Innovations in Transportation Infrastructure Development: A Road Less Traveled Perspectives of the Public Owner

Trends in State Highway Funding, National Historical Trend (1978 – 2004) Percent Fuel TaxesVehicle TaxesTollsGeneral FundOther Source: 2004 Highway Statistics, Table HF-10. Facility pricing (tolls) a small – but growing – method of financing transportation in the United States

2005 Gas Tax Rental Car Tax 23¢ Gas Tax 5¢ Gas Tax Federal Revenues Licenses, Permits, and Fees TNB and Other Toll Revenue Ferry Fares Miscellaneous Vehicle Sales Tax Local Revenues $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 Direct User Fees $400 Million Indirect User Fees $4,535 Million Special Taxes $176 Million General Taxes $49 Million Billions (Current Dollars) Current Transportation Funding Sources in Washington State Fiscal Years

Tacoma Narrows Bridge TNB under construction: 6 th largest D/B project in the world (as of 2005)

Realigning the traditional roles: Tacoma Narrows Bridge project Public SectorPrivate Sector Acquire Right-of-Way (ROW)Design BuildFinanceOperateMaintain Own (reversionary)

“ Cost Savings” by reversing the financing of TNB Mortgage Statement: Total Principal and Interest Over 24 Years Estimated at $1.572 billion Total Borrowing $711 m Mortgage Statement: Total Principal and Interest Over 34 Years Estimated at $1.908 billion* Total Borrowing $794 m *United Infrastructure Washington (UIW) Preliminary Financing Plan dated January 25, It is estimated that toll-payers will save at least $336 million over 24 years. But there is a price associated with these savings: more risk. Original TNB “Private Public Partnership”: financing **Seattle Northwest Securities, assumptions as of May 10, 2005 (interest rates as of 5/10/ BP with CABs issues 7-9). Traditional State Bond Financing**

“…A review of 23 new turnpikes nationwide shows that a clear majority are failing to meet revenue projections to justify their costs. Even with adjustments for the break-in period in the opening years, 86 percent of new toll roads in states failed to meet expectations in their first full year. By year three, 75 percent – 15 of the 20 that have been open that long – remained poor performers.” Truth be tolled first in a three-part series Roads to riches Paved with bad projections Denver Post June 1, 2006 Proposition Bet: what are the chances of being “right” about traffic revenue forecasts?

Revised policy (and political) considerations in PPP deals Subsidy level from statewide tax sources (no longer “lowest tolls possible”) Amount of funds raised relative to discount paid (no longer lowest cost of borrowing) Ownership of facility by private sector Willingness to “fail”

Camino Columbia Tollroad Laredo, TX Project Start: 1999 Project Complete: 2000 Project Cost: $90,000,000 Traffic only 10% of forecast Defaulted on debt; sold at auction for 13 cents on the dollar BUT: State purchased and operates as toll road – with much lower cost basis. Failure, or success?