highway System. This 596-page report, asked for by Congress, documented the deterioration of the underlying pavement on much of the system, its numerous bottleneck interchanges, its horribly congested urban corridors, and the lack of enough lanes for likely growth of long-distance truck traffic in some corridors. The report’s bare-bones estimate of the cost of rebuilding and modernizing our most important and valuable highway resource—the Interstate Highway System—was $1 trillion over the next two decades. Yet nowhere in the Biden administration’s $2.3 trillion infrastructure plan is there any mention of this report and the need for major investment in the Interstate system, essentially to build it back better.

Fortunately, the American Jobs Plan is only a proposal and it can still be improved by Congress and the Biden administration. As the saying goes, the president proposes and Congress disposes. Our only hope may be that either in the upcoming surface transportation reauthorization bill or in a better-focused infrastructure bill, Congress and the administration will begin to take the country’s needs to improve major highways and bridges far more seriously.

New Reason Foundation Report Shows U.S. Lags in Infrastructure Finance

Many of us in the transportation sphere too often conflate the terms funding and finance when it comes to transportation infrastructure. Funding refers to how a project is paid for (e.g., fuel taxes or tolls), while finance refers to how to obtain the capital investment needed. When most people buy a home, they finance the deal rather than paying in cash. Typically, homebuyers put in some actual money with a down payment and borrow the rest via a mortgage.

It’s the same with infrastructure finance. In the private sector (utilities and railroads) or with public-private partnerships, investors put in equity and cover the majority of the up-front investment via debt (e.g., revenue bonds). Economists and financial analysts explain that for long-lived infrastructure, financing makes good sense. By raising the capital upfront, the project gets built now and its benefits are enjoyed by those who pay as they use it over its long life.

Alas, the United States lags most other developed countries in using long-term financing for major infrastructure projects, such as airports, highways, seaports, and other transportation facilities. Reason Foundation’s Annual Privatization Report 2021—Transportation Finance provides the details. The report, which annually reviews major infrastructure investment fund deals and trends, will be published this Wednesday, but we’re making it available today for readers of this newsletter.

Despite the COVID-19 pandemic, the global infrastructure investment fund industry had a banner year in 2020, raising $103 billion, the second-highest total ever. The report shows the 20 largest greenfield public-private partnership transportation projects financed in 2020, only one (John F. Kennedy International Airport, Terminal One) was in the United States. That’s mostly because many other countries have privatized major infrastructure and/or used long-term public-private partnerships (P3s) far more widely than the United States has.

Until recently, most of the infrastructure funds (about 35 percent of which are based in the United States) were “closed-end,” typically with a 10-year life. But the Annual Privatization Report—Transportation Finance discusses the recent rise of longer-term, open-ended funds whose growth has been a good fit for public pension funds, insurance companies, and other long-term investors who need to match their long-term liabilities with long-term, sustainable revenue streams.

The report also documents the growing trend of U.S. public-sector pension funds investing in P3 and privatized infrastructure. These pension funds seek to invest equity in alternative investments, hoping to increase the average rate of return on their investment portfolios. It’s not possible to invest equity in a public-sector airport or toll road, but the special-purpose vehicle (SPV) created by private developers of P3 toll roads and airports seek equity investors. Australian and Canadian pension funds have been investing in such infrastructure worldwide for several decades, but this is still an emerging phenomenon in the United States. The report provides specifics.

A number of tables in the report provide specifics on funds, companies, and projects that are being financed. Table 9 is a recap of U.S. public-private partnership transportation infrastructure projects, with details on how they have been financed. Overall, there have been 17 revenue-risk toll projects and nine availability-payment highway projects, contrary to the view that availability-payment (AP) projects are the wave of the future. The table shows significant differences in financing, with a much larger share of state funding (averaging 37 percent) in the AP projects compared with just 14 percent in the revenue-risk projects. And as you, therefore, might expect, the equity investment in revenue-risk projects averages 29 percent compared with only 6 percent in AP projects. Hence, revenue-risk investors have significantly more skin in the game.

Finally, a significant takeaway from the Annual Privatization Report 2021— Transportation Finance is that U.S. pension funds and insurance companies would benefit if there were a lot more U.S. public-private partnership infrastructure projects in which they could invest equity. Unfortunately, we have yet to see U.S. public pension funds speak out in favor of policy changes that would lead to more U.S. P3 projects—such as eliminating the federal cap on tax-exempt private activity bonds and overcoming political opposition to the use of tolls in state P3 legislation.

New Report Finds the U.S. Also Lags in P3 Transportation Projects
By Baruch Feigenbaum

Much of the recent political discussion has been about the need to repair and modernize America’s transportation infrastructure. But, as with many issues, there has been significantly less discussion about how to properly procure and manage long-term infrastructure.

One available option is to increase the number of long-term public-private partnership projects, which continue to grow in other countries. As Reason Foundation’s Annual Privatization Report 2021—Surface Transportation, another section of the annual report we’re making available today for this newsletter’s subscribers, shows, the U.S. did not have any of the world’s 10 largest transportation P3 projects last year. The report examines international trends in surface transportation public-private partnerships, P3-related legislative activity at the state level across the United States, and the federal government’s impact on state governments’ ability to use P3s. It also outlines why we can optimistic that public-private partnerships can generate a lot of the investment needed to reconstruct and modernize aging Interstate highways.

In 2020, four public-private partnership projects with a value of over $1 billion reached financial close, including two of them in Germany. Seven of the 10 largest projects were availability payment public-private partnerships. And four of the largest P3s were mass transit projects.

While French Guiana (population 294,000) and Kazakhstan (population 19 million) are procuring highways through public-private partnerships, state and local governments in the United States (population 328 million) are not tapping the potential of P3s. In fact, for the 2020 fiscal year, there was not a single public-private partnership project valued at $100 million or more in the U.S. that reached financial close. While the COVID-19 pandemic and related federal stimulus funding certainly made 2020 a unique year, the fact remains that the U.S is far behind most of the rest of the world in transportation P3 activity.

In addition to a lack of projects, there was also only one major P3-focused bill introduced in the United States. And that bill, legislation in Pennsylvania that would have allowed counties and cities to procure their own P3s, failed. Further, only three states proposed long-term public-private partnership concession projects.

The Pennsylvania Department of Transportation proposed a $2.2 billion Major Bridge P3 Program to replace 11 aging Interstate bridges, partly modeled on the state’s Rapid Bridge P3 that led to the replacement of more than 500 smaller bridges. The state’s plan to use tolling to finance the reconstruction has led to opposition in the legislature.

Elsewhere, the town of Popps Ferry, Mississippi, proposed replacing an aging bridge via a public-private partnership. And Georgia has shortlisted proponents for the State Route (SR) 400 express toll lanes, the state’s first public-private partnerships, and the first of several planned P3 managed lane projects in the Atlanta suburbs.

Beyond COVID-19, I think there are four reasons why public-private partnership transportation activity is lagging in the United States. First, much of the low-hanging fruit in a few states has already been picked. States with the most workable P3 authority have entered into deals for some of their best projects. For example, Virginia has built or is building, managed lanes, most via P3s, on almost every freeway in Northern Virginia and several freeways in the Hampton Roads area. Similarly, Florida has built a number of P3-managed lane projects. These states can and will enter into more public-private partnerships, but some of the most attractive projects in states with the best public-private partnership laws may have already been completed.

Second, and a bigger factor, many states don’t have workable public-private partnership laws. While 36 states, Washington, DC, and Puerto Rico have P3 authority for transportation projects, full public-private partnerships have been implemented in only 11 states, Puerto Rico, and by the Port Authority of New York & New Jersey. It’s not that the other 25 states and D.C. don’t have multiple potential P3 projects. Instead, the existing laws give preferential treatment to government projects or contain obstacles that disincentivize the private sector. In many states, it is critical that policymakers reform state public-private partnership laws to tap the potential of these projects.

Third, the U.S. has struggled to make mass transit public-private partnership projects successful. Since mass transit projects are subsidized, they must be procured via availability payments. And that kind of P3 does not bring new revenue to the table. But using a P3 for a transit project still has benefits, including, if written properly, risk transfer and assured long-term maintenance. Given that transit projects are more likely than highway projects to be delivered late or over budget, this risk transfer is a real benefit to taxpayers and governments. Unfortunately, both of the country’s existing transit P3s have struggled.

The FasTracks Eagle project in Denver suffered from technical problems with the commuter rail lines that had nothing to do with the public-private partnership structure. Meanwhile, the Purple Line in Maryland suffered from a poorly designed contract that hamstrung both the state and private sector. Other countries have built successful mass transit P3s. In fact, public-private partnerships are how the majority of the world’s new transit projects are being developed. There is no reason why American cities and states cannot create mass transit P3s that work for taxpayers and the private sector.

Finally, federal policy limits the incentives states have to enter into P3s. Many P3s make use of Transportation Infrastructure Finance and Innovation Act (TIFIA) loans. While recent surface transportation bills have provided adequate project funding, the U.S. Department of Transportation has turned what is supposed to be a check-the-box procedure into a de-facto discretionary grant process. Given that projects eligible for TIFIA loans are required to have two investment-grade credit ratings, USDOT does not need to make project sponsors jump through bureaucratic hoops. Some sponsors have forgone loans rather than go through the process. Congress should insist TIFIA revert back to its original purpose.

For public-sector projects, the U.S. has a robust tax-exempt municipal bond market. To level the playing field, Congress authorized tax-exempt private activity bonds (PABs) for surface transportation in 2005. However, the $15 billion lifetime cap has been reached. It is critical that Congress either eliminate the cap or raise it to a minimum of $45 billion to allow eligible public-private partnership projects to use private activity bonds.

Most importantly, Congress needs to allow states to toll more of their Interstates as part of the necessary rebuilding and modernization effort. Toll concession P3s provide a funding and financing tool. Yet, these P3s are largely limited to new capacity because of a federal ban on tolling existing lanes. One current option is to rebuild bridges or tunnels using tolling as Pennsylvania has proposed. Another option is to add variable tolls on all Interstate lanes—after they’re rebuilt— to reduce traffic congestion but, realistically, this option is limited to major urban areas.

However, the most important change Congress could make is to expand the Interstate System Reconstruction and Rehabilitation Pilot Program (ISRRPP), which allows only three states to use toll financing to rebuild one of their Interstates, to a program that allows all states to use tolling in the effort to rebuild all of their Interstates.

The Case Against a VMT Tax on Heavy Trucks

With the federal Highway Trust Fund spending far more than it receives in highway user tax revenues every year, there is a growing consensus that if the users-pay/users-benefit principle is to remain the basic principle for highway funding at the federal level, the revenue must match the spending. In an effort to help reach that goal, Sen. John Cornyn (R-TX) has proposed that the federal government levy a 25 cents per mile tax on heavy trucks (over-the-road trucks, known as Class 7 and Class 8 big rigs).

Congress has shown increasing interest in eventually shifting highway funding from per-gallon fuel taxes to some kind of per-mile charge. And both the Congressional Budget Office and, more recently, the Joint Tax Committee have calculated the possible revenue yield of a tax on miles driven by heavy trucks, and at least one think tank has proposed beginning the transition to per-mile charges with trucks.

Needless to say, Sen. Cornyn’s proposal has led to fierce opposition from the two national trucking organizations: fleets, represented by the American Trucking Associations (ATA), and truck owner-drivers, represented by the Owner-Operator Independent Drivers Association (OOIDA). The two groups sent a joint letter on May 25 to Senate Finance Committee Chairman Sen. Ron Wyden (D-OR) and Ranking Member Sen. Mike Crapo, arguing strongly against the proposed trucks-only vehicle miles tax.

I agree that Cornyn’s proposal is a bad idea, while strongly supporting shifting the way we fund our highway system, over time, from per-gallon gas taxes to per-mile charges (generally known as mileage-based user fees—MBUFs).

The trucking industry has long been leery of being taxed per mile driven, likening this to a few states levying weight-distance taxes on heavy trucks. But the industry has been slowly coming around to the idea of replacing fuel taxes with per-mile charges. Trucking companies have been taking part in some of the federally-funded MBUF pilot projects in various states, and more recently in a multi-state pilot managed by The Eastern Transportation Coalition (formerly the I-95 Corridor Coalition). As I reported here last year, one outgrowth of this project was the creation of a motor carrier working group to advise the Mileage-Based User Fee Alliance.

It’s critically important that transportation policymakers continue to involve commercial trucking in these pilot projects, to learn about the unique aspects of commercial trucking and the institutions connected with it that may help or hinder an eventual transition to mileage-based user fees. But forcing one portion of commercial trucking to serve as the guinea pig, when there is no consensus on methods of charging, the best institutional arrangements to carry out the charging, enforcement and accountability measures, etc., is misconceived and unworkable. And if such legislation were actually enacted, it would set back progress toward the eventual transition that we all know is needed.

In particular, a basic premise of Mileage-Based User Fee Alliance and the growing number of pilot projects is that the per-mile charge should replace the fuel tax, whether at the state or the federal level. But Sen. Cornyn’s proposal would violate this by adding the new mileage tax on top of existing federal gas taxes on trucking. No one who wants to see the needed transition from gas taxes to mileage-based user fees actually happen should support adding these fees on top of gas taxes or singling out commercial trucking in this manner.

That said, the ATA/OOIDA letter goes somewhat overboard in making its case. While it presents some figures only for the Class 7 and 8 trucks in Cornyn’s proposal, many of its other claims are based on the entire commercial trucking industry. Second, the letter repeats the old canard that trucks don’t really do significant damage to pavement and bridges, debunking the 1962 AASHO Road Test as flawed and obsolete. In fact, there has been a lot of additional research on the relationship between truck axle weight and pavement and bridge strength and durability. See, for example, the research summarized in chapter two of the 1989 Brookings volume Road Work, by Small, Winston, and Evans. Nearly every civil engineering student learns about pavement strength and durability and learns formulas for the likely performance of both rigid (concrete) and flexible (asphalt) pavement.

The ATA/OOIDA letter states clearly that the industry is willing to pay more so that highways can be better funded, and this is clearly in the industry’s interest. And in my previous work a decade ago, I found that trucking companies willingly pay about four times as much per mile as cars do on U.S. long-distance toll roads, which shows that they understand the need to pay considerably more than cars to use our highways.

Sen. Cornyn and Congress should dump this divisive, trucks-only tax idea before it does irreparable harm to the needed transition from paying for highways per gallon to paying for them per mile.

Prospects for Federal Automated Vehicle Legislation in the 117th Congress
By Marc Scribner

On May 18, the Consumer Protection and Commerce Subcommittee of the House Energy and Commerce Committee held a hearing titled, “Promises and Perils: The Potential of Automobile Technologies.” Several automotive safety technologies were discussed, but the primary focus was on automated driving systems (ADS) that hold the potential to relieve humans of driving responsibilities. This hearing came a week after another failed effort in the Senate to move forward federal ADS legislation as part of the Endless Frontier Act, with Sen. John Thune (R-SD) blaming opposition from “the trial lawyers and the Teamsters” as the reason why he lacked the votes to attach his amendment. Given that Democrats currently have tenuous control of both the House and the Senate, and that trial lawyers and unions are among the key Democratic constituencies, federal automated driving systems legislation in the 117th Congress faces strong headwinds.

One witness in the May 18 House hearing, AFL-CIO Transportation Trades Department President Greg Regan, indicated his member unions would oppose efforts to integrate highly automated vehicles into the federal automotive safety regulatory regime unless Congress and regulators mandated redundant human drivers to preserve unionized driver jobs. Such a move would contradict long-run automotive safety goals and longstanding safety policy.

Human error and misbehavior are responsible for nearly all crashes, and federal law does not allow speculative economic matters to override safety considerations. Requiring redundant human drivers during all ADS operation in perpetuity would also significantly undermine—if not eliminate entirely—the business case for ADS-equipped vehicles, where most companies investing in these technologies are seeking to eliminate human driver responsibilities and even, in some cases, human driving capabilities with purpose-built vehicles that lack conventional manual controls.

On the Senate side, the American Association for Justice (AAJ), formerly the Association of Trial Lawyers of America, has made shifting demands over the last few years, to the confusion and frustration of lawmakers and ADS developers. Most recently, AAJ has demanded a special rifle-shot exemption from the Federal Arbitration Act of 1925 that would prohibit arbitration clauses in future contracts between ADS-equipped vehicle providers and customers. The current draft bill is silent on—not supportive of—arbitration and the customer contracts at issue likely won’t exist for at least several years as the ADS technologies are developed to enable future commercial services.

The source of AAJ’s ADS arbitration fixation appears to be a major loss suffered by the plaintiffs’ bar in the Supreme Court’s Epic Systems decision in May 2018, which held that class-action waivers in employment arbitration agreements are enforceable under federal law. Prior to the ruling, AAJ had been at most a bit player in ADS policy discussions and its main output on the subject was a 2017 report of theoretical musings around future liability regimes for ADS-equipped vehicles. But even if Congress acquiesced to AAJ’s demand, it is unclear whether the plaintiffs’ bar would support the bill. When bipartisan, bicameral negotiators in December 2018 agreed to ban hypothetical arbitration clauses at the behest of AAJ, the group repaid the favor by publicly urging the bill’s defeat on different grounds that its lobbyists had not previously raised.

The next opportunity for ADS legislation in the 117th Congress is likely the safety title of the forthcoming surface transportation reauthorization. The current extension of the 2015 Fixing America’s Surface Transportation Act (FAST Act) authorization expires at the end of September, so Congress will need to come up with a full surface transportation reauthorization or another extension in the next four months. However, there is no indication that lawmakers are willing to break from special interests, especially as both major political parties seek to amass their campaign war chests heading into the 2022 midterm elections that will determine control of the House and Senate. For transportation policy, this is another disappointing turn of events and an example of unnecessarily partisan and special-interest–driven politics. Readers may recall that the House passed its similar ADS bill, the SELF DRIVE Act, by unanimous voice vote in 2017 but it did not advance in the then Republican-controlled Senate.

If Congress fails to include it in a surface transportation reauthorization this year, prospects for ADS legislation in the 117th Congress will be dim. While regulators at the National Highway Traffic Safety Administration can continue their slow work of modernizing Federal Motor Vehicle Safety Standards without congressional action, ADS developers will likely need to wait until at least 2023 for Congress to make the regulatory reforms they are seeking. The patchwork of state ADS policies driven by impatience with Congress’s failure to adopt uniform national ADS policy is likely to grow. And American developers may increasingly set their sights on more welcoming places abroad.

Misplaced Critique of Revised Traffic Control Devices Handbook

An informal coalition of city, pedestrian, and bicycle organizations has been campaigning against the latest revision of the engineering document that sets standards and guidelines for traffic control devices. They claim the latest edition of the Manual on Uniform Traffic Control Devices (MUTCD) is biased against pedestrians and cyclists and should be replaced or significantly rewritten.

The very first pavement striping, stop signs, and electric traffic signals were developed ad-hoc between 1911 and 1920 in the early days of the automobile. In the 1920s, auto clubs and fledgling state highway departments recognized the need for uniform standards, and the American Association of State Highway Officials published the first manual on standard road marking signs and signals in 1927, but it applied only to rural roads. Further efforts by a Joint Committee on Uniform Traffic Control Devices led to the first national MUTCD appearing in 1935. Over the years subsequent editions, under the auspices of the Institute of Transportation Engineers (ITE), have responded to changing technologies and ongoing empirical research findings.

Today, while ITE still plays a major role, each new edition is reviewed and approved by FHWA and put out for public comment prior to being finalized. That accounted for the flurry of commentary on the draft of the latest edition, including a May 5 Bloomberg City Lab commentary by new urbanist Angie Schmitt, “Let’s Throw Away These Rules of the Road,” and a June 1 Wired piece by Aarian Marshall, “This Arcane Manual Could Pave the Way to More Human-Friendly Cities.”

Among critics’ claims in the articles were that, “The Manual consistently prioritizes operational efficiency for motor vehicles over safety,” and that “It lets engineers avoid installing Walk signals,” Schmitt quoted the National Association of City Transportation Officials as commenting. And, “It lets speeding drivers determine the speed limit,” a subheading in Schmitt’s commentary said.

A traffic engineer friend and colleague, who asked to remain anonymous, was dismayed by these critiques. First, far from ignoring pedestrians and cyclists, he noted that the word “pedestrian” appears 1,133 times in the new edition of the manual, “bicycle” appears 293 times, and “bicyclist” is mentioned 115 times. Regarding Walk signals, he explains that careful analysis is needed to determine where to place traffic signals in the first place and whether there is enough pedestrian traffic to include ‘walk’ signals (which in many cases increase the signal time to permit pedestrians enough time to cross). There are nine warrants that are to be followed in analyzing such decisions. Two of these nine are specifically based on pedestrian needs, and no warrant subordinates pedestrian safety.

And the much-criticized 85th percentile rule for speed limits is there in order to reduce large variations in speed among vehicles using a road, which are known to increase accidents.

The point is that traffic engineering invariably involves making trade-offs, which, unfortunately, does not seem to occur to some of the critics who bombarded FHWA with identical form letters that asserted defects and presented wishes not based on engineering analysis.

The comment period closed on May 14, so the decisions on any changes to the draft 11th Edition are now up to FHWA. I hope data-based engineering judgement prevails over feel-good critiques.

News Notes

Benefits of Priced Managed Lanes Top Other Lane Additions
A highly detailed study comparing the social and economic impacts of four highway alternatives found that adding a priced managed lane produced better results than adding a regular lane or an HOV lane or tolling all the lanes of an existing freeway. The paper was presented at the 2020 Transportation Research Board Annual Meeting and has now been published in the Journal of Transportation Engineering, Part A: Systems. “Social Impact Analysis of Various Road Capacity Expansion Options: A Case of Managed Highway Lanes,” by Wooseok Do, et al., is available here.

“Are Electric Cars Better for the Environment?”
That was the headline on a March 25, 2021 article in the Wall Street Journal. The short answer is yes, but not as much as you may think. Drawing on researchers at the University of Toronto, the article compared life-cycle CO2 emissions of gasoline and electric vehicles, including construction, producing the energy source, and operation for up to 200,000 miles for a Toyota RAV4 and a Tesla Model 3. Over a 200,000-mile lifetime, the emissions of the Toyota are 78 tons, compared with 36 tons for the Tesla. Net savings from the Tesla begin at the 20,600-mile point. In addition, the Tesla also comes out slightly ahead in total cost of ownership, according to Consumer Reports.

Alabama Truckers Question Legality of Trucks-Only Toll Bridge
The Alabama Trucking Association sent a letter to the two metropolitan planning organizations (MPOs) on either side of the Mobile River questioning the constitutionality of building the replacement I-10 bridge over the Mobile River as a trucks-only toll bridge. Besides questioning the potential impact on the congested Wallace Tunnel, the trucking group questions the constitutionality of doing so, implying that it might litigate against the plan if it goes forward.

Pennsylvania’s Toll-Financed Bridge Replacements Still in Play
In late April, the Pennsylvania Senate voted to prohibit PennDOT from proceeding with its plans to toll-finance the replacement of nine aging Interstate highway bridges. The Republican Senate members also passed changes to the state’s P3 law that would require legislative approval before PennDOT could proceed with any highway P3 that involved tolling. With passage not assured in the lower house, PennDOT has announced plans to release its request for proposals for the project this month, with the RFP scheduled for December. The project would be done as design/build/finance/maintain with the private partner compensated by availability payments supported by the new toll revenues to be paid to the state.

In Search of Transportation Equity
On May 11, a former USDOT official presented testimony on this emerging topic to the Senate Environment & Public Works Committee (EPW). It is one of the most thoughtful presentations to a congressional committee I have ever read. Steve Polzin discusses the many trade-offs inherent in siting any transportation facility. He also reminds readers that roadways function as parts of a transportation network and must not be analyzed in isolation. And he also points out that removing 50-year-old roadways will inevitably result in shifts of traffic (and its externalities) to other parts of the network. A brief paragraph cannot possibly convey the depth and seriousness of this discussion, which should be required reading for everyone interested in transportation equity.

Parkersburg to Privatize Its Memorial Bridge
Last month, the city council of Parkersburg, WV, gave final (unanimous) approval to selling the aging Memorial Bridge to United Bridge Partners. The company has committed to invest $50 million to rehabilitate the toll bridge and replace cash tolls with modern electronic toll collection. UBP will pay the city $4 million for the bridge, and the city will save at least $15 million in near-term operating and maintenance costs. In recent years, UBP has replaced aging bridges in Virginia and Indiana under long-term P3 agreements and has more recently signed a contract to do likewise in Bay City, MI.

Moody’s Cautious on American Jobs Plan’s Transportation Elements
In a report released April 7, Moody’s Investors Service pointed out that the traditional infrastructure funding in the $2.3 trillion package would only “modestly” address roads, bridges, and highway funding needs over an eight-year period, and would not provide a long-term stable funding solution. The report also notes that the large funding increases for urban transit and Amtrak will face what may be permanently suppressed ridership post-pandemic. The report, “White House Plan Provides Boost for Core Infrastructure Assets, But Not Transformative,” requires registration.

Inflated Job-Creation Numbers for California High-Speed Rail
Intrepid Los Angeles Times reporter Ralph Vartabedian once again delved into the California high-speed rail project, this time finding the project’s job-creation claims are grossly exaggerated. Despite a banner at one of the high-speed rail construction sites reading “5,000 jobs and counting,” the actual number of construction workers employed at any one time has seldom exceeded 1,000. The 5,000 number comes from records of people dispatched to job sites from union halls. “Each time a worker is sent to a job site, whether for one day or hundreds of days, it counts as a job for the purpose of the banners,” Vartabedian reports. He also discovered that of the $6.1 billion spent on the rail project thus far, only $265 million has been spent on construction labor.

Turnpike Service Plaza Company Gets New Owner
HMS Host, which operates service plazas on toll roads including the turnpikes of Delaware, Indiana, and New Jersey, is being acquired by a consortium of Blackstone Infrastructure Partners, Applegreen LTD, and B&J Holdings LTD. Applegreen itself operates 161 service areas in the United States, while Host also operates restaurants and shops in many U.S. airports. The consortium is paying $375 million for HMS Host, and will be its successor in current long-term service plaza P3s with the Delaware, Indiana, and New Jersey toll road providers.

Most Urban Counties Are Shrinking, Per Latest Census Report
Economist Jed Kolko explained in The New York Times Upshot on May 4 that the latest population estimates from the Census Bureau show that most urban areas lost population in 2020 for the second year in a row, while lower-density suburbs grew the fastest in 2020. Most of these changes stem from domestic migration, rather than births or immigration. Among the 10 fastest-growing metro areas last year were Austin, Boise, Cape Coral (FL), and Phoenix. The 10 metro areas that shrank the most include Jackson (MS), Honolulu, San Jose/Sunnyvale, San Francisco/Oakland, Los Angeles/Orange County, and metro Chicago. There are many implications here for transportation planning.

Florida Turnpike Joins E-ZPass
At last, Florida is becoming a full-fledged member of the 19-state E-ZPass consortium. A May 28 announcement by the Florida Turnpike Enterprise informed motorists that they can obtain a SunPass Pro transponder that will work at all 35 member toll agencies of E-ZPass, and can be obtained for $14.95. The Central Florida Expressway Authority joined E-ZPass in 2017.

Kansas May Develop Express Toll Lanes on Congested Highway
The Kansas Department of Transportation and local Overland Park transportation officials are considering the addition of express toll lanes to the congested 69 Highway. Overland Park is located south of Kansas City and has been growing rapidly. The estimated cost of the project is $300 million, with projected toll revenues likely to be sufficient to finance the project.

New Report on Performance of Starlink Broadband Service
A company called Ookla last month released a report on the performance of the SpaceX satellite broadband service, now undergoing beta testing with a large group of customers. With the initial fleet of Starlink satellites (a small fraction of the planned constellation), service is better in the United States than in Canada, and its speeds depend considerably on location. The report says service meets FCC Rural Development criteria and “could be a cost-effective solution that dramatically improves rural broadband access without having to lay thousands of miles of fiber.”

Opposition Mounts to DC-Baltimore Maglev
Two organizations spoke out forcefully last month against plans to spend $14-17 billion in taxpayers’ money to build a maglev train that would make the trip between the two downtowns in 15 minutes. NIMBY opposition is coming from Prince George’s County council members, who are sending a letter against the project to the Maryland congressional delegation, the Maryland DOT, and the Federal Railroad Administration. They say the draft environmental impact statement (EIS) did not reflect negative impacts on their communities, such as land value decreases from a maintenance yard and an electricity substation. The 40-mile route would be partly underground and would have only one intermediate stop (at BWI Airport) between Washington, DC, and Baltimore. And in congressional testimony last month, Amtrak CEO William Flynn argued that tax money would be better spent on improving commuter MARC rail service and replacing Amtrak’s ancient tunnel near Baltimore. If the maglev project experienced a typical cost overrun of 40 percent, its cost per mile would be around $542 million.

New Report Details Post-Construction P3 Performance Measures
Most studies on long-term highway design build finance operate maintain (DBFOM) P3s have focused on the procurement process and the construction phase, but few have dealt with longer-term performance and end-of-concession hand-back provisions. The National Cooperative Highway Research Program has released a new study to fill that gap: “Performance Metrics for Public-Private Partnerships.” The researchers reviewed metrics and the handback criteria for 18 P3 projects in nine states, as well as a survey of 26 state transportation departments. My one concern is that only two of the six case studies were revenue-risk P3s, both of which failed due to overly aggressive traffic and revenue projections. There have been 17 revenue-risk highway P3s thus far, so it’s unfortunate that successful examples like I-495 in Virginia and I-635 in Dallas were not selected.

Commentary Clarifies Types of Private Activity Bonds (PABs)
The public-private partnership community has made extensive and productive use of tax-exempt private activity bonds as part of the financing of nearly two-dozen DBFOM transportation projects, using up the entire $15 billion authorized years ago by Congress. My colleague Marc Scribner discovered in discussing an increase or abolition of that cap that some members of Congress were opposed, thinking these were the kinds of PABs used to finance sports stadiums and other boondoggles. To set the record straight, Marc has written a commentary, on the subject, explaining the different kinds of PABs.

Honolulu Heavy Rail Project’s Ongoing Woes
What can you say about a 20-mile elevated heavy rail transit project that was supposed to cost $5.1 billion and open by January 2020 but is only half-built and is now estimated to cost $12.4 billion and begin service by 2031? My Reason colleague Marc Joffe reviews this project as a cautionary tale of not achieving value for money.

Vehicle Autonomy Is Far Harder than Many Thought
In a recent piece at The Verge, Andrew Hawkins explains recent divestitures and mergers in the automated vehicle world. He assigns blame for this to three hard truths. First, true vehicle automation will take a lot longer to reach mass scale than previously thought. Second, it’s going to be a lot more expensive. Third, going it alone is no longer a viable option. This is a well-informed dose of skepticism about a field noted for relentless hype.

Haskell: 'Public-Private Partnerships Will Help Get CT Moving'

"Public-Private Partnerships Will Help Get CT Moving"

by State Senator Will Haskell and State Representative Roland Lemar

President Biden is pushing a big, bold infrastructure package. Connecticut is now a stronger applicant for federal aid.

Congress is debating an historic and transformative investment in our country's roads, bridges, and rails. Nearly any iteration of President Biden's plan would create thousands of jobs and provide a path toward a greener, safer, more connected future. This is welcome news in Connecticut, where decaying infrastructure hampers our economic development and worsens our quality of life. Soon, Connecticut will begin competing with other states for a fair share of federal funds.

There's no question that Connecticut has major needs, from restoring over 350 structurally deficient bridges to speeding up a commuter train line that's gotten slower over the last five decades. We're pleased to say that, thanks to legislation recently approved by the House and Senate, Connecticut will be able to compete with our neighbors in attracting innovative financing and address those needs.

What is innovative financing? Right now, we typically pay for infrastructure improvements through bonding. That's fine, to the extent that we're comfortable asking our kids and grandkids to pick up the tab. But since bonding in Connecticut is limited, so too is our ability to tackle major projects. Think, for example, of the messy intersection where I-91 meets I-84, or the Waterbury Mixmaster. Consider the moveable bridges in Fairfield County that are so old they require trains to slow down in order to cross safely. In each case, tackling these renovations costs hundreds of millions of dollars. Consequently, it will take ages to make these investments under our glacial status quo.

Luckily, innovative financing tools such as availability payments provide a path forward. Previously prohibited in Connecticut, private sector partners could now to provide money up front for the Department of Transportation as an alternative or supplement to bonding. There's no transfer or leasing of state assets, nor privatization of state work. States pay back these private sector partners through installments, resulting in more projects and speedier completion. Along the way, they gain access to specialized technology and expertise that is available in the private sector.

What does this have to do with President Biden's infrastructure plan? Transportation Secretary Pete Buttigieg has made clear that the federal government will reward states that take advantage of innovative financing opportunities. Already, federal grant reviewers charged with distributing the Infrastructure for Rebuilding America program and Rebuilding American Infrastructure with Sustainability and Equity awards are asking states to demonstrate their capacity to innovate.

Connecticut's outdated public-private partnership regulations, until now, have held our state back. If SB 920 becomes law, the Department of Transportation will have the opportunity to partner with private sector investors, increasing the pace with which we can pursue transformative improvements rather than slowly chip away at the small stuff. We did not let this moment pass us by, and we're excited to get Connecticut moving again.

Senator Haskell and Representative Lemar are Senate and House Chairs of the Transportation Committee.

Opinion/Slade: Better infrastructure through private, public partnerships

Lawrence Slade serves as chief executive of the Global Infrastructure Investor Association, an organization representing investors with $1 trillion of infrastructure assets under management.

If, as the old adage says, a fish rots from the head down, a state's economy crumbles from the infrastructure out. That's certainly the case for America's smallest state.

Owing to excellent seaport access and thoughtfully managed waterways, Rhode Island was once a commercial anchor of one of the most prosperous enclaves in the history of the world. Now, the state's economy is free-falling after decades of industrial collapse, and civil engineers rate its derelict critical infrastructure systems — everything from energy and dams, waste and waterway systems, and bridges and roads — among the very worst in the nation.

It's no coincidence, either: economies rise and fall on infrastructure because it expands access to opportunity by enabling the efficient delivery of people, goods, and services. But in the case of Rhode Island, chronic infrastructure instability is throttling opportunity — and will continue to do so unless and until policymakers adopt more comprehensive, market-based solutions to this crisis.

At a seemingly manageable 12,664 miles, Rhode Island has the second smallest state paved road inventory in the United States. But despite spending more than $438,000 per highway mile — a figure that far exceeds all but eight other states — fully half of its roads are in poor condition, according to the most recent survey by the American Society of Civil Engineers.

If you're looking for a bright spot, you won't find it in the state of bridges. Rhode Island is home to the country's third-highest percentage of structurally deficient bridges, a slight improvement from two years ago when it owned the greatest share. Some of the most-crossed interstate bridges in the state capital are rated structurally deficient, and all were constructed in or before the 1960s.

The period of economic expansion following the Second World War was a golden age of infrastructure investment. We built bridges, dams, and airports, deepened ports, and laid tens of thousands of freight and passenger rail miles. Today, the majority of these historic projects are reaching the end of their functional and safe life.

Unfortunately, the state's infrastructure will only deteriorate when countless critical assets approach a mass grave. What we've been doing for decades, blindly throwing millions of tax dollars at potholes, isn't working. It's time to get creative with the funding mix for infrastructure projects.

Private participation in infrastructure has been successfully leveraged by governments worldwide. The public-private partnership model spreads the risk (and return) between government and private enterprise to deliver a better experience for customers. Even the National Institutes of Health leveraged public-private partnerships to develop coronavirus vaccines that millions of Americans have trusted.

With transparency in the bidding, hiring, construction, and operation of infrastructure assets, public-private partnerships provide infrastructure better and more efficiently than either sector could alone. Still, many state and local governments, particularly blue and Northeastern jurisdictions, have been hesitant to invite the resources and expertise of the private sector. This is plainly foolish in the face of enormous funding shortfalls.

Someone needs to say it, and Providence needs to hear it: Rhode Island spends like it's Massachusetts but delivers infrastructure like it's Mississippi, and it's working families that shoulder the burden.

Infrastructure once made Rhode Island an enormous success and envy of the industrialized world. It can do that again, but policymakers need to get wise to the value of private sector participation.

Public-private partnerships crucial to economic recovery

The pandemic caused devastating economic damage to our communities. While the job market may never return to what it was before 2020, it’s undeniable that government action, combined with the ingenuity of small businesses and corporations, staved off what could have been even further socioeconomic harms.

Between improvements in California’s pandemic impacts, government lending programs and changes in business models, California is poised to reopen on June 15.

Prior to the shutdown, many cities, including Sacramento, were moving toward developing partnerships with private interest

Conventionally, many of us are taught that there are significant differences between the public and private sector. Some extol the virtues of maintaining private, individual interests, while others praise promoting the general welfare through government policy.

In normal times, some may argue that these interests are often competing, but if there is one stark lesson to take away from the coronavirus pandemic, it’s that those lines, while necessary, aren’t as deep as they may seem.

Prior to the shutdown, many cities, including Sacramento, were moving toward developing partnerships with private interests to enhance the quality of life for their residents.

One example is the partnership between SAFE Credit Union and City of Sacramento to invest in the new Convention and Performing Arts District. The partnership will no doubt play a key role in restoring the regional economy and improving downtown’s landscape.

As part of this agreement, the city secured an additional $23 million investment in support of Sacramento. So, the question is then: why don’t local governments and businesses partner more?

According to Deloitte Center for Government Insights, cities that smartly use such partnerships can reap a host of benefits, such as driving energy sustainability projects, reducing traffic congestion and driving overall job creation. Research shows that since 2015, more than 30 states have opened public-private partnerships to their municipalities as a way of driving growth.

Yes, such partnerships, dependent upon the project, can increase costs and profitability may vary. But a more global view would suggest that when risks are fully appraised, the return on the investment from a social and economic standpoint can be much more beneficial than a government or business going it alone.

To be certain, Sacramento has been savvy when it comes to innovating. Smart leadership led to the development of the downtown arena, investments in wireless technologies, the Crocker Art Museum, development of the Railyards, the Golden1 Center, as well as ongoing relationships including the Downtown Sacramento Partnership that reports more than $1 billion in public and private investments in the downtown area within the last decade.

SAFE has made a commitment to investing regionally and locally.  We look to set the example of working within the community to do its part to ensure economic recovery from this unprecedented pandemic.

I encourage all businesses and city leaders to continue the innovative thinking that has made Sacramento great and to continue to find ways to partner in the best interest of all our communities.

Public-Private Partnerships: An Alternative to Tax-funded Infrastructure

President Biden’s proposed Infrastructure Bill comes with a hefty price tag estimated to be approximately $2 trillion. While such legislation has traditionally been paid for with tax hikes and/or the issuance of bonds, Florida is at the forefront of an alternative funding mechanism – public-private partnerships (P3’s).

Florida Statute 255.065 sets forth Florida’s P3 framework. Considered perhaps the most advanced and developed P3 structure, many states look to Florida as the standard-bearer when it comes to implementing P3 projects. Now Florida’s P3 structure could guide the federal government in its plan to fund the President’s Infrastructure Bill.

Under Florida’s framework, government agencies shift some control and ownership to private companies in exchange for significant amounts of capital from the private sector to pay for needed public projects. Florida provides for government agencies to competitively solicit for such projects or for private entities to submit unsolicited proposals to government agencies for such projects. However the project originates, though, the government agency and the private entity ultimately enter into a comprehensive agreement whereby the private entity provides the capital or financing for a project that serves a public purpose, as well as the design, building, upgrading, operating, and/or ownership of the project. Typically, the private entity owns the project for some period of time and returns ownership to the government agency at an appointed time. Sometimes the government entity provides the private entity with a long-term ground lease of public property upon which the project is to be constructed and/or operated. Often there is a revenue split among the government agency and private entity, for example, from parking fees in the case of a parking garage or rents and revenues from retail operations. The Florida Statute provides guidance and minimum requirements but specifically states that it is to be “liberally construed to effectuate the purposes” of the Statute. In other words, government agencies and private entities can be creative so long as the project serves a public need or creates a public benefit.

Structuring a P3 raises legal and business issues which differ from the traditional business-to-business transaction model. For instance, we represented a private company that entered into a long-term ground lease with a state-owned university to construct and lease a building on state-owned land and license a dormitory and parking facilities on state-owned land for use in connection with the leased building. When dealing with an agency of the state, traditional indemnification covenants and damage remedies may not be available to the non-state party because of sovereign immunity issues, legislative funding constraints, and state contracting policies regarding such matters. Accordingly, creativity and flexibility need to be employed to address, as much as possible, the legal and business issues which governmental limitations may limit in a manner that is acceptable to the non-state party. Insurance policies may need to be utilized as a substitute for traditional indemnification covenants. The remedies available to the non-state party will need to be carefully considered and modified in light of the limitations placed upon available remedies against a state agency. In that transaction, we were able to address these special issues mutually beneficial to both the non-state party and the state, and the transaction has been a success for both parties.

We have previously written about the wide net President Biden has cast in defining “infrastructure” in his Infrastructure Bill. While P3’s have traditionally been used for more traditional infrastructure projects such as roads, bridges, airports, ports, and public buildings (all captured within the President’s definition), the new broader definition now places projects such as affordable housing, renewable energy, job retraining, and child care under the “infrastructure” umbrella. As a result, far more industries stand to benefit from the President’s Infrastructure Bill. Suppose the federal government follows Florida’s lead in its use of P3’s as a funding mechanism. In that case, private entities can be creative in their identification of projects and the terms under which they are willing to undertake the projects, government agencies stand to see more viable projects, and the public at large stands to benefit from the resulting increased investment in public projects.

How to 'Build Back Better' with public-private partnerships

Infrastructure is a high priority of the Biden administration and one of the very few areas of public policy where the prospects for bipartisanship are favorable. After all, who doesn’t want to improve our highways, bridges and broadband access?

While the president’s mantra for infrastructure improvement is “Build Back Better,” we must also ensure that we rebuild and revitalize responsibly. And that means engagement and partnership with the private sector to guarantee that infrastructure projects are carried out efficiently, effectively, transparently and in a socially and environmentally responsible manner.

The optimal means of doing so is through a public-private partnership (PPP), the very same vehicle that helped build Silicon Valley, launched the U.S. space program (and lunar landing) and developed and distributed COVID-19 vaccines under the Trump and Biden administrations.

In a sense, we are where we are today courtesy of public-private partnerships. While Spanish regents Ferdinand and Isabella may have financed Columbus’s first voyage to the New World, Juan Niño, the Quintero brothers and Juan de la Cosa were, respectively, the owner-operators of the Niña, Pinta and the Santa Maria.

The fact is that public-private partnerships built much of the early infrastructure of the United States, including the Philadelphia and Lancaster Turnpike road in Pennsylvania, which was initiated in 1792, and an early steamboat line between New York and New Jersey in 1808.

PPPs are slated to experience a renaissance in light of the $1.9 trillion proposed by the Biden administration to create 2.7 million jobs over the next 10 years and add over $5.7 trillion to the economy by 2024, making up for the COVID-19 recession job losses by a factor of 10.

So, what exactly are PPPs, how do they work and what are their benefits? PPPs are contractual agreements between government agencies – federal, state or local – and private companies. Collaboratively, they provide a public service, typically infrastructure-related utilities such as water, sewer, transportation, bridges, highways or light rail. Most public works projects in the U.S. are designed by the government and put out for bidding.

The lowest responsible bidder is awarded the contract. Then if there is an operational component, the facility will typically be operated by government employees. The major benefit of a public-private partnership is in getting the private entities involved to deliver a product more efficiently, more cost effectively and with improved service. The private entity has the expertise to provide the service; it is their focus, as it is what they were created for. With PPPs the financial risk is transferred from taxpayers to investors; the undertaking is “bundled” (the private partner designs, builds, finances and operates); and PPPs offer expanded capital opportunities — financing that uses a combination of equity and debt. One should note that a municipal government might be so heavily indebted that it cannot undertake a capital-intensive building project; but a private enterprise may be interested in funding its construction in exchange for operating profits once the project is complete. 

The financing of PPPs is generally sourced by the government through surpluses or borrowing or by the private sector through debt and equity finance. The funding, however, is typically sourced from taxes or user charges, depending upon whether it is a government-pays or user-pays scheme.

Examples of PPPs abound. For instance, the California Fuel Cell Partnership, a public-private partnership to promote hydrogen vehicles (including cars and buses) in California, is notable as one of the first initiatives for that purpose undertaken in the United States. The challenge is which comes first, hydrogen cars or filling stations?

Another public-private partnership example is  Challenge Seattle, a coalition that has been exploring an ultra-high-speed rail corridor from Portland to Seattle to Vancouver, along with broadband internet access and strategic land zoning.  

PPPs surely have their limitations, however. The Cross City Tunnel project in Sydney is a good example. When a concessionaire fails to fulfill its contractual obligations, the state is forced to take over project delivery, and this can entail substantial delays and cost overruns. Failure to complete a project can have other downsides. In the first instance, the intended facility is not built at all, so residents and businesses must continue to deal with the problems impacting the existing system. Second, a PPP failure that results in significant losses for bondholders could damage the prospects for future project financing.

For PPPs to succeed, a shared vision and mutual respect are paramount. Both parties must be as committed to achieving the others’ goals as they are to their own. Contracts alone cannot achieve this. Incentives (as opposed to penalties) and the involvement of a government champion/politically influential advocate are essential. Other requisites are the presence of political will and quality of institutions and governance. At the management level, measurable objectives, proper monitoring, clear accountability and consultative decisionmaking are essential.

To say U.S. infrastructure is in a sorry state of disrepair is an understatement. The American Society of Civil Engineers’ report card on the nation’s infrastructure grades it a “D+,” meaning mostly below standard, while the latest Global Competitiveness Report of the World Economic Forum finds the U.S. has declined from fifth place in 2002 to 13th in 2021 in terms of the quality of its infrastructure. 

The challenge is great and immediate. Harnessing and combining government investment, financing, oversight and accountability with private sector acumen in designing, planning and executing of projects will enable our infrastructure reform efforts to succeed.