Funding US Infrastructure NW Financial Group, LLC

Infrastructure is not free “You can pay me now or pay me later” or pay me later” Fram Oil Filter Man NW Financial Group, LLC

Transportation Wheel of Fortune NW Financial Group, LLC

Highway Constituency The average driver in the US:  travels 13,600 miles per year  average gas mileage of 19.6 mpg  purchases 706 gallons of gas/year  cost of 1 penny on gas tax = $7.06 PER ANNUM NW Financial Group, LLC

Cost to Drive  IRS Cost Study allows 58.5 cents per mile in 2008 or a total of $7,605 per annum for an average driver  An average driver, at 13,000 miles per year, pays less than $400 per year for the right to expect paved and well maintained roads statewide (Ohio example) Per AnnumPer Mile State Gas Tax$ cents Federal Gas Tax$ cents Drivers License$ cents Vehicle Registration$ cents Total$ cents NW Financial Group, LLC

 Drivers readily spend thousands of dollars a year on their cars, maintenance and insurance but balk at use based gas taxes to rebuild the roads they are riding  Cost to average driver of 10 cent increase in gas tax would be $70 per year  10 cent gas tax increase would fund $6 Billion in capital investment in a state like Ohio Tolls or Taxes?

Gas Tax vs. Tolls  Assuming a car gets 20 MPG and the gas tax is 26 cents the cost is 1.4 cents per mile  The cheapest toll roads in the country cost more than 5 cents per mile  In Texas new toll roads are being priced at 14 cents plus per mile NW Financial Group, LLC

Indiana Toll Road Revisited NW Financial Group, LLC

Indiana Toll Road PPP  Gave up 75 years of revenue for 10 years of capital funding  Provided non-compete for 75 years  Car toll will rise from $4.65 to over $145 over the full 75 years and perhaps as much as $400  Excess revenues go to corporate profits not the transportation network NW Financial Group, LLC

 Protect overall transportation system Minimize siphoning for private profitsMinimize siphoning for private profits Maximize recycling of positive cash flowsMaximize recycling of positive cash flows  Assure reasonable user costs Oversight of toll escalation factorsOversight of toll escalation factors Protect against congestion on free road alternativesProtect against congestion on free road alternatives  Transparency No rushed dealsNo rushed deals Open and public processOpen and public process Full disclosure of costs to usersFull disclosure of costs to users So what is the “Public Interest”?

NW Financial Group, LLC  Actual Accelerated DeliveryAccelerated Delivery Risk TransferRisk Transfer Potential Operating BenefitPotential Operating Benefit  Political Upfront DollarsUpfront Dollars Offloading of responsibilities for operations and toll increasesOffloading of responsibilities for operations and toll increases Advantages of PPP

NW Financial Group, LLC  Cost of Capital produces less value  Control of public roadways is surrendered  Control of future economic development is impacted  Loss of dollars for transportation system Texas SH121- $2 billion, captured the Public Ownership DividendTexas SH121- $2 billion, captured the Public Ownership Dividend Disadvantages of PPP

NW Financial Group, LLC  Really means it is an unfeasible project based on tolling model  No more than a performance management contract for an asset that rarely underperforms when publically run  States are really entering into a long term annual payment no different than bonding for the road and owning it themselves  Concept is based on electric utility production, in reality roads are rarely “off-line” Availability Payments

NW Financial Group, LLC  Public monetization's produce more dollars than private monetization's and keep all dollars in the public transportation network – Texas SH121  Overreaching in terms of leverage leads to failure – New Jersey  Public is now focused on cost to user of monetization rather than just upfront benefit – Chicago Parking  Monetization is really a corridor tax on toll users to pay for other non toll roads The Future Environment for PPP

NW Financial Group, LLC  Public capital availability is not an issue  Investors accept and respect US public enterprise toll roads  Public Toll roads will aggressively raise tolls  Build America Bonds proves corporate market  Tax exempt market still deep  PUBLIC OWNERSHIP DIVIDEND PPP Lessons since 2006

NW Financial Group, LLC  Very viable for project acceleration through a design/build approach  Very viable for risk transfer for difficult or troubled projects – Miami Port Tunnel, Colorado NW Pkwy.  Not desirable for financing or concession approach due to high cost of equity capital  And now lack of high leverage low cost debt to blend down capital costs What is the Future of PPP?