Tuesday, October 10, 2006

D.J. Gribbin, Former National Field Director of the Christian Coalition and counsel to the FHA, works for Macquarie


P3 Toll Roads on the March

Expert Sees 16-25 Concessions Over 2 Years


by Lynn Hume
The Bond Buyer
Copyright 2006

CHICAGO - During the next two years, states will probably award between 16 and 25 concession projects for toll roads to be operated and improved by public-private partnerships, D.J. Gribbin, a division director at Macquarie Holdings Inc., told the bond lawyers meeting Thursday night.

"For 2007, I expect we will see states award six to 10 concession projects," Gribbin, former chief counsel of the Federal Highway Administration until earlier this year, said in a speech to the American College of Bond Counsel. "The following year will be a little busier with between 10 and 15 projects awarded," he said.

"While the number of projects is quite modest, the value of these transactions over the next couple of years could reach $80 billion," Gribbin said.

In such concession projects, a private company signs a long-term lease with a state or local government to operate a toll road in exchange for the right to collect tolls. The government, however, still controls the price of the tolls, and the timing and nature of the improvements to be made on the roads, which are detailed in the agreement.

Macquarie Holdings is an affiliate of Macquarie Bank Ltd., in Australia, which is a provider of investment, advisory, trading, and financial services around the world. Macquarie Infrastructure Group is the leading investor, developer, and operator of transportation concessions - toll roads built and operated through public-private partnerships - in the United States and other developed countries.

Macquarie's concession investments in the United States include the Chicago Skyway - the first privatization of an existing road in the country - the Indiana Toll Road, the Dulles Greenway in northern Virginia, and the South Bay Expressway in San Diego.

So Gribbin, who became Macquarie's first employee in Washington, D.C., in January, and worked on the legal and public policy issues involved in public-private partnerships for eight years before that at the FHA, Koch Industries Inc., and the National Federation of Independent Business, is uniquely qualified to talk about PPPs or P3s, as they are called.

He told the bond lawyers that in the next year, he expects to see six states adopt new P3 legislation allowing for concession toll road projects: New York, Pennsylvania, Illinois, Ohio, New Jersey, and Delaware.

Gribbin said the U.S. highway system, which began development as long ago as 1794, is "a wonder of the world" but something that most Americans take for granted.

However, many U.S. highways today are failing to keep up with growth. They are over-congested and need repair, he said. Gribbin attributes the failure of highways to two things. First, he said, Americans have stopped building highways. Since 1980, vehicle miles traveled have increased 103% but lane miles have increased by only 5%.

In addition, governments have refused to adequately allocate "rare space" on the highway network, he said. Gribbin explained that "rare space" means rush hour space in which governments could allow commuters to pay tolls and essentially "buy" their way out of congestion.

The solution to highway failures, Gribbin said, is to treat the highway system like the phone system, pipeline systems, and the electricity network - allow the private sector to operate it and price it accordingly.

"While some have been dismissive of the prospects of toll roads in the U.S., the evidence indicates a strong, growing acceptance of this old, but new approach to providing highway infrastructure," Gribbin said.

In a yet-to-be-released study, pbConsult found that during the last 10 years an average of 50 to 75 miles of new, limited-access highways have been constructed each year as toll roads, representing 30% to 40% of all limited-access roads constructed during this decade, he said.

The report also found that 22 states and one territory have moved forward with about 147 new toll road projects since the passage of the Intermodal Surface Transportation Efficiency Act (ISTEA), the highway reauthorization act of 1991. Of these projects, 28 have made it through the environmental process and are either in design or construction, according to the report.

If all of these projects were constructed, they would provide 13,800 new lane miles of capacity at a cost of about $77 billion, Gribbin said.

© 2006 The Bond Buyer: www.bondbuyer.com