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scenario, the implementation of more aggressive tolling one of the first state PPP-enabling legislations. Some of the
would generate financial gains close to those under the long- early PPPs for development of toll roads in the 1990s, such as
term concession scenario and still allow the county to retain the Pocahontas Parkway in Virginia and the Southern Connec-
full control of its toll roads. tor in South Carolina, included the creation of 63-20 non-profit
corporations to issue debt. California enacted PPP legislation in
The significant exposure of these deals in the media has 1989, allowing for four pilot PPP projects. Two, the SR-91
led the public, and even some transportation professionals, to Express Lanes and the South Bay Expressway, were developed
view or refer to PPPs as only long-term concessions and/or under the Build-Transfer-Operate model with private finance.
Design-Build-Finance-Operate (DBFO), in which the rights
to collect tolls and set toll rates, and the operations and main- On the federal side, SEP-14 was created in 1990, allowing
tenance of a toll facility are transferred to the private sector. states to experiment with innovative contracting options, such
As noted previously, however, PPPs encompass a wider range as cost-plus-time bidding, lane rental, and the use of warranties
of procurement methods with varying levels of private respon- for certain project elements. Subsequent transportation acts,
sibility based on risks transferred. Furthermore, the public con- such as ISTEA, TEA-21, and SAFETEA-LU created pilot
cerns raised by PPPs vary within each PPP type, and these programs and innovative finance tools that added flexibility
increase as the level of private involvement increases. for implementation of tolling and also encouraged states to
pursue private participation in transportation infrastructure.
It is also important to distinguish between "greenfield" and
"brownfield" PPPs, where the former refers to any PPP for For example, the Transportation Infrastructure Finance and
new infrastructure (e.g., DBFO) and the latter refers to long- Innovation Act of 1998 (TIFIA) was created to leverage fed-
term lease agreements or concessions for existing facilities. eral resources and stimulate private capital investment by pro-
viding credit assistance for large transportation projects. The
precursor to the creation of this credit assistance program was
EVOLUTION OF PUBLICPRIVATE the Alameda Corridor. Recent PPPs that have been approved
PARTNERSHIPS IN THE UNITED STATES
for TIFIA loan assistance include the refinancing and funding
The history of PPPs in the United States presented in this sec- of the Pocahontas Parkway (for a future extension), SH-130
tion comes from various sources including the U.S.DOT PPP Segments 5 and 6, SR-125, and the I-495 Capital Beltway
"Report to Congress" (2004), the USC Keston Institute study high-occupancy toll (HOT) lanes. Interest in the TIFIA pro-
on PPPs (2007), the FHWA PPP Guidebook (2007), and the gram has increased recently owing to relaxed rules emerging
recent GAO report on PPPs and the public interest (GAO from SAFETEA-LU, coupled with the recent credit crunch
2000b). Modern PPP agreements are not new in the United that has raised significantly the cost of private debt, making
States. In 1990, FHWA's Special Experimental Project Num- TIFIA credit assistance more attractive.
ber 14 (SEP-14) authorized the use of innovative contracting
techniques, including design-build and, as reported by the SAFETEA-LU amended the Internal Revenue Service
FHWA PPP Guidebook, 42 states, the District of Columbia, Code to allow tax-exempt Private Activity Bonds (PAB) for
Puerto Rico, and the Virgin Islands have the ability to deliver privately developed and operated highway and freight facil-
transportation projects through design-build. ities, authorizing up to $15 billion through 2009. As of March
2008, $3.3 billion had been allocated to various projects,
Private sector participation in road development dates including the Port of Miami Tunnel in Florida (availability
back to the 1790s, with the development of the Philadelphia payment concession) and the I-495 Capital Beltway in Vir-
and Lancaster Turnpike in Pennsylvania. The private role in ginia (HOT lane concession), among other projects. FHWA
highway development, however, diminished over time. Toll created the Special Experimental Program 15 (SEP-15), which
facilities were developed by public turnpike authorities after allows for experimentation on new PPP approaches to project
World War II, mainly in the north and the east of the United delivery, focusing primarily on four major components includ-
States (U.S.DOT 2004). In addition, with the development of ing contracting, compliance with environmental requirements,
the Interstate Highway System and a higher reliance on gas right-of-way acquisition, and project finance.
taxes for road development, private sector involvement in
highways was mainly through either design contracts between Although many of the toll roads developed in the late 1990s
state DOTs and architectural/engineering firms or construc- included private participation, some, including the Pocahontas
tion contracts. Parkway and Southern Connector, were financed through tax-
exempt bonds, TIFIA assistance, and commercial debt, with
In the late 1980s, states began to explore the potential no equity from the private sector. PPPs in recent years have
for increased private sector participation in highway develop- involved private equity investment in DBFO (e.g., Texas'
ment. In Virginia, the Dulles Greenway was authorized by leg- SH-130 Segments 5 and 6 and Virginia's I-495 Capital Belt-
islation in 1988, and developed under one of the first PPP agree- way HOT lanes) and long-term leases (e.g., Chicago Skyway
ments in the United States. This project was the precursor of the and Indiana Toll Road), and some of the toll roads financed
Virginia Public-Private Transportation Act of 1995 (PPTA), in the 1990s through non-profits have been refinanced in recent
