New Hampshire’s first welcome center public-private partnership project has been greeted with interest from both visitors and other states looking to wring revenue from highway rest stops.
The New Hampshire Department of Transportation opened the new Hooksett Welcome Centers on Interstate 93 in 2015. New Hampshire entered into a 35-year ground lease with The Common Man family of restaurants at the rest areas, about 30 miles north of Massachusetts border, with the state receiving a percentage of the revenues. The two locations are projected to bring in four million visitors annually and deliver $38 million in rent revenue over the course of the lease.
“It was an opportunity to take what was two rest areas and liquor stores on opposite sides of the highway and look at ways of improving them through some form of a P3 initiative,” said Paul Godfrey, a department manager at HNTB Corporation, which consulted the NHDOT through the RFP process. “The revenue from sales is far exceeding expectations.”
Godfrey said Ohio and New Jersey have both contacted New Hampshire to examine ways they incorporate similar P3 strategies for their aging rest areas.
Connecticut, Maryland, Virginia and Pennsylvania have also undertaken privatization approaches for highway rest areas, but Godfrey emphasized that none have ever presented the opportunity New Hampshire had in front of it given the location on a stretch of the interstate highway controlled by the Bureau of Turnpikes, which is not subject to federal rules on liquor sales.
New Hampshire's state run liquor outlets have long been a destination for out-of-state aficionados of discount booze.
The first two years of the new visitor centers have seen many visitors spend hours at the locations eating lunch, shopping at the liquor stores, examining state-made products on display and partaking in “food truck” days during the summer, according to Godfrey.
“It was designed to be an attraction so that it becomes not just a rest stop but a destination,” said Godfrey. “New Hampshire has taken the rest stop P3 to the next level.”
Matt Bruning, press secretary for the Ohio Department of Transportation, said the topic of New Hampshire’s rest stop P3 came up during a recent multi-state conference call, but there has been no formal move yet to proceed with the concept. New Jersey transportation officials could not be reached for comment.
NHDOT deputy commissioner Christopher Waszczuk said $880,000 of revenue has been generated to the state thus far along with significant savings from a private operator maintaining the properties.
The Common Man funded the design, construction, maintenance and operation of both service areas with new buildings on both sides of the highway featuring a food court, 1950s-style diner, an Italian farmhouse restaurant, deli, breakfast shop, 24-hour convenience store and bank branch.
Both rest stops also feature 20,000-square-foot NH Liquor and Wine Outlet stores that are funded and operated by the New Hampshire Liquor Commission. In contrast to many other states were hard alcohol is sold directly by the state government and prices are typically relatively high, in New Hampshire the strategy is to pursue revenue through volume and discounting; in its own words, the "State Liquor Commission aggressively pursues a strategy that provides you with the best possible value and the most pleasant shopping experience."
“The rest stops needed a major renovation and improvement,” said Waszczuk. “What is unique about these locations compared to typical highway rest stops is there are no national brands and it has a local flavor.”
The vision of a visitor center P3 was the brainchild of former NHDOT commissioner George Campbell, who saw potential in the rest stops on the gateway road to the White Mountains and NASCAR’s New Hampshire International Speedway. After two RFPs starting in 2009 that did not successfully attract bids that aligned with the project goals, the third attempt proved a winner with a new strategy based on emphasizing New Hampshire-centric themes with the NH Liquor Commission constructing and operating its stores independently.
Roddy Devlin, a project finance and P3 attorney at Squire Patton Boggs, said a recent Connecticut P3 to redevelop 23 service plazas in the state has proved successful and combined with the New Hampshire initiative shows the potential for states embracing private investment for smaller projects. The concessions of the Connecticut rest stop areas were acquired last year by John Laing Infrastructure Fund in a deal advised by Squire Patton Boggs.
“It shows you don’t have to be a mega-project to have a useful P3 that benefits the public,” said Devlin. “The private sector can operate restaurants and businesses better than the public sector.”
Rebecca Harris, director of the transportation advocacy organization Transport NH, said that outside the box approaches such as the Hooksett Welcome Centers P3 are critical with states unable to rely on state and federal support for transportation projects. Governor Chris Sununu’s two-year budget signed in late June designates total funding for transportation expenses at $615.6 million in the 2018 fiscal year and $617 million for 2019.
“Given the shortfall in funding at the state and federal level for all modes of transportation, I commend the New Hampshire Department of Transportation for exploring new sources of revenue,” said Harris. “The federal and state gas tax revenues have not been sufficient to maintain our roads and bridges for many years, let alone modernize our transportation system to include options that make our state attractive to businesses and skilled labor.”
The American Society of Civil Engineers 2017 New Hampshire Infrastructure Report Card graded the state at C-minus citing a lack of transportation funding commitments. The ASCE report noted that legislation implementing a 4-cent-per-gallon gas take hike is projected to produce roughly $33 million in additional revenue per year for NHDOT infrastructure projects. Revenue from the gas tax increase under a new state law is allocated first for bond debt service on larger projects, but the ASCE emphasizes that this is not a long-term funding solution because the taxes expire in 20 years or when the bonds are paid off.
New Hampshire general obligation bonds are rated Aa1 by Moody’s Investors Service, AA-plus by Fitch Ratings and AA by S&P Global Ratings. Moody’s analyst Baye Larsen cited strong revenue performances that have improved reserve levels following several years of narrow balances in a report last November that assigned an Aa1 rating prior to the state issuing $114 million in GO bonds.