WASHINGTON - The transportation bill scheduled for its first vote in a House subcommittee this week would drastically alter the ability of state and local governments to toll and enter into public-private partnerships by creating a federal office that would oversee and approve such actions for highways financed with federal aid.
Reaction from the market this week has been mixed. Some sources said the bill adds another level of bureaucracy to the system, and would discourage P3 transactions, while others say that reasonable checks on tolling agreements would be a net positive for the sector in the long run.
The bill, introduced by House Transportation Committee chairman James L. Oberstar, D-Minn., to replace the Safe, Accountable, Flexible, Efficient Transportation Equity Act: a Legacy for Users, or SAFETEA-LU, would create an Office of Public Benefit within the Department of Transportation. The office would be a "one-stop shop" for all tolling and P3s, according to the committee's summary of the bill. The office would oversee tolls and P3s, and approve or deny state plans for toll rates on highways that receive federal funding.
The bill also defines the terms of P3 agreements. It would require concessionaires to both give states permission to improve or expand roads near the toll road and allow them to buy back the facility "in the future."
The current law similarly disallows tolls on Interstate roads, bridges and tunnels, consistent with the "freeway" tradition, but does not extend to highways that are financed by states with federal aid. But it permits exceptions through piecemeal programs for value pricing, express lanes, and interstate construction and rehabilitation projects.
It also allows states to create unlimited high-occupancy toll lane projects on interstate facilities, as long as the project has approval from the Federal Highway Administration, state Department of Transportation, and the operating agencies. As a result, about 2,900 miles of toll facilities exist in the 46,730-mile federal highway system, according to the FHWA.
The bill also includes tolling at the local level in its plans for a large-scale metropolitan transportation program. Metro areas would be allowed flexibility in developing plans for tolling and congestion pricing, but those plans would be subject to approval from the Office of Public Benefit.
If certain provisions are enacted, the federal government would overstep its bounds and discourage private investment at a time when states are starving for federal funds due to decreased gas tax revenues, sources said.
"It would represent a very significant expansion of federal authority over P3s, and apparently would extend not only to the Interstate system but to all federal-aid highways, which is a line that hasn't been crossed before," said Payson R. Peabody, a former congressional staffer and attorney with Dykema Gossett PLLC here. Peabody added that it is inappropriate for the DOT "to be dictating the rules for deals that are between states and concessionaires."
On the other hand, creating a national infrastructure bank - not yet included in the bill, but expected to be added to it later, according to a committee spokesman - that lends to investors would arguably be good for P3s, Peabody said.
A federal policy for tolling that replaces pilot programs and creates uniform rules could be a boon to public and private stakeholders, if it leads to more P3 deals, others said.
"It's conceivable that it could make it easier for existing facilities to move in lock-step with other tolled facilities," said Mike McDermott, a Fitch Ratings analyst for toll roads.
Another analyst, Kurt Forsgren of Standard & Poor's, said it's difficult to forecast the results of the legislation, but that credit analysts "look for the ability of toll operators to be able to price the access to their infrastructure as they see fit without controls," among other factors.
But a stringent set of rules could ultimately save tolling projects from losing public support, said Jack L. Schenendorf, a longtime Transportation Committee staffer, now of counsel at Covington & Burling LLP here.
"A number of the P3s that have been agreed on from the beginning are not in the public interest. They are too extreme," Schenendorf said. The administration of George W. Bush was "willing to approve virtually anything, so I think there have been some pretty bad P3s agreed to at this point, and I worried that it would backfire" and cause a backlash among drivers.
As a result, a reasonable set of rules could benefit state and private tolling entities in the long run, by preventing exorbitant deals, Schenendorf said. But the rules should not be so restrictive as to drive P3s into the ground, he said.
Private companies "might be upset about it because they won't get the same kind of giveaways that the Bush administration gave," he said.
"This is a deal being made by a government, in a facility built with federal funds that belongs to the people. That's the difference here, these are public assets," he said.
