Financing Surface Transportation in the United States: Forging a Sustainable Future—Now! (2012)

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

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

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

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

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

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

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