Leasing agreements and asset management options involve revenue sharing contracts that benefit the economy over the long term

Leasing agreements and asset management options involve revenue sharing contracts that benefit the economy over the long term

Drawn by the numerous advantages they provide, nations across the globe have been increasingly turning to PPPs to provide essential facilities and services. One of the principal benefits governments derive from PPPs is the ability to create infrastructure without the need for either short- or long-term government funding.18 This opportunity to improve or create infrastructure without incurring additional debt obligations provides an invaluable service to governments facing constitutional, statutory, or administrative limitations, or restrictions on spending or levels of outstanding debt.19¶ Considering the rapidly increasing government expenditures and the current economic recession in the United States, the use of BOT, BOO, and DBFO agreements provides a means of supplying crucial public facilities and transportation networks at little or no cost to the public treasury. Furthermore, the use of asset management and other leasing agreements for existing public infrastructure can create a much-needed revenue stream for governments at every level. For example, the 2006 lease of the Indiana Toll Road to a private consortium for $3 .8 billion not only prevented further public expenditures on the roadway, but also funded Indiana's statewide transportation improvement plan, "Major Moves."20 Due to the lease of the road, Indiana is currently the only state in the nation with a fully funded ten-year transportation plan.21 Given the flexibility and variety of PPP options, governments can negotiate contracts that not only provide for significant initial payments, but also include revenue-sharing options that could continue to provide significant monetary benefits to the public throughout the life of the contract.

P3s empirically successful – long-term, constant source of economic (and infrastructural) growth

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Partnerships have long been successfully used in such nations as Australia, New Zealand, Ireland, France, Spain, Chile, Norway and the Netherlands. The evidence is compelling: Partnerships provide capital that is needed for highway construction, maintenance and operations - while well-structured public-private lease agreements keep accountability and oversight in the hands of elected officials and public highway authorities. American policymakers have recently begun to pursue public-private partnerships, and have saved substantial amounts of money for the taxpayers.¶ Two recent U.S. partnerships illustrate how public-private partnerships can benefit America's taxpayers while ensuring safe, modernized road for our drivers.¶ LEASING FOR DOLLARS¶ First, consider the example of the Chicago Skyway. In October 2004, the City of Chicago leased out the operation of an eight-mile, 48-year-old toll road that carries traffic over the Calumet River. In exchange for a 99-year lease, which allows the leaseholder to keep the Skyway's toll revenue, Chicago gained $1.82 billion. The money was paid by a consortium formed by two private companies - Macquarie Bank of Australia and Cintra of Spain - which are obligated to safely maintain and operate the roadway.¶ The flow of traffic is smoother than ever along the Skyway now. Within months, the facility was converted to electronic tolling, created extra peak-period capacity using reversible lanes, and began employing more workers during these peak periods. Private operators have a powerful incentive to improve throughput-more throughput, more revenue, and happier customers. And thanks to the partnership, the City of Chicago became $1.82 billion richer.¶ Second, consider the example of the Indiana Toll Road. In the spring of 2006, the State of Indiana leased out the operation of the 157-mile, 50-year-old toll road that runs across the northern part of the state from the Ohio border to the Illinois border - where the road adjoins the Chicago Skyway.¶ In exchange for a 75-year-lease, the State of Indiana gained $3.85 billion. The firm that won the bidding is the same consortium that won the Chicago Skyway lease: the venture formed by Macquarie Bank and Cintra, which will keep the highway's toll revenue.¶ As part of the agreement, Macquarie and Cintra pledged more than $770 million for upgrades to the roadway, including added lanes, the reconstruction of the road's pavement and bridges, and the installation of an electronic toll collection system (which allows traffic to keep flowing, without having to stop to pay a toll).

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Spending – Helps Growth - 2
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Indiana's taxpayers now have an extra $3.85 billion to funnel into other state priorities; they save money on the highway maintenance that will now be overseen by Macquarie and Cintra; and they look forward to the planned infrastructure improvements, which might have otherwise overwhelmed the state's highway budget.¶ Other states and regions have been exploring or enacting such partnerships, including Texas, Florida and California. The example of the Chicago Skyway and the Indiana Toll Road have fascinated lawmakers who are eager to ease the tax burden on their states, while catching the attention of American road-construction and toll-road-operating firms. Private investors seem to be thinking: What economic value have Australian-based Macquarie and Spanish-based Cintra identified in these toll-road lease agreements - and what kind of profits can other investors gain?¶ WHAT'S IN IT FOR INVESTORS, TAXPAYERS?¶ As always, private interests will shrewdly calculate, "What's in it for me?" while defenders of the public interest must examine, "What's in it for the strength of our nation's transportation system?"¶ Well-designed public-private partnerships can satisfy both the profit-and-loss imperative of private investors and the public-interest priority of America's citizens.¶ Financiers know a good deal when they see one, and evidently they recognize the wisdom of investing private capital in American infrastructure projects - fixed, bricks-and-mortar assets that will provide a predictable stream of toll-based revenue, year-in and year-out. At the moment, overseas-based companies like Macquarie and Cintra have paved the way in creating public-private partnerships - but as American firms amass capital, study potential deals, and seek leases of their own, the international firms' head start probably won't last very long.

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