Interstate Tolls Seen As Untapped Source For P3s

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DALLAS - The Senate Finance Committee was told Thursday that tolling the existing free lanes on interstate highways could provide the revenues needed to expand the use of public-private partnerships to finance state and local transportation infrastructure projects.

The revenues generated by converting interstate highways to toll roads would be attractive to potential private investors seeking a return on their investment, said Baruch Feigenbaum, assistant director for transportation policy at the non-partisan Reason Foundation.

"If you have [interstate] tolling you then have a lot more states that can use that to enter into more P3s," Feigenbaum said. "It's a critical tool, because the best kinds of P3s are those supported by revenues."

The six-year, $275 billion DRIVE Act highway funding measure approved this week by the Senate Environment and Public Works Committee allows for expanding the current three-state test market for interstate tolls. President Obama's Grow America Act proposal also expands the ability of states to levy tolls on interstates.

Current federal law prohibits states from tolling existing free lanes on federally financed highways. States are allowed to toll new interstate lanes that are added to increase road capacity.

More states are offering annual availability payments rather than toll revenues to attract private investors to transportation projects but that doesn't solve the real problem, Feigenbaum said.

"You can provide availability payments, but those come from the gasoline tax and not from new revenues," he said. "You might have solved the financing problem but you still have the funding problem."

Interstate tolling would give flexibility in dealing with their transportation needs to states, said David Narefsky, partner and co-leader of the infrastructure practice group at Mayer Brown LLP.

"If states had the expanded authority to toll existing interstates, you would be able to have a real opportunity for states to expand P3s and use the toll revenue to pay for all of this badly needed infrastructure that we're told we can't find a way to pay for."

Narefsky also urged the committee to increase the cap on special transportation private activity bonds used extensively in transportation P3s. The limit on the bonds should be raised to $30 billion because the $15 billion authorized in 2007 is almost exhausted, he said.

The Finance Committee is looking at ways to generate the $90 billion or more of new revenue required to support a six-year transportation funding bill, but Chairman Sen. Orrin Hatch, R-Utah, said P3s and other alternative financing approaches are not the solution to the revenue shortfall in the Highway Trust Fund.

"While they are important, these financing alternatives and ideas are not meant to address the immediate shortfall in the Highway Trust Fund," Hatch said. "As long as our federal highway program is based upon reimbursements to states made on a formula basis, there is no workable substitute for federal funding."

A report last week from the Congressional Budget Office said the 36 highway P3s in the United States under way or accomplished within the past 25 years total $32 billion, or less than 1% of the $4 trillion spent by all levels of government over that period. About half of the $32 billion has been dedicated within the past five years, CBO said.

Colorado has successfully used P3s to finance transportation projects but the simplest solution to the highway funding problem would be an increase in the gasoline tax, said Shailen Bhatt, executive director of the Colorado Department of Transportation.

Financing mechanisms cannot correct what is essentially a funding problem due to revenue shortfalls, he said.

"We in Colorado would love to bond and accelerate our most important projects, but we need a revenue stream to pay for it," Bhatt said. "Our nation's highways need a stable funding source first and foremost if we want to move ahead in transportation."

 

 

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