Effect of Public-Private Partnerships and Nontraditional Procurement Processes on Highway Planning, Environmental Review, and Collaborative Decision Making (2013)

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

22 The implementation of P3 project raises legal and financial issues that are uncommon with traditional public-sector pro- curements. This chapter discusses these issues, providing the reader with an understanding of how these issues interface with the NEPA and planning processes. The context in which public–private partnerships are con- templated, procured, and executed is largely driven by a statu- tory and regulatory framework established by the federal and state governments. To consider the implications and inter- action of the P3 process with those in the Decision Guide requires a concrete understanding of relevant legal issues dis- cussed in this chapter. In addition, federally mandated trans- portation planning requirements for state DOTs and MPOs play a central role in how and when P3 projects are considered or procured. These issues are discussed in more detail in Chap- ters 5 and 6. Finally, financing options and tools associated with P3s are also important drivers of identifying at what stage in a project’s development the decision to use a P3 is made. Legal Issues with P3 Projects This section provides an overview of the requirements for gaining legislative or statutory authority to implement P3s and the essential federal regulations and statutes that guide their application and execution. P3-Enabling Legislation/ Statutory Authority Constraints Before being able to seriously consider a P3 alternative as part of the project planning and environmental review processes, the public owner must have the authority to procure and implement P3 projects. Although various federal statutes and regulations address particular aspects of design–build and P3 projects, those statutes and regulations do not supersede state and local laws. Authorization to engage in P3 procurements can come only from the state or local legislation. Consequently, unless a public owner’s enabling authority already includes sufficient flexibility to allow P3 procurements, the agency will have to obtain separate authority. Considering the different needs and political realities faced by public owners, it is not surprising that there is great variance between P3 statutes throughout the United States. Note that in addition to statutes granting design–build and P3 authority, public owners may obtain this authority from general legisla- tion, state constitutions, city charters and other sources. Legal Concepts Critical to Success The following seven key legal concepts (among others) are critical to the success of P3 projects: 1. Permission to rely on reduced/alternative payment and performance security. 2. Authority to bundle design, construction, operation, main- tenance, and other services into a single procurement. 3. For predevelopment agreement projects, the ability to con- tract with a private entity to assist the public owner in defin- ing a feasible project and, if the project is deemed feasible, to negotiate an agreement to implement the project. 4. For toll projects, tolling and toll enforcement authority and the authority to compensate a private entity for losses it incurs due directly to the construction of previous unplanned competing facilities. 5. For availability payment projects, authority to obligate funding for multiple years. 6. Authority to use funding and financing from any available and lawful source. 7. Authority for a private entity to receive a return on its investment. In addition to these key legal authorizations, public owners often need the flexibility to modify or waive otherwise appli- cable technical specifications. Without this flexibility, public C h a P t e r 3 Legal and Financial Issues with P3 Implementation

23 requires the department to develop rules related to toll road development agreement proposals and procurements involv- ing unsolicited proposals (Utah Code Section 72-6-204(1) and Section 72-6-205(3)). In certain cases, public owners may adopt regulations on their own volition to clarify ambiguities in the enabling statute. Federal Statutes and Regulations P3 transportation projects that will be funded in whole or in part with federal highway funds or that are federalized for any other reason are subject to certain federal requirements. For projects funded by FHWA, this includes not only Title 23 of the United States Code and FHWA implementing regulations found in Title 23 of the Code of Federal Regulations but also several other federal laws that apply to the grant of federal funds. Those laws include the NEPA and potentially as many as 40 other environmental laws and regulations. Design–Build Contracting Of particular importance to P3 transactions are the federal requirements governing design–build contracting, as P3 proj- ects fall within the definition of design–build contracts in the laws governing federal-aid contracts (see 23 U.S.C. § 112 and 23 C.F.R. pt. 636). Other provisions dealing with design– build contracting are scattered throughout FHWA’s general contracting requirements, found in 23 C.F.R. pt. 635. (Addi- tional provisions are also found in 23 C.F.R. pt. 627, pt. 637 and pt. 710.) Section 636.109 of Title 23 C.F.R. provides specific con- straints applicable to public owners that intend to award a design–build contract (including P3 contracts) before the com- pletion of the NEPA process (see also 23 U.S.C. § 112). Consis- tent with the specific protections put in place through NEPA regulations (see 40 C.F.R. pt. 1506.1 [restricts certain actions during the NEPA process]), Section 636.109 includes provi- sions stating that before the completion of the NEPA process, • The public owner may authorize the private entity to pro- ceed with preliminary design (as defined). • The private entity may provide assistance in defining the project alternatives, but cannot prepare the actual NEPA document or have any decision-making responsibility with respect to the NEPA process. • The design–build contract must prohibit the private entity from proceeding with final design (as defined) or physical construction activities for any project component for which the NEPA process is not complete. • The design–build contract must ensure that the merits of all alternatives, including the no-build alternative, are eval- uated and fairly considered and that no commitments are owners can be forced to implement specifications that inhibit the successful use of P3s. Impacts to Planning and Environmental Review Although each of the key legal concepts listed can be critical to the success of a P3 project, most do not directly affect the project planning and environmental approval processes. One exception, however, is the need for explicit authorization for the private entity to assist the public owner in defining a fea- sible project to later be developed by the private entity, which is at the heart of the first phase of predevelopment agreement P3 projects. Aside from granting this authority, P3-enabling legislation does not typically provide detail regarding how pri- vate entities are to conduct this predevelopment work. In con- trast, and as discussed below, federal statutes and regulations specifically address what private entities with an interest in development of the project can and cannot do when perform- ing this work on federalized projects. Similar to the restric- tions put in place by federal statutes, state constitutions and other similar documents may address what private partners can and cannot do when performing design–build and P3 work. For example, Article 22 of the California constitution explicitly authorizes the state of California and other govern- mental entities to contract with private entities for architec- tural and engineering services. California voters established this authority by adopting a constitutional amendment in 2000 after a union that represents professional engineers in state government sought unsuccessfully to obtain a constitutional amendment that would have prohibited the contracting out of these services to private entities. It is not uncommon for public owners who have obtained P3-enabling legislation to later discover that the legislation needs to be revised to address issues that the legislature did not anticipate. For example, the Florida Department of Transpor- tation’s (FDOT) P3-enabling statute, located in Section 334.30, has been revised seven times since it was first adopted in 1991. The revisions adopted in 2007 gave the department the author- ity to make availability payments and to lower the minimum required amount for payment and performance security (FL Stat. § 334.30). The specific revisions at issue were instituted by Section 50 of House Bill 985, which was passed during the 2007 legislative session and which the governor signed into law on June 19, 2007 (FL s. 50, ch. 2007-196). The department sought these revisions to address issues it was encountering with its first two P3 procurements: the Port of Miami Tunnel and Access Improvements Project and I-595 Corridor Roadway Improve- ments Project. Both projects reached financial close in 2009. In some states, the P3-enabling legislation contemplates adoption of regulations by public entities to provide detail regarding how to implement the statute. As an example, the Utah Department of Transportation’s P3-enabling statute

24 official name of this program is Special Experimental Project No. 14—Alternative Contracting. The TEA-21 authorization and subsequent adoption of the design–build rule by the FHWA was, in large part, a result of the successes achieved under the SEP-14 program. SEP-15 The FHWA has also established Special Experimental Proj- ect 15 (SEP-15), which allows experiments more specifically focused on P3 projects. The stated intent of SEP-15 is to allow agencies to explore alternative contracting, environmental approval, right-of-way acquisition, project finance and trans- portation planning processes that deviate from Title 23 U.S.C. and applicable FHWA policies and regulations—subject to the caveat that the FHWA’s experimental authority does not allow it to waive laws outside of Title 23 U.S.C. or the policies and regulations of any agency other than FHWA. Various state DOTs have used this program to explore innovative techniques on federal-aid P3 projects. According to the FHWA’s website, DOTs from Alaska, California, Florida, Idaho, Mississippi, Oregon, Texas, and Virginia have used the SEP-15 program (FHWA 2012b). These same agencies have used SEP-15 to enter into P3 agree- ments before completion of the NEPA process—enabling them to integrate private-sector ideas and innovation into the envi- ronmental/permitting approval process and to streamline the process of obtaining loans under TIFIA [23 U.S.C. §§ 601-609 (2006)]. As previously noted, current design–build regula- tions permit award before completion of the NEPA process: the change in the regulation was the result of direction from Congress in the 2005 transportation reauthorization bill, known as the Safe, Accountable, Flexible, Efficient Transpor- tation Equity Act: A Legacy for Users (SAFETEA-LU) [see 23 U.S.C. § 112(f), added by §174 of Pub. L. No. 109-59, 119 Stat. 114 (2005)]. Although the FHWA continues to encourage SEP-15 applications, no SEP-15 projects have been approved since 2008 (FHWA 2012b). State DOt and MPO Planning requirements Planning requirements for all transportation projects including P3s coincide with the first two phases of the Decision Guide: long-range planning and programming. Long-Range Planning The first phase in the Decision Guide covers long-range plan- ning. Federal law requires that states and metropolitan regions develop and update long-range transportation plans address- ing needs and policy over a 20-year period. According to the made to any alternative being evaluated under the NEPA process. • The design–build contract must include termination provi- sions in the event that the no-build alternative is selected. These provisions enable public owners to obtain the ben- efit of bringing the private entity into the project early enough to allow it to participate in shaping project concepts while also protecting against the possibility that the private entity’s participation could improperly influence the environmental review process. For example, the provisions described permit the private entity or design-builder to define potential project alternatives and contribute underlying data to the environ- mental review process but do not permit the private entity or the design-builder to serve as a joint lead agency in the envi- ronmental review process. They cannot control the environ- mental review process or be a preparer of any formal NEPA document, such as an EIS or environmental assessment (EA). (23 C.F.R. § 636.109(b)(6) and 40 C.F.R. § 1506.5(c)). How- ever, this does not prevent the transportation agency from asking this private partner to produce studies and other infor- mation related to the environmental process, or, more gener- ally, to provide its view of key project-related issues. Indeed, nothing prevents the private partner from providing such information or views of its own accord under these rules. By prohibiting the private entity from proceeding with final design or with construction for any project segment before completion of the NEPA process, the regulation guards against the risk of a private entity intentionally or unintentionally pushing a public owner toward a particular alternative. These constraints also protect the private entity from risking loss of significant amounts of money expended in support of a project alternative that ultimately is not selected. In 1998, Congress authorized the use of design–build (including P3) contracting for federal-aid highway projects with the passage of the Transportation Equity Act for the 21st Century (TEA-21). This is Pub. L. No. 105-178, §1307, 112 Stat. 107 (1998). The regulations fully implementing this sec- tion were issued in 2002 at 67 Fed. Reg. 75926 (December 10, 2002). The regulations include revisions to various provisions of the FHWA regulations, as well as the addition of a new part 636 of Title 23 C.F.R. Pending the issuance of these regula- tions, FHWA specifically authorized the use of design–build contracting through its ongoing “experimental” program. Before the passage of TEA-21, Title 23 made design–build contracting impossible because it required public owners to award design contracts based on a qualifications-based selec- tion process and to award construction contracts to the low- est responsible responsive bidder. However, starting in 1990 the FHWA began to allow agencies to evaluate design–build contracting and other nontraditional contracting techniques on a project-by-project basis through its SEP-14 program; the

25 and similar to the long-range planning phase, involves com- piling information on project definition, financing, and air quality compliance. However, because TIP and STIP programs are composed of a smaller number of projects that have been defined at a greater level of detail, the analyses and decisions involved in preparing the TIP and STIP are more nuanced than those of SLRP. Like MTPs, TIPs and the STIPs must be fiscally constrained. TIPs are also subject to conformity analysis to demonstrate that a region will meet air quality standards after the projects are implemented. (The sections that follow will discuss require- ments for funding availability and fiscal constraint, with a focus on application to P3s, and transportation plan conformity.) A state DOT solicits or identifies projects from areas of the state outside the boundaries of MPOs that are included based on adopted procedures and criteria. TIPs developed by MPOs must be incorporated without change into STIPs. Typically, a STIP is developed for a time period consistent with that of a TIP. Unlike long-range planning, programming does not involve establishing an overall transportation policy vision for regions. Instead, it focuses on developing a near-term implementation plan that reflects the regional vision and policy priorities artic- ulated during long-range planning. The programming phase of the Decision Guide is iterative, recurring at least once every 4 years and more frequently if changes are made to a TIP or STIP. As is often the case resulting from the natural progression from draft environmental impact statement (DEIS) alterna- tives to a preferred DEIS alternative, the definition of the proj- ect in the TIP or STIP must also be updated for consistency purposes before environmental approval can be obtained. These types of refinements involve not only the physical defini- tion of the project but also operational and policy issues, such as the decision to operate new capacity as priced lanes or toll facilities. If the decision is made to introduce tolling on a facility, that decision could potentially lead to the delivery of the project as a P3. This could have a significant impact on the fiscal constraint assumptions included in the TIP or federally mandated law the Statewide Long-Range Transporta- tion Plan (SLRP), DOTs have a certain degree of flexibility in how they approach long-range planning and can develop plans that are primarily policy-oriented or that include a specific list of projects that will be needed. This federally mandated metro- politan planning process requires all urbanized areas in the country with populations of more than 50,000 to produce a long-range plan that identifies projected transportation and policy needs over a 20-year horizon. This regional planning requirement is undertaken by MPOs, which are transportation policy bodies comprising representatives from local transpor- tation agencies and governments. The essential characteristics of these planning documents are summarized in Table 3.1. Although there is overlap between the long-range planning responsibilities of state DOTs and MPOs, the primary differ- ence in their respective responsibilities is the federal require- ment that MPO long-range plans be financially constrained. States may, but are not required to, include financial plans in the state long-range plan. This means that they must include estimates of reasonably available financial sources for opera- tions, maintenance, and capital projects and include cost esti- mates for proposed improvements, while limiting mention of capital projects in the plan to those that can be funded from the revenues. In addition to meeting financial constraint requirements, the MTP must go through the process of con- formity to assess its consistency with state air quality goals, as discussed later in this chapter. Project Programming In addition to long-range transportation plans, federal law requires that states and MPOs also maintain nearer-term TIPs. For states this document is called the state transportation improvement program (STIP); it identifies projects in the MTPs/SLRP that will be completed in the coming 4-year cycles (see Table 3.1). The programming phase of the Decision Guide aligns with the completion of the TIP and STIP programming, Table 3.1. Long- and Short-Range Transportation Planning Documents Plan Type Who Develops? Who Approves? Time Horizon Content Fiscal Constraint Requirement Update Requirement MTP MPO MPO 20 Years Future goals, strategies, and projects Yes Every 5 years; 4 years for non­ attainment and maintenance areas SLRP State DOT State DOT 20 Years Future goals, strategies, and projects No Not specified TIP MPO MPO/Governor 4 Years Transportation investments Yes, by year Every 4 years STIP State DOT U.S. DOT 4 Years Transportation investments Yes, by year Every 4 years Source: Adapted from The Transportation Planning Process: Key Issues (FHWA and FTA 2007).

26 associated with financing a P3 project must be “reasonably expected to be available.” A P3 may be reasonable under the same considerations, as in the example given. In addition, Other indictors of “reasonableness” for [P3] projects are if a State or local jurisdiction has had past success in implementing [P3s], and if State-enabling legislation is in place, or if efforts are under way to enact State-enabling [P3] legislation and there is evidence of support by the Governor and/or legislature. There should also be interest in the project from the invest- ment community. (FHWA 2009) Funding sources associated with innovative finance tech- niques, including tolling and pricing and various debt instru- ments (which, along with private equity, are often integral to a P3s’ financings), must be reflected in the MTP, TIP, and STIP financial information and in other supporting financial plans. Again, in-place enabling legislation that allows a state or a local- ity to pursue tolling is a key step in determining fiscal constraint reasonableness. Nonattainment and Maintenance Areas An exception to the requirement regarding reasonable avail- ability of funding occurs in air quality nonattainment and maintenance areas, limiting projects in such areas appearing within the first 2 years of a TIP and STIP to those with funding that is available or committed, as defined in Section 450.104 of Title 23 C.F.R.: Available funds means funds derived from an existing source dedicated to or historically used for transportation purposes. For Federal funds, authorized and/or appropriated funds and the extrapolation of formula and discretionary funds at his- toric rates of increase are considered “available.” A similar approach may be used for State and local funds that are dedi- cated to or historically used for transportation purposes. Committed funds means funds that have been dedicated or obligated for transportation purposes. For State funds that are not dedicated to transportation purposes, only those funds over which the Governor has control may be considered “committed.” Approval of a TIP by the Governor is considered a commitment of those funds over which the Governor has control. For local or private sources of funds not dedicated to or historically used for transportation purposes (including donations of property), a commitment in writing (e.g., letter of intent) by the responsible official or body hav- ing control of the funds may be considered a commitment. This is a much stronger requirement than being “reason- ably expected to be available,” because the funds must already exist or be based on clear historical trends. The new funding allowance of what can be considered reasonable, which relies on future authorizing actions, becomes difficult to justify as STIP, because P3 procurements have the potential to reduce the level of public investment needed to implement proj- ects, thereby allowing the TIP or STIP to include other proj- ects not otherwise eligible for the short-term implementation program resulting from limitations on public funding. If permitted by law, unsolicited P3 offers may also result in a private developer proposing a project that was not included on the TIP or STIP. A private developer may also propose sub- stantive changes to existing projects, such as operating them as toll facilities rather than nontolled general purpose capacity. Although such changes may cause concern among those unfamiliar with P3 projects, P3-enabling legislation allow- ing unsolicited P3 offers also establishes processes for DOTs to judge whether any unsolicited offers have merit and to ulti- mately to make the decision whether an unsolicited P3 offer will be advanced or terminated. The next step in most cases is a call for competing bids to the unsolicited offer. P3 autho- rizing statutes in some states (e.g., Ohio) require consis- tency with the planning and programming process for any unsolicited bids. Understanding Funding Availability and Fiscal Constraint with P3s Revenue forecasts used to demonstrate fiscal constraint in the MTP, TIP, and STIP must be “reasonably expected to be available.” There is some degree of interpretation within this requirement. FHWA’s Office of Planning, Environment, and Realty offers guidance and examples of what is considered rea- sonable and not reasonable (FHWA 2009). Revenue forecasts are permitted to include “new funding sources and levels of funding not currently in place.” The funds may require future action by a legislative or executive body, and the reasonable- ness of such an occurrence can be projected based on past historical trends. FHWA suggests two important consider- ations in determining a revenue assumption to be reasonable: evidence of a review and support of the new revenue assump- tion by state and local officials and documentation of the ratio- nale and procedural steps to be taken, with milestone dates for securing the funds. One “reasonable” example is this: A new toll or other user fee dedicated to a particular project or program may be reasonable if there is clear evidence of sup- port by the Governor, legislature, and/or other appropriate local/regional decision makers and a strategy exists with mile- stones for securing those approvals within the time period for implementing the affected projects. (FHWA 2009) The same guidance memorandum discusses the treatment of innovative finance techniques and P3s in MTPs, TIPs, and STIPs. As with traditional funding sources, those sources

27 to new violations of the National Ambient Air Quality Stan- dards, increase the frequency or severity of existing violations, or delay the timely attainment of the standards or an estab- lished interim milestone. Conformity also includes confir- mation that established Transportation Control Measures, strategies that affect traffic patterns or reduce vehicle use such as HOV lanes and bicycle facilities, are being implemented on schedule, as included in the SIP and programmed in the TIP. The conformity determination is made by the MPO policy board, followed by a determinations issued by both FHWA and the Federal Transit Administration (pursuant to 40 C.F.R. pt. 93) that the MTP and TIP meet conformity requirements. Except for administrative modifications, a conformity deter- mination must be made each time an MPO updates or amends its MTP or TIP and at least every 4 years. A conformity deter- mination is also required within 24 months of an approved SIP or SIP revision. Finally, certain nonexempt projects—any potential P3 would assuredly be a nonexempt project—must be assessed individually for conformity, if located in carbon monoxide or particulates found in nonattainment and maintenance areas. The project’s impact on localized concentrations (“hot spots”) of carbon monoxide and particulates are weighed against the natural ambient air quality standards. This analysis is typically performed during the NEPA process. P3s and Project Finance A prime benefit of P3s is the availability of project finance alter- natives that become possible when the private sector is involved in a project. Among the primary advantages of P3s are a private partner’s potential equity contribution and the partner’s will- ingness to accept responsibility for arranging often complex financing while accepting risks that often increase the proba- bility that a project will proceed or, ultimately, lower its overall cost. P3 project finance can be a significant issue prior to the completion of the environmental review process. Public and Private Financing Options Even though cost considerations should not be the main focus of the NEPA process, the financing options available to a pub- lic owner can ultimately impact a final NEPA decision. His- torically, public owners have financed transportation projects using available public funding, proceeds from the sale of public bonds and, if permitted, toll revenues (which back toll revenue bonds). P3 projects increase the number of options available to public owners to finance their projects. Private entities often contribute equity to P3 projects and have access to private bank and bond financing. Under P3 agreements, the public owner may completely shift the responsibility for project financing to the private sector with no recourse (e.g., certain either available or committed. This requirement can present a problem for P3s, since the plan of finance for P3s usually cannot be finalized until after the conclusion of the NEPA process. Obtaining a FONSI or ROD requires that the entire project as described in the environmental document be consistent with the MTP. Approval must also come from a STIP/TIP in the case of a “regionally significant project,” defined in 23 C.F.R. pt. 450.104 as having a direct impact on regional transportation needs and being normally part of the metropolitan or regional transportation network model. They may require federal funds (FHWA 2011). But before the MTP or STIP/TIP in nonattainment and maintenance areas can be approved, financial constraint must be demonstrated. There is some flexibility in proposing P3s in the later years of the MTP, but funding must be available and committed in the first two years of TIP/STIP. Adding P3 to the TIP/STIP would be difficult since the funds are not yet committed until finan- cial close. This is why FHWA advocates involving discussion of P3s early in planning. The approach adopted by FHWA to managing fiscal con- straints for P3s in nonattainment and maintenance areas is to apply many of the same tests to determine whether funding is “reasonably expected to be available,” including ensuring enabling legislation is in place, weighing evidence of support, and examining the prior track record on P3s. FHWA has tended to defer to cost estimates in the TIP, checking for con- sistency with the most recent version of the project’s financial plan. In addition, it may also rely on a letters of commitment from the parties involved, in the case of a private partner’s equity contribution or a commercial bank’s intention to lend money. Finally, FHWA may also consider evidence of other assurances, such as those required of TIFIA. Without a final NEPA decision, TIFIA credit assistance cannot be secured, but the application process requirements (e.g., a detailed financial plan with sources and uses of funds and cash flow pro forma) typically are developed up to 1 year in advance and may be available to assist in better demonstrating the rea- soning and likelihood of funding availability. Transportation Plan Conformity In nonattainment and maintenance areas, the MTP and TIP also must go through the process of conformity to assess con- sistency with the state implementation plan (SIP), a federal requirement under the Clean Air Act that sets forth how a state will comply with federal air quality standards. A SIP includes an emissions inventory based on actual or modeled emissions by category, including on-road, mobile source emissions. Established targets for this category of emissions yield a motor vehicle emissions budget, against which new projects’ impacts must be measured. Conformity is demonstrated by showing that the plan’s proposed projects will not cause or contribute

28 tax-exempt private activity bonds. Nor do many public own- ers have experience with the details of private financing. As a result, for public owners to successfully navigate the financing issues related to P3 projects, it is often necessary for them to hire financial consultants and private law firms familiar with both public and private financing markets. Factors Influencing the Use of Different P3 Options Successful P3 projects do not all have the same financing struc- ture or the same need for public-sector funding. For example, certain projects that produce revenues, such as toll roads, may be fully self-funding without any need for public funds to sup- plement toll revenues. This was the case with the TxDOT’s SH-121 project, the Sam Rayburn Tollway, before the selected private entity lost the project to the North Texas Tollway Authority. In most cases, however, the projected revenue from a proposed project will not be sufficient to cover the private entity’s costs and return on investment and consequently additional public funding is needed to make up the difference. This was the situation for FDOT’s I-595 Corridor Roadway Improvements Project. There is often a close relationship between the types of pub- lic funding available for a project and the type of P3 a public owner can successfully pursue. Some funding is only avail- able for a specific fiscal year or for a specific purpose. Accord- ingly, even if a P3 project is technically feasible, it may be financially feasible only if the right types of funding are avail- able at the right time. This dynamic is evident in recent availability payment P3 projects. With availability payment arrangements project sponsors typically defer payment to the private partner until the project is opened for service. For these arrangements to work, the sponsor needs one or more dependable revenue sources over the lifetime of the concession period. Sponsor revenues may include tolls collected on the facility or other funds. Although availability payment P3 structures shield pri- vate partners from revenue risk, the private partners and their lenders must be convinced that the public owner has secured and dedicated the required funding to the project or has a clear, reliable process for obtaining the necessary approvals for pub- lic funding. Private entities may demand additional reassur- ances from the public owner that it has in fact obligated these funds before agreeing to proceed with assembling financing for an availability payment project. toll concessions) or may retain ultimate responsibility to pay for the project, but extend the time period for payments to the private entity beyond substantial completion of the project (e.g., design–build–finance agreements and availability pay- ment concessions). Although private financing interest costs can be more expensive than public financing, in some cases the total amount required to be financed is reduced as a result of innovative ideas to reduce project costs, the investment of private equity, and the private partners’ agreement to accept risks that would otherwise have to be covered by the financing. In certain circumstances, such as the recent financial crisis, public agencies may also be precluded from accessing the tra- ditional municipal debt market. In addition to these P3 financing options described, the fed- eral government has made certain programs and tools avail- able for public owners/private entities to use on P3 projects. These tools have played an important role in enabling the recent success of P3 projects throughout the country. One such tool is the U.S. DOT TIFIA program, which has been used on 14 different highway P3 projects (FHWA 2012c). Through this program, U.S. DOT provides federal credit assis- tance in the form of direct loans, loan guarantees, and standby lines of credit to finance transportation projects of regional and national significance. TIFIA financing is often the most affordable form of financing available to private developers for P3 projects because the interest rate is linked to the favor- able U.S. Treasury market rate. In addition, U.S. DOT has gen- erally been willing to agree to long maturities on TIFIA credit instruments with deferred repayment schedules (the maxi- mum maturity for TIFIA credit instruments is 35 years after substantial completion). The pairing of these aspects of the financing allows private developers to repay their more expen- sive debt first and pay back the principal amount of the less costly TIFIA financing last, thereby creating a less costly overall financing package. Developers cannot finalize these packages, however, until after the NEPA process is complete, because U.S. DOT cannot approve TIFIA loans nor make any other con- tractual funding commitments prior to the completion of the NEPA process. The approval of TIFIA credit assistance through execution of a term sheet is a federal action and, hence, cannot occur until after NEPA analysis is completed (see 40 C.F.R. pt. 1506.1 and 23 C.F.R. § 771.113). This requirement is also reflected in FHWA’s regulations and in TIFIA [see 23 C.F.R. § 771.113 and 23 U.S.C. § 602(c), respectively]. It should be noted that many public owners are not famil- iar with TIFIA or other public-sector financing tools, such as