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Federal-Aid Funding and Availability Payments

Highway Photo06/20/12

The Federal Highway Administration (FHWA) recently implemented a policy that will allow State Departments of Transportation (DOTs) to use Federal-aid funds in innovative long-term contracts with private developers. In such agreements, the State grants exclusive rights (a "concession") to a developer – concessionaire – who assumes responsibility for the highway's construction, operations and upkeep. Such contracts often allow the concessionaire to collect tolls, but tolling may not prove suitable for every project. Instead, some States agree to regularly-scheduled payments ("availability payments") that the concessionaire earns via its ability to make the highway available to the public at prescribed levels of service.

The new FHWA policy will allow those considering the availability payment public-private partnership (P3) delivery method to count on a level of Federal assistance comparable to that of a traditional public works project. While San Francisco's Presidio Parkway (as seen in photo) was the first project in the country to use Federal-aid for availability payments, these new and expanded policy flexibilities will make it easier for other States to follow suit and take advantage of this form of innovative financing.

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