"it's tollway or no way."
Business may get big role in roads
February 5 2006
By Ryan Mahoney
Atlanta Business Chronicle
Copyright 2006
State lawmakers and officials are exploring a new way to pay for the highways Atlanta desperately needs, maybe with your 401(k).
Several major international and U.S. companies are encouraging Georgia to consider a type of public-private partnership, known as "concessions," that gives the private sector an unprecedented role in road-building.
In concessions, a consortium of contractors and investors builds or expands a road with toll lanes -- putting up part or all of the funding -- then operates and maintains it under a long-term lease with the city, state or county. The concessionaires recover their investment by keeping the toll revenue generated over the term of the lease, which may be up to 100 years.
In some cases, the concessionaires even pay the government $1 billion or more for the privilege, although that payment can inflate the toll rates.
"We need to discuss this," said Larry Dent, Georgia Department of Transportation deputy commissioner and the department's No. 2 official. "It sounds exciting to be able to get that money, but it's going to be on the back of whatever toll mechanism you choose."
Sydney, Australia-based Macquarie Bank Ltd., one of the world's largest infrastructure investors, would like to add a few projects in Georgia to what is essentially its toll road mutual fund, which attracts institutional investors such as insurance companies, pension plans and 401(k)s.
"We've sort of been keeping an eye on Georgia," said Chris Leslie, an executive director at subsidiary Macquarie Securities, "and are really waiting for the right type of project to appear."
Billions invested
Other countries have long used concessions to build all types of public infrastructure, including roads, ports, light rail, airports and utilities. Now European and Australian firms are bringing the practice to U.S. shores and taking the lead on projects here.
Concessions-backed roads are in the works in a handful of states, particularly California, Texas and Virginia. They range from an 11-mile highway soon to open in San Diego to a planned superhighway through Texas to Mexico.
Some locales are even selling leases on existing toll roads to concessionaires armed with ready cash. Chicago recently got nearly $2 billion in such a deal, and Indiana is poised to collect almost $4 billion.
There have been some speed bumps; Orange County, Calif., ended up buying out the investors on a tolled lane expansion there, and the Texas superhighway has yet to materialize.
But there's a simple reason concessions are gaining steam, said Robert Poole, director of transportation studies at Reason Foundation, a free-market think tank in Los Angeles.
At 50 years old, the federal interstate highway system is showing signs of revenue exhaustion. In Georgia, as in other states, there's enough money from the gas tax to cover highway maintenance, but not enough to allow much major new construction. Concessions offer an easy way out.
"If you want funding for big capacity increases, it's tollway or no way," Poole said. "The concessions model works."
Governments like concessions because they can raise more capital for projects, stretching their finances over a longer period. They retain control of everything from how often the concessionaire can hike the tolls to how frequently it must remove graffiti and roadkill. And, as with most public-private deals, using private funding means projects get built faster.
For their part, the concessionaires don't have to worry about earning their money back during the first decade of the road's operation, which often is how long it takes for commuters to start using a new toll road en masse. On the downside, they can take a hit if drivers don't flock to the new road as predicted.
Georgia officials also may need time to get used to the concessions approach. GDOT approved the state's first-ever public-private road deal, a proposal that does not use concessions, less than two months ago. It is expected to take bids for public-private ventures on other corridors this summer.
That initial project, the billion-dollar widening of interstates 75 and 575 in Cobb and Cherokee counties, will be partially financed either by truck-only toll lanes or by bus rapid transit lanes that drivers could pay to use as de facto express lanes. A group led by Bechtel Infrastructure Corp. will design and build the project and chip in with debt financing -- as opposed to the equity investment common in concessions -- but will not operate the road or collect tolls as a concessionaire would.
Interest building
With the I-75/575 project moving forward, the state Senate Transportation Committee, under the new leadership of former Senate Majority Leader Bill Stephens, R-Canton, is taking a keen interest in concessions. On Jan. 25, in the first of what are expected to be several meetings addressing the issue, the committee heard a presentation by The Goldman Sachs Group Inc. (NYSE: GS), which has advised several states on public-private legislation.
Goldman Sachs Vice President Rick Fitzgerald said the tolls planned for the I-75/575 project may not generate enough revenue, potentially leaving the state to cover the cost.
"To get private capital into the mix," Fitzgerald said, "a concession agreement is the best way."
Spokesmen for Bechtel and Washington Group International Inc. (Nasdaq: WGII), part of a group that has proposed conventional public-private projects for Georgia 400 and Ga. 316, said their firms are considering concessions for future use but are more comfortable with the low-risk, tax-exempt bonds used in conventional public-private initiatives.
"Concessionaires, by and large, are investors," said Washington Group Vice President Jim Carroll. "We're in business to build roads."
States are beginning to embrace the model, though.
"We want to use the private sector to build corridors, and undoubtedly, those corridors will be user-financed," said Jim Ely, executive director of Florida's turnpike system, who is scheduled to address Stephens' transportation committee later in February.
© 2006 Atlanta Business Chronicle msnbc.msn.com
February 5 2006
By Ryan Mahoney
Atlanta Business Chronicle
Copyright 2006
State lawmakers and officials are exploring a new way to pay for the highways Atlanta desperately needs, maybe with your 401(k).
Several major international and U.S. companies are encouraging Georgia to consider a type of public-private partnership, known as "concessions," that gives the private sector an unprecedented role in road-building.
In concessions, a consortium of contractors and investors builds or expands a road with toll lanes -- putting up part or all of the funding -- then operates and maintains it under a long-term lease with the city, state or county. The concessionaires recover their investment by keeping the toll revenue generated over the term of the lease, which may be up to 100 years.
In some cases, the concessionaires even pay the government $1 billion or more for the privilege, although that payment can inflate the toll rates.
"We need to discuss this," said Larry Dent, Georgia Department of Transportation deputy commissioner and the department's No. 2 official. "It sounds exciting to be able to get that money, but it's going to be on the back of whatever toll mechanism you choose."
Sydney, Australia-based Macquarie Bank Ltd., one of the world's largest infrastructure investors, would like to add a few projects in Georgia to what is essentially its toll road mutual fund, which attracts institutional investors such as insurance companies, pension plans and 401(k)s.
"We've sort of been keeping an eye on Georgia," said Chris Leslie, an executive director at subsidiary Macquarie Securities, "and are really waiting for the right type of project to appear."
Billions invested
Other countries have long used concessions to build all types of public infrastructure, including roads, ports, light rail, airports and utilities. Now European and Australian firms are bringing the practice to U.S. shores and taking the lead on projects here.
Concessions-backed roads are in the works in a handful of states, particularly California, Texas and Virginia. They range from an 11-mile highway soon to open in San Diego to a planned superhighway through Texas to Mexico.
Some locales are even selling leases on existing toll roads to concessionaires armed with ready cash. Chicago recently got nearly $2 billion in such a deal, and Indiana is poised to collect almost $4 billion.
There have been some speed bumps; Orange County, Calif., ended up buying out the investors on a tolled lane expansion there, and the Texas superhighway has yet to materialize.
But there's a simple reason concessions are gaining steam, said Robert Poole, director of transportation studies at Reason Foundation, a free-market think tank in Los Angeles.
At 50 years old, the federal interstate highway system is showing signs of revenue exhaustion. In Georgia, as in other states, there's enough money from the gas tax to cover highway maintenance, but not enough to allow much major new construction. Concessions offer an easy way out.
"If you want funding for big capacity increases, it's tollway or no way," Poole said. "The concessions model works."
Governments like concessions because they can raise more capital for projects, stretching their finances over a longer period. They retain control of everything from how often the concessionaire can hike the tolls to how frequently it must remove graffiti and roadkill. And, as with most public-private deals, using private funding means projects get built faster.
For their part, the concessionaires don't have to worry about earning their money back during the first decade of the road's operation, which often is how long it takes for commuters to start using a new toll road en masse. On the downside, they can take a hit if drivers don't flock to the new road as predicted.
Georgia officials also may need time to get used to the concessions approach. GDOT approved the state's first-ever public-private road deal, a proposal that does not use concessions, less than two months ago. It is expected to take bids for public-private ventures on other corridors this summer.
That initial project, the billion-dollar widening of interstates 75 and 575 in Cobb and Cherokee counties, will be partially financed either by truck-only toll lanes or by bus rapid transit lanes that drivers could pay to use as de facto express lanes. A group led by Bechtel Infrastructure Corp. will design and build the project and chip in with debt financing -- as opposed to the equity investment common in concessions -- but will not operate the road or collect tolls as a concessionaire would.
Interest building
With the I-75/575 project moving forward, the state Senate Transportation Committee, under the new leadership of former Senate Majority Leader Bill Stephens, R-Canton, is taking a keen interest in concessions. On Jan. 25, in the first of what are expected to be several meetings addressing the issue, the committee heard a presentation by The Goldman Sachs Group Inc. (NYSE: GS), which has advised several states on public-private legislation.
Goldman Sachs Vice President Rick Fitzgerald said the tolls planned for the I-75/575 project may not generate enough revenue, potentially leaving the state to cover the cost.
"To get private capital into the mix," Fitzgerald said, "a concession agreement is the best way."
Spokesmen for Bechtel and Washington Group International Inc. (Nasdaq: WGII), part of a group that has proposed conventional public-private projects for Georgia 400 and Ga. 316, said their firms are considering concessions for future use but are more comfortable with the low-risk, tax-exempt bonds used in conventional public-private initiatives.
"Concessionaires, by and large, are investors," said Washington Group Vice President Jim Carroll. "We're in business to build roads."
States are beginning to embrace the model, though.
"We want to use the private sector to build corridors, and undoubtedly, those corridors will be user-financed," said Jim Ely, executive director of Florida's turnpike system, who is scheduled to address Stephens' transportation committee later in February.
© 2006 Atlanta Business Chronicle
posted by Porkus Maximus Tex: at Sunday, February 05, 2006
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