WASHINGTON - State and local governments, in an effort to meet growing demand for transportation infrastructure, increasingly are reaching out to private companies to help them construct and operate highways, bridges, and transit systems.
Projects that are in the pipeline include the Route 3 North highway in Massachusetts; the Central Texas Turnpike Development Program, which includes several roads in Austin and elsewhere; and the Dulles, Va., Corridor Rapid Transit Project, according to officials representing state agencies, engineering and consulting firms, as well as the investment banking community who spoke yesterday at the American Road and Transportation Builders Association's annual conference on public-private ventures.
These projects will add to the few transportation ventures that the public and public sectors that have already been jointly undertaken. The projects that are further ahead include the San Diego SR 125 Parkway, the Las Vegas Monorail, and the Tacoma, Wash., Narrows Bridge.
"The public sector can't meet all infrastructure needs alone," said James Atwell, assistant commissioner for finance at the Virginia Department of Transportation. " We need a combination of public and private sector together to bring transportation infrastructure to this country."
Virginia last year become one of the first states to embrace the concept of public-private cooperation in transportation, which led to a $348 million bond sale for the Pocahontas Parkway, south of Richmond.
"I think we got it sold in Virginia, and I think we need to sell it nationwide," he said.
Most of the projects would use the so-called 63-20 financing concept. Under this financing method, a state or local agency establishes a non-profit 63-20 corporation, which then sells tax-exempt bonds on behalf of the agency. A private company typically would design, build, maintain and operate the project, which will be owned by the 63-20 entity through the life of the bonds and then revert to public ownership.
Typically, the bonds would be backed by tolls.
However, that is not the case with the Route 3 North project since the Massachusetts legislature barred it from toll use. That project consists of adding one lane in each direction and reconstructing 27 bridges along the 21-mile long existing highway between Burlington and the New Hampshire border.
"Tolls in Massachusetts is a four-letter word," explained Edward Corcoran, who yesterday started working at Foley, Hoag & Eliot, a Boston law firm. As the former deputy secretary of the Massachusetts Executive Office of Transportation and Construction, Corcoran has helped getting the Route 3 North project off the ground.
Instead of tolls, the estimated $200 million project will be financed by bonds backed by future state appropriations. Corcoran noted that such bonds would not be backed by the full faith and credit of the state, but added that they still would be only slightly riskier than general obligation debt.
"The understanding is -- and I think it's pretty clear with the legislature -- that if there was a failure to appropriate ... it would have a significant ripple effect on the rest of the Commonwealth's bond capacity," he said.
Corcoran added that the state plans to use a 63-20 design for the project, but that other financing mechanisms are under consideration.
The San Diego SR 125 parkway also may use a 63-20 structure, although its sponsors hope to keep the project fully private. The sponsors plan to sell $250 million in bonds next June, and the level of interest rates then will decide whether to sell taxable or tax-exempt debt.
"If the interest rates are somewhere where we like them to be ... we can keep the deal private and we can essentially do it as a corporate bond financing," said Michael Schneider, senior vice president of Parsons Brinckerhoff, a major engineering firm involved in the project. "If the interest rates are too high, we are creating a 501c(3)," a non-profit entity which would adhere to the 63-20 regulations.
The city of Chula Vista, just south of San Diego, has already agreed to form a 63-20 entity if the sponsors decide to go that route, Schneider said.
"We're keeping our options open. We will make a decision probably just a couple of months before we go to the market," he said.
