Revenue Risk Sharing for Highway Public-Private Partnership Concessions: A Discussion Paper

Federal Highway Administration2016PDFTech ReportPage, SashaVerdouw, WimHam, MarcelHelwig, JohnJohn A. Volpe National Transportation Systems Center (U.S.)United States. Federal Highway Administration. Office of Innovative Program DeliveryDeCorla-Souza, PatrickUnited States. Federal Highway Administration. Office of Innovative Program DeliveryUnited StatesPublic private partnershipsProject deliveryTollsFinancingHighway project deliveryRevenue riskToll concessionsProject financingFHWA-HIN-17-005DOT-VNTSC-FHWA-17-03DeCorla-Souza, PatrickThis discussion paper was developed for transportation professionals who may be involved in a Public-Private Partnership (P3) concession project. P3 concessions are an integrated service delivery approach where a public transportation agency enters a contractual agreement with a private sector entity to deliver a service and/or facility for a specific period. Under the P3 approach, the private sector entity is singly responsible for the design, construction, finance, operations and maintenance of facilities for a specified concession period. During the last decade, several U.S. P3s experienced significant financial stress requiring restructuring. Lately, some private concessionaires have avoided revenue risk P3s, preferring those in which public agencies assume all the revenue risk, typically through availability payments. To ensure robust private participation in U.S. P3s - and explore whether there is a "middle ground" between availability payment and revenue risk toll P3s -this paper seeks to foster a discussion about revenue risk sharing. The discussion paper evaluates revenue risk sharing mechanisms from both the public and private sector perspectives, applying four criteria -- value for money, fiscal impacts, financeability and ease of implementation. The discussion paper was developed based on existing literature, interviews with over 25 P3 market participants, and analysis of cases in the U.S. and internationally.143