Public Private Partnerships Ryan A. Hoff May 15, 2007 FHWA Northern Borders Conference Chicago, Illinois May 15, 2007 Indiana Perspective

Our Industry Capital Intensive $75 Billion in 2005 Insatiable appetite for $ Often Taken for Granted?

VMT:  100% Ton-miles Freight:  50% NAFTA Surface Trade:  80% US Population:  30% # Registered Drivers:  39% # Vehicles:  55% Setting the Stage - Nationally

VMT:  100% Ton-miles Freight:  50% NAFTA Surface Trade:  80% US Population:  30% # Registered Drivers:  39% # Vehicles:  55% Setting the Stage - Nationally

Traditional Funding Motor Fuel Taxation – Department of Treasury: 18.4¢/gal of gasoline 24.4¢/gal of diesel 8.0¢/gal of gasohol – Department of Revenue: 18.0¢/gal of gasoline 16.0¢/gal of diesel – Gasoline Range: Georgia low at 7¢ Wisconsin high at 28.5¢

Funding History US Department of Treasury: – Last increase: Indiana Department of Revenue: – Last Increase: ¢/gal of gasoline but only 1¢ went to Highway Fund – Before 2003:Last Increase: : 1¢/gal of diesel 1983: 1¢/gal of gasoline

Remedies? Timely Fuel Tax Increases/Indexing? Pay by the mile??? – GPS – Annual plate registration with true- up at title transfer Other fees (ie. Taxes, Permits, Tolls)? Public Private Partnerships

A Delivery Model which: – Allows Private investment in the public sector – Allocates risk and responsibility in new ways – Uses other peoples’ money, other peoples’ equity – Provides opportunities otherwise unavailable

The Common Thread Flow of Money, and The Allocation and Assumption of Risk Drives the Relationship….. all defined in a long term lease agreement!

Major Risk Elements $ $ $ $ $ $ Risks Removed $ $ Long Term O&M, Etc. ConstructionROW Environmental Permitting Legislative Approval Controlling Agencies Preliminary Feasibility Traffic & Revenue Project Value

Indiana’s Experience Indiana Toll Road (Asset Lease) – I80/I90 Northern Indiana. 152 Miles from OH to IL. – 75 year term, $3.8B up-front payment to Indiana – Modernized toll rates established prior to closing – Rate escalation limited over term – Concessionaire’s ability to isolate risk 50 years of operating history Limited Construction Risk – Benefit: Fully funded 10 year transportation plan

Indiana’s Experience Interstate 69 Indianapolis to Evansville (Once considered as P3, now a freeway) NEPA Tier I: non-tolled version issued 2004 Revised to include tolling option Advisors engaged to assist in RFP development Decided to revert to the freeway model NEPA Law suit filed Tier 2 permitting process underway Construction to begin June 2008 $700M “in the bank”

Indiana’s Experience Illiana Expressway Joint project with IDOT 70 Mile beltway around Chicago & NW Indiana Congestion Relief Economic Development Development efforts on portion East of I65 suspended 3/24/07 due to public opposition

Indiana’s Experience Indiana Commerce Connector 85 mile - partial outer beltway Up to 75,000 vehicles/day Economic development Congestion relief Development efforts suspended 3/24/07 due to public opposition

What We’ve Learned - Mechanics Do not underestimate effort required to create a P3 project The path from point A to point B looks perfectly straight from 30,000 feet A multi-disciplined approach. Seek help. Financial decisions trump technical merits

What We’ve Learned – Political Do not assume authority is forthcoming Education is key to, but not a guarantee of, success Project by project approvals difficult to obtain Project must be a solution to an identifiable problem Solid project information essential to convince public and decision makers of need and benefits

What We’ve Learned - Public Respect the Internet. Grass roots resistance mounts quickly. There is no limit to what the opposition will say in order to support their case. Supporters are intimidated at large public meetings. Opponents will offer any and all project alternatives to discredit your proposals. Elected and local leaders’ support often bends under constituent pressure.

Indiana – Supporting Information Information = Knowledge = Power Compile information and project estimates before unveiling your proposal Research in support of new highways Prepare to Debate - Never assume the obvious Interrelationship between economy & highways obvious to industry, but not to motoring public

Indiana – Economic Development – : IEDC closed on 327 new deals – Represents $11B of new investment in Indiana – 37,000 new jobs – 80% located in counties with Interstate access – Top 15 projects totaled $5.8B. Communities within 20 mi of Interstate received $5.0B of that investment

Interstates as Economic Catalysts Counties with Interstate access (51/41): – 2004 Per capita personal income 12% higher – 85% with PCPI over $30,000 have access – Median household income 10% higher – Assessed property value grew 4X faster – Property value increased 2,000% or more – Sales tax revenue 6x greater growth – Poverty lower – Unemployment lower

Indiana – Growth Projections By 2025, Central Indiana will add 300 sq. mi. of new urban area In 20 years, population in Central Indiana will increase by the equivalent of three counties Traffic has doubled on many of our major highways and Interstates

Public Private Partnerships Contact: Ryan A. Hoff Legislative Director Indiana Department of Transportation (317) FHWA Northern Borders Conference Chicago, Illinois May 15, 2007