ACCESSING PRIVATE CAPITAL FOR TRANSPORTATION INFRASTRUCTURE PROJECTS

Transcription

1 ACCESSING PRIVATE CAPITAL FOR TRANSPORTATION INFRASTRUCTURE PROJECTS Transportation Infrastructure Finance Workshop Chicago, Illinois OVERVIEW AND KEY PLANNING FACTORS April 29, 2008 David Seltzer, Principal

2 Capital Investment Needs and Funding Gap (by Mode) Annual Modal Needs * $30 B $155 B $15 B $10 B 100% 80% 60% 40% 20% 0% Transit Highways Airports Freight Rail 2 private public funding gap * Annual Capex Requirements stated in 2007 $, as estimated by NCHRP, FHWA, ACI & AASHTO.

3 How Best to Fill the Funding Gap? Either Reduce Costs Total Needs Funding Gap Identify New Revenue Streams Monetize Existing Revenues (Leverage) 3 Save on Construction Costs Accelerate Schedule Reduce Financing Expense Funding Resources Or Increase Resources

4 Role of Partnerships ( P3 ) in Helping to Fill the Investment Gap? To answer that question, we need to determine: What do we mean by P3 and private capital? What underlying revenue stream pays the return to investors? What institutional structure should be used? What are the potential sources of investment capital? Which financing tools are best suited to the project? 4

5 Potential Advantages of P3 Accelerated Project Completion Operating Efficiency thru Financial Incentives Risk Transfer to Sector Innovation/Enhanced Project Management 5 Access to New Sources of Capital * * (requires identifying a source of return for investors.)

6 Investment in Context Highway Capital Spending ($905 Billion Total) Tax-Backed Muni Debt $140 B (16%) Concession Financing (Taxable) $9 B (1%) Grant Funding $697 B (77%) User-Backed Grants & Muni Debt $59 B (6%) 6

7 Categorizing P3 Activity to Date Major Highway PPP Projects * ($26 Billion Total) Concession Project Financing $7.6 B Design-Build with Funding $4.2 B D-B with Innovative Financing / Operation $4.3 B 7 Tax-Exempt Project Financing $9.8 B * As of September 2006 Source: Works Financing

8 P3 approaches have been used for transportation projects nationwide Tacoma Narrows Bridge I-15 Reconstruction Reno Rail Corridor Northwest Parkway Denver E-470 Hiawatha Light Rail Line Chicago Skyway Lease CREATE Indiana Toll Road Lease Jamaica JFK Airtrain 8 Las Vegas Monorail Alameda Corridor Foothill Eastern Toll Road San Joaquin Hills Toll Road SR 125 Toll Road AZ-17 Project Location Intermodal Projects in Green Highway Projects in Blue Transit Projects in Red NM 44 (US 550) Trans - Texas Corridor Central Texas Turnpike Selected transactions; Source: Works Financing Hudson - Bergen Light Rail Line Dulles Greenway Pocahontas Parkway Southern Connector Osceola Parkway Miami Intermodal Center Camden Trenton Light Rail Line

9 Key Project Finance Planning Factors Identify the Revenue Stream (Sources of Repayment or Return) Select the Best Financing Tools Transportation Infrastructure Projects Determine Institutional Structure 9 Assess Capital Sources

10 1. Identify the Revenue Streams Sources User Fees Direct Passenger Charges -- Tolls -- Fares Direct Goods Charges -- Throughput Charges -- Gate Fees Corporate Pledges Sources Tax & Grant Supported Federal Funds --General Appropriations --Custom Fees General State Appropriations Broad-Based Taxes -- Sales Taxes -- Customs Charges Broad-Based User Fees -- Motor Fuels -- Motor Vehicles Indirect/ Value Capture -- Special Assessments -- Development Impact Fees 10 Tax Credits / Depreciation Benefits

11 2. Determine Optimal Institutional Structure Based on the Bundle of Services to be Provided Project Activity Traditional Governmental Delivery D-B with Funding D-B with Innovative Financing or Operation Governmental Tax-Exempt Project Financing Concession Project Financing Delivery Operation or or Financing or Ownership Examples Utah I-15; Conway Bypass (SC) Route 3 (MA); US 550 (NM) TCA Toll Roads (CA); Denver E-470 Dulles Greenway (VA); Chicago Skyway 11 Increasingly Increasingly

12 3. Assess Potential Sources of Investment Capital Sector Capital Sources Sector Capital Sources Strategic Equity Equity Tax-Oriented Equity Financial Equity Governmental Equity Grants & Contributed Capital Equity Debt Vendor Financing Placements (Banks & Lessors) Capital Markets Grant Funded Loans --State Infrastructure Banks --Section 129 Loans State/City Funded Loans --State Revolving Funds Debt 12 Tax-Exempt --Taxable --Tax Credit (?) Federal Credit --TIFIA / RRIF

13 4. Select Appropriate Financing Mechanism Transport Project Does the Project have its own Revenue Stream? Yes No Government Grants User Charges Value Capture General Taxes Indirect Fees Is the Revenue Stream from Fees or Taxes Bankable? Yes No 13 TIFIA Support SIB Assistance Tax Exempt Govt Bonds Activity Bonds Tax Credit Financing Pay-As-You-Go

14 Issues to Consider During the Workshop P3 encompasses a wide range of private participation in project delivery, operation, ownership and financing. P3 does not generate resources in and of itself; it requires an underlying revenue stream of some sort user charges, federal grants, state/local taxes. P3 can help shift risks, accelerate projects, introduce innovations and bring efficiencies. P3 can also help leverage revenues to generate upfront cash for certain projects--but so can municipal bonds. 14 The Challenge: Matching the Project Sponsor s objectives with the best-suited Approach, on both financial and transportation policy grounds.

15 Capital Investment vs. Investment of Capital Western Column Revenue Stream (User Charges) Eastern Column Revenue Stream (Tax Dollars) Northern Row Capital Source NW Investment NE Investment Government Grants SIB Assistance Federal Credit Pension Funds SR 125 (CA) (TIFIA Loan Payable from Tolls) Sandusky Interchange (OH) (SIB Loan Payable from State Highway Fund) 15 Southern Row Capital Source Tax Exempt Bonds Taxable Bonds Lease or Vendor Financing Equity SW Investment SR 125 (CA) (Bank Debt and Equity) Pennsylvania Turnpike (Toll Revenue Bonds???) SE Investment Route 44/U.S. 550 (NM) (GARVEE Bonds) Cooper River Bridge (SC) (Tax-Exempt Bonds Payable from State Sources)