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Introduction Benjamin Perez, Parsons Brinckerhoff, Rapporteur Conference History this bill constituted a significant increase of $77 billion in funding over its predecessor, the Intermodal Surface The Transportation Research Board (TRB) has con- Transportation Efficiency Act of 1991. At TRB's third ducted a series of four conferences addressing the evolu- transportation finance conference, Meeting the Fund- tion of transportation finance and funding. The first TRB ing Challenge Today, Shaping Policies for Tomorrow, conference on transportation finance, Transportation held in 2002 in Chicago, Illinois, transportation profes- Finance for the 21st Century, was held in Dallas, Texas, sionals focused on the reauthorization of TEA-21 and in 1997. It focused on a variety of new tools and tech- the exchange of information on tools and techniques niques known collectively as innovative finance. These designed to enhance and expedite project delivery. approaches encompassed diverse public- and private-sec- The 2010 conference in New Orleans, Louisiana, tor actions that moved beyond the traditional federal-aid titled Forging a Sustainable Future--Now! was con- and state-aid funding processes to include private activ- ducted at a critical crossroad for transportation finance ity bonds, state infrastructure banks, and publicprivate amid a global economic downturn and the uncertainties partnerships, among others. All were considered cutting- that lay ahead. With Congress having had to transfer edge approaches in their formative stages. The proceed- money from the general fund into the Highway Trust ings of the 1997 conference led to acknowledgment of Fund for the first time in its history and with the reau- the need for providing federal, state, and local govern- thorization of the Safe, Accountable, Flexible, Efficient ments with a resource that could facilitate understanding Transportation Equity Act: A Legacy for Users still pend- and increase utilization of the new funding and project ing, transportation professionals gathered to participate delivery options. This suggestion ultimately evolved into in thought-provoking discussions, to explore revenue a research project undertaken by TRB's National Coop- generation alternatives, and to help identify research erative Highway Research Program [20-24(13)], which topics to advance the knowledge and understanding of created a clearinghouse for innovative finance informa- infrastructure needs. tion. The project's products were incorporated into the Center for Excellence in Project Delivery website now maintained by the American Association of State High- Workshop Sessions way and Transportation Officials. In 2000, transportation professionals gathered in Suzanne S ale of the Transportation Infrastructure Scottsdale, Arizona, to discuss the new finance oppor- Finance and Innovation Act (TIFIA) Joint Program Office tunities stimulated by the Transportation Equity Act in the Federal Highway Administration's (FHWA's) for the 21st Century (TEA-21). Funded at $198 billion, Office of Innovative Program Delivery opened the work- 5

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6 F I NA NC I NG S U R FA C E TR A NSPOR TA TION IN T HE U NIT ED ST A T ES shop sessions by welcoming workshop participants. She sis System, and the Transit Economic Requirements explained the role that the preconference workshops Model. Benefitcost analysis procedures were included have played in previous TRB transportation finance con- in a 2009 notice of proposed rulemaking for the TIFIA ferences as being less formal in nature and more intensive credit program that was subsequently withdrawn, and explorations of specific topics of interest that provide most recently they have been integrated as a component time for questions and interaction. She indicated that the of the Transportation Investment Generating Economic objective of these interactive workshops is to assemble Recovery grant program. subject matter experts and practitioners who will offer Dr. Timothy stated that benefitcost analysis involves their professional perspectives and personal insights on a number of key steps. The first is to establish a baseline tools and techniques to enhance the financial decision- against which the economic effects of a transportation making process for transportation investments. investment will be compared. The level of detail of the analysis should be commensurate with the value of the improvement, and the inputs for the analysis should be Workshop 1: BenefitCost Analysis-- obtained from the studies used to develop the project. If Advancing the State of the Art the majority of inputs needed for the benefitcost analy- sis have not been prepared for the planning, design, and Mark Burris of the Texas Transportation Institute (TTI) engineering studies efforts to develop a given project, moderated the first workshop that explored the role of there is cause for concern. The credibility of a benefit benefitcost analysis in the transportation project deci- cost analysis is enhanced by limiting and focusing the sion-making process, addressing both financial and non- scope of the effort, by avoiding optimism or overestimat- financial criteria that can be used to evaluate projects. ing bias, and by considering a range of actions since a The workshop was designed to provide attendees with single build case may lead to over- or underinvestment. economic theory, an analytical framework, and tools Dr. Timothy suggested that benefitcost analysis is to evaluate infrastructure investment beyond the one- broader than financial analysis in that it calculates bene- dimensional financial feasibility aspect of a given proj- fits to society. Benefitcost analysis calculations are done ect. Dr. Burris mentioned that a workshop on the same in constant dollars. Good benefitcost analyses can be topic had been conducted in Washington, D.C., on May used to support funding decisions and the finalizing of 17, 2010, and that the presentations from that earlier project options. While benefitcost analysis does not deal session were available on the TTI website at http://tti. with risk assignment issues, it can be designed to cap- tamu.edu/conferences/benefit_cost10/. He also identified ture nontraditional issues such as livable communities, a number of studies and ongoing research efforts on the economies of agglomeration and densification, health application of benefitcost analysis to the transportation and lifestyle choices, and spatial and social distribution. decision-making process. Livability is often challenging to quantify, but it should not be overlooked in a benefitcost analysis. There are ways to capture the value of increased real estate devel- Role of BenefitCost Analysis in U.S. opment as a benefit associated with livability. U.S. DOT Department of Transportation Infrastructure is working to develop better definitions of concepts that Investment Programs should be included in benefitcost analyses. Dr. Timothy was asked about how benefitcost anal- Darren Timothy of FHWA's Office of Innovative Pro- ysis should address user charges as the preponderance gram Delivery made a presentation on the U.S. Depart- of toll projects increases. He replied that user charges ment of Transportation's (DOT's) perspective on are treated as both costs and benefits. In response to a benefitcost analysis, which is to foster long-term eco- question on discount rates, Dr. Timothy stated that U.S. nomic growth, encourage accountability, and introduce DOT uses a standard rate of 7 percent, but that 3 percent rigor and discipline into the transportation planning and may be a good alternative when nonU.S. DOT funding decision-making processes. The federal focus on bene- is used on a project. fitcost analysis began with the Federal Transit Admin- istration's New Starts Program's cost-effectiveness criteria and the Federal Aviation Administration's Air- California Case Study: An Overview of the port Improvement Program. In the late 1990s, benefit Application of NET_BC Software for the cost analysis was addressed in FHWA's Conditions and California Department of Transportation Performance Report to Congress. The FHWA Office of District 5 System Analysis Study Asset Management developed a number of benefitcost analysis tools including the Highway Economic Require- Dean Munn of the Corradino Group described the ments System, the National Bridge Investment Analy- NET_BC costbenefit software package that was devel-

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int r odu c t ion 7 oped to assess four highway projects in the San Luis As the United Kingdom developed its motorway net- Obispo region of California. The projects are located in work from 0 miles in 1959 to more than 2,000 miles in the southern end of Santa Clara County, where there is 1995, the CBA approaches were refined. Simple cost tension between demand for new housing and preser- benefit approaches were developed in the 1960s by using vation of the region's agricultural uses. The California a limited range of monetized economic impacts such Department of Transportation (Caltrans) was interested as time savings, accidents, operating costs, and capital in capturing multiple issues in the development of the costs. CBA methods codified further in the 1970s stan- costbenefit analysis (CBA) software, including com- dard values were set for travel times. The government muter travel times, farmland preservation, environmen- also established national values and set assumptions on tal issues, and tourism. The NET_BC model was based appraisal periods and discount rates. in part on outputs from the Association of Monterey In the 1980s under the Conservative government, Bay Area Governments (AMBAG) travel demand mod- motorway development was at its peak, and there was els used to assess the highway improvements, as well as pressure to include environmental issues in CBA assess- construction and ongoing operations and maintenance ments. At that time the government established the Stand- costs for the projects. The model was built to be attached ing Advisory Committee on Trunk Road Assessment to the AMBAG model and took advantage of informa- (SACTRA) to establish norms and procedures for com- tion on the location of traffic signals and vertical grades pleting reviews of proposed motorway improvements. in the model to calculate fuel use. SACTRA examined issues including induced traffic, envi- The NET_BC model has four primary variables: dis- ronmental impact projections, and wider assessments of count rates, the analysis period, construction assump- the economic impacts of motorway improvement proj- tions, and costs. A number of underlying assumptions ects. In the mid-1990s under the Major government, were also adjusted to be consistent with Caltrans stan- the Transport White Paper recognized the limitations dards. The NET_BC model calculates mobility benefits of continuous motorway expansion, and later in 1998 and looks at the value of time by time of day, mode, and the Blair government introduced important new goals trip purpose. The model accounts for vehicle operating for transport appraisals, including more rigorous assess- costs and is sensitive to traffic flow characteristics. Other ments of the economy, safety, environment, accessibility, issues such as environmental effects are not quantified and integration. monetarily but are included in the overall analysis. The CBA was codified further in 1998 when the Depart- NET_BC model produced effective results that helped ment for Transport issued its New Approach to Appraisal decision makers focus on quantitative effects of real (NATA) model to be used in the review of 66 motorway issues and helped them arrive at consensus by identify- projects. NATA included standard worksheets to assess ing clear winners among the alternatives considered. The benefits and costs, all of which feed into a summary outcome of the NET_BC model was one of a number of table. Information is available at http://www.dft.gov.uk/ factors that was used in informing decisions. webtag/. The NATA procedures include both monetized In a response to a question on the relationship and qualitative assessments, and they established a struc- between the transportation alternatives assessed and tured seven-point scale for qualitative assessments with land use growth, Mr. Munn stated that if the resources clear and consistent definitions. were available to do so, the model could be expanded to The NATA approach is proven and has informed address changes in land use and noted that the state of CBA practices established by the World Bank. NATA California has been effective in controlling where growth has been successful because it has a policy focus; is objec- takes place. tive; uses standard and comprehensive metrics; measures variability; is multimodal, succinct, and scalable; and provides a transparent audit trail. The level of detail of a Evolution of the Use of CBA in the NATA analysis is challenging, and the model has a clear United Kingdom focus on highway improvements and is not as strong when applied to rail or transit projects. Andrew Price of Halcrow Group provided an overview The Eddington Transport Study, conducted from of the development of CBA procedures used in the United 2004 to 2006, was a major assessment of the link Kingdom. The population density of the United Kingdom between transport and productivity. The conclusions is 12 times greater than that of the United States. The were that transport needs to be greener to support eco- United Kingdom also has a strongly centralized govern- nomic growth; that U.K. appraisal methods, although ment and has developed standard appraisal guidelines for well developed, could be improved to take account of CBA. Roads are largely publicly funded, and there is little wider economic impacts; and that smaller projects tended use of tolling. The primary mode of travel is the automo- to have higher benefitcost ratios. The Eddington study bile, which accounts for 95 percent of trips. recommended that transport policy should be evidence

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8 F I NA NC I NG S U R FA C E TR A NSPOR TA TION IN T HE U NIT ED ST A T ES based, ensure fair pricing of all transport modes, and In the hypothetical case of Leverage Parish, Mr. George focus on making better use of existing networks before explained how the rating agencies would approach debt investing in new projects. The Department for Transport backed by a parishwide 1-cent gasoline tax increase. has responded to the Eddington study in a number of Various combinations of coverage ratios and interest ways. It has been reorganized into Eddington priority rates implied by different credit rating levels were exam- areas to address interurban, urban, and international ined. Mr. George presented calculations showing that gateway transport issues. the revenue generated by the toll road would be insuffi- cient to issue $300 million in tax-backed bonds covering the entire cost of constructing the road. Instead, the debt Workshop 2: Financing Projects in Challenging would have to be resized and was found to be maximized Times--Emerging Trends for Raising Capital at $250 million if the bond received a BBB rating. With a rating of AA $200 million could be raised, and with Moderator David Seltzer of Mercator Advisors began a rating of A $225 million could be raised. Mr. George the second workshop by summarizing the multiple chal- stated that the smaller amount of debt would likely lenges in assembling financing for transportation projects cover construction costs but would not support ongo- in the current economic climate, which is characterized ing maintenance needs on the basis of either a life-cycle by declining revenues and the limited availability of bond cost or asset management approach. This fact could lead insurance. He indicated that the purpose of the work- to higher long-term maintenance costs for the Leverage shop was to explore emerging trends to help in overcom- Parish toll road. ing difficulties in issuing debt for projects. Mr. Seltzer Mr. George concluded his presentation with a brief created a hypothetical case study for a $300 million proj- overview of the various aspects that rating agencies ect in "Leverage Parish," Louisiana, for a 10-mile toll consider in assessing a transaction and an appraisal road financed by publicly backed revenue bonds leverag- of the current bond market. He observed that spreads ing user charges on the facility. He stated that initially, have recently reverted to more normal levels, so rating the road would generate $20 million in annual toll rev- assessments are more narrowly focused on fundamental enues. Revenues would increase by 2.5 percent annually, macroeconomic indicators. Such indicators include gross and the facility's net income would double in 30 years. domestic product over the past 30 years, spending levels, The panelists were asked to discuss options for financing trade volumes, retail trade, inflation, and employment. the facility under the present market conditions. Cherian Mr. George commented on the uncertain prospects for George discussed taxed-back debt options for the Lever- employment recovering to levels seen before the current age Parish facility. Lisa Fenner compared two new bond economic crisis. Other indicators include housing starts, instruments: Build America Bonds (BABs) and tax credit corporate profits, oil prices, savings levels, household bonds. Jorianne Jernberg discussed federal credit instru- debt, net worth, and mortgage delinquencies. ments that could be used to support the project, and With regard to the Leverage Parish case study, Mr. Michael Parker discussed long-term publicprivate part- George indicated that the important message from his nership arrangements backed by availability payments. presentation was that considering only a typical munic- ipal debt credit rating of A and the required coverage ratio would have limited the amount of money that Financing Projects: The Tax-Backed Alternative could have been leveraged from the parish gasoline tax to only $225 million. Thus, issuing special tax debt with Cherian George of Fitch Ratings explained how a rating lower ratings and lower coverage levels can be helpful agency would consider a bond transaction leveraging a and should be considered. special tax, such as a gasoline tax. These types of transac- tions are not normally rated as an obligation of the state or municipality. Because they are levied at a fixed rate, Emerging Trends for Raising Capital: the rating agencies focus on the economic fundamentals New Forms of Tax-Preferred Debt that would drive the level of revenue derived from special taxes. The rating agencies assess these dynamics with the Lisa Fenner of KPMG Infrastructure Advisory reviewed additional bonds test (ABT), which is used to determine two new federal debt tools that might allow the financ- the amount of debt that can be leveraged from a particu- ing of the Leverage Parish toll road project: BABs and lar dedicated revenue stream. The ABT is based on his- tax credit bonds. BABs were authorized by Congress as torical receipts, certified revenues from the most recent part of the American Recovery and Reinvestment Act 12 to 24 months. To be classified as A to AA, bonds (ARRA) of 2009. They have been well received by the must usually have a coverage ratio of 1.20 to 4.00 times markets and provided broad debt authority at a time the amount of debt to be issued. when traditional municipal debt transactions could not

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int r odu c t ion 9 easily access the market. BABs have attracted a differ- However, in this case the bond would have a 17-year ent investor base because the bonds are taxable. With maturity, an average interest rate of 0 percent net of 100 a larger pool of investors, demand for BABs is up and percent subsidy, and a sinking fund investment rate of 2 yields are down. There is no limit on the amount of BAB percent. debt that may be issued. However, all BABs must be Ms. Fenner stated that in the end, issuers need to executed by the close of 2011, when the program will determine which type of debt will be the most appropri- expire, and the use of the proceeds is limited to capital ate for them and afford them with the flexibility they projects. need. They will need to assess the relationship between BABs have been extremely popular and represented 40 revenues and existing bond covenants and consider to percent of all municipal bond issues in 2009 and 2010. what extent their bonding capacity is constrained, the To compensate for the fact that BABs have higher costs extent to which financing is dependent on receipt of a to issuers than does traditional municipal debt, the U.S. subsidy, and whether debt service payments can be made Treasury provides either a subsidy of 35 percent of the without subsidy. They need to consider whether they financing costs to issuers of BABs or a similar tax credit would have other uses for the money that could be lever- to BAB investors. Nearly all BAB issuers have opted for aged or if they would lose the subsidy if they do not pur- the subsidy, which provides a significant savings in inter- sue a particular project or use. Many issuers have used a est costs in the long term, and most BAB issues have been combination of traditional municipal bonds and BABs. in the range of 20 to 40 years. One strategy would be for issuers to agree on a minimum Today, BABs generally have a 10-year call, and rat- savings threshold and then if possible retain flexibility to ing agencies are examining the degree to which projects make the final decision at pricing, remembering that the are dependent on the subsidy. There are also substantial cost of capital is only one component of project delivery. reporting requirements with BABs. Because the program is temporary, there is uncertainty about whether it will be extended, which leads to concern over the ability to New State Financing Mechanisms sell the bonds in the future. Less demand would result in higher yields. Subsidy rates may also be lowered from John Muoz of Texas DOT briefly discussed the pass- 35 to 28 percent, and changes in tax rates could affect through program used in Texas, which is also commonly BABs. referred to as a "shadow toll" program. He summarized In terms of tax credit bonds, the ARRA and the Hir- key features of Texas DOT's project, which includes ing Incentives to Restore Employment (HIRE) Act made pass-through tolls (a per vehicle or per vehicle mile fee changes to qualified tax credit bond programs and set paid by Texas DOT to a private partner). The value of volume caps for issuance. The HIRE Act also allowed the fee is determined by the number of vehicles using direct pay subsidies to be provided to issuers in addi- the facility. With pass-through tolls, the cost to users tion to traditional tax credits. The direct pay subsidy of the road is assumed by Texas DOT. To date, Texas model can result in 0 percent interest rate loans to issu- DOT has executed a total of 17 pass-through toll agree- ers. Structurally, qualified tax credit bonds feature bullet ments with a combined value of $1.4 billion. It has plans maturities, where sinking fund deposits accumulate over to expand the program by more than $400 million by time in an amount sufficient to pay bonds at maturity. 2011. Pass-through toll agreements are carefully negoti- The U.S. Treasury makes monthly determinations on ated and are management intensive, with local agency the maximum maturity of the bonds. As of May 2010, and private-sector partners required to optimize finan- tax credit rates were at 5.47 percent, and the permitted cial performance. For Texas DOT, pass-through tolls sinking fund investment rate was at 4.33 percent. There are an innovative off-book financing tool; the revenues are certain structural limitations on qualified tax credit pledged by the department are actually leveraged by bonds. The maximum permitted terms for the bonds other public agencies or private partners rather than by vary and can affect bonding capacity, and there are costs Texas DOT. Mr. Muoz focused the remainder of his associated with optional redemption flexibility. Volume presentation on how the use of pass-through or shadow caps are also creating competition for funding. tolls could be helpful to Leverage Parish in increasing If BABs were used, the Leverage Parish hypothetical its debt capacity. toll project's debt capacity would be $255 million on He also discussed transportation reinvestment zones, the basis of a 35 percent subsidy, or $241 million with another innovative tool being used by Texas DOT that a 28 percent subsidy, assuming an A-category bond rat- could be helpful to Leverage Parish. This mechanism is ing, a 30-year maturity, and a debt service coverage ratio similar to tax increment financing, with an incremental of 1.3. With qualified tax credit bonds, the debt capac- property tax levied within a specified area that is used to ity of the project would increase to $307 million on the take out additional debt to support capital construction basis of a similar rating and debt service coverage ratio. costs of new transportation improvements.

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10 F I NA NC I NG S U R FA C E TR A NSPOR TA TION IN T HE U NIT ED ST A T ES Federal Credit: TIFIA and Proposed National The TIFIA program presents the following disadvantages: Infrastructure Innovation and Finance Fund The TIFIA program is oversubscribed and cannot Jorianne Jernberg of FHWA's TIFIA Joint Program finance all projects that might want to use federal credit Office discussed how federal credit programs could be assistance. used to increase the debt capacity of Leverage Parish. At TIFIA support is limited to 33 percent of project the time of the conference, the TIFIA program had sup- costs. ported a total of 21 projects and $110 million in budget TIFIA requires a dedicated revenue source to authority to offer assistance in the form of direct loans, pledge for repayment. loan guarantees, and standby lines of credit. TIFIA credit Direct TIFIA loans may not be as favorable for assistance can only be used to support one-third of proj- stronger (high-rated) projects with access to the tax- ect costs. The use of TIFIA credit enhancements increases exempt market. debt capacity because TIFIA accepts a lower debt cover- TIFIA support makes the entire project subject to age ratio than do the capital markets. The program also federal rules, including the National Environmental Pol- accepts a junior lien on future revenues and levies no icy Act of 1969. penalties for prepayment. The "springing lien" may be viewed negatively by In the hypothetical case of the $300 million highway senior lenders. improvement project in Leverage Parish with $20 million TIFIA assistance may displace rather than induce available for annual debt service, TIFIA assistance could participation by capital markets in some instances. be used to finance one-third of the capital cost. With that assistance, the project's debt capacity would range between $346,395,639 and $420,532,477, depending Availability PaymentBased Concessions on the interest rate on senior debt and the following assumptions: Michael Parker of Jeffrey Parker & Associates, Inc., dis- cussed the use of availability paymentbased concessions TIFIA interest rate, 4.70 percent; in the United States and their possible application to the Senior interest rate, 4.61 percent (BABs) or 7.00 toll facility in Leverage Parish. To date, only two avail- percent (private activity bonds); ability payment concessions had reached financial close Debt tenor, 30-year debt; and in the United States: the Port of Miami Tunnel and the Debt service coverage requirement, 1.103. I-595 Improvements Project, including high-occupancy toll lanes in Fort Lauderdale, Florida. Two others were Using TIFIA debt on the project expands debt capac- pending: the Denver Regional Transportation District ity while reducing the interest rate exposure through a Eagle project and the Long Beach Courthouse. Mr. fixed interest rate on the TIFIA instrument. Parker emphasized that raising the money for a proj- Ms. Jernberg concluded her remarks by summarizing ect is distinct from actually delivering the project and the advantages and disadvantages of the TIFIA credit that many risk factors are associated with that process, program. The following are among the advantages: including cost overruns and delays. Availability payment concessions remove traffic revenue TIFIA is a patient source of capital for projects risk for private investors. Payments are made to the conces- with ramp-up risk. sionaire on the basis of its ability to meet a performance TIFIA offers flexible payment structures, including standard, with the payment stream normally beginning deferrals, prepayments, and mandatory payment sched- after construction has been completed. In return for the ules. opportunity to earn availability payments, the concession- TIFIA provides fixed interest rates and more favor- aire is responsible for designing, financing, building, oper- able rates than can generally be found in the capital ating, and maintaining (DFBOM) the facility for a specified markets for similar instruments in today's interest rate concession period, which normally lasts between 20 and 40 environment. years. Availability payment concessions work well on tech- Direct TIFIA loans strengthen senior bondholders' nically complex projects where the improvement is a high security by shifting up to 33 percent of borrowings to a priority but does not have the ability to generate adequate junior position. cash flows to cover its capital and financing costs as a tolled Coinvestment by the federal government indicates facility. Availability payments are also appropriate in situa- public-sector commitment to and due diligence on the tions where revenue and demand are difficult to predict or project. influence, as well as in situations where service quality is a TIFIA facilitates large project financings with sig- more important or applicable goal than revenue maximiza- nificant public benefits. tion. Availability payment concessions also lend themselves

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int r odu c t ion 11 well to innovation and deriving value over the life cycle of Comment: Over the past decade, some planners did not projects. take long-term operation and maintenance requirements Mr. Parker concluded his presentation by compar- into consideration, especially with contractor-dominated ing the pros and cons of DFBOM concessions, includ- concession groups. The market has since matured. Main- ing availability arrangements. On the pro side, DFBOM tenance has become more important than most other concessions provide predictable, guaranteed life-cycle issues. cost and performance levels as well as the opportunity to optimize risk allocation and encourage innovation. Comment: Capital is relatively easy to obtain, but good However, DFBOM concessions also involve the costs of operational and maintenance efficiency is difficult to financing and risk premiums, and they may require revi- achieve. It is helpful if operation and maintenance costs sions of existing statutory frameworks. The procurement can be capitalized. and change order process is also likely to be more com- plex and time-consuming than are traditional procure- Question: You may or may not have the ability to dedi- ments, but they can bring value with the right projects. cate a revenue stream to an individual project. If you combine revenue sources, how do the buckets flow? Mr. Parker: With the Port of Miami tunnel, the Workshop 2 Comments, Questions, and Answers TIFIA program found that the structure allowed risk to be shared, and this alleviated risk exposure in certain Comment: Availability payments are likely to be more areas. Different revenue sources come with covenants popular over time. The Bipartisan Policy Center recom- and caveats and conditions, so this can make it complex mends focusing on performance and long-term life-cycle to commingle tools. Some issues can be addressed by performance. In the future, more money will be focused statute or covenant. on maintenance activities, and life-cycle costs will need to be taken into consideration. Questioncomment: How do states and credit rating agencies take availability payments into account? Are Comment: A value-for-money comparison analysis needs they treated like debt? If a state treats availability pay- to consider the ramifications of having a project being ments like operating costs, then the rating agencies might "gold plated." One tool is to use net present revenue value do the same. Would an availability payment contract analysis to quantify the risk of cost overruns. There is much with a 30-year concession period be less risky than a practical flexibility. Rather than examining single projects, 50-year contract? A 50-year debt term would concern it may be more advantageous to examine entire portfolios. the rating agencies.

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