- Briefing Room
P3s concessions may be used to lease existing publicly-financed tolled facilities to private sector investor operators for a specified period of time during which they have the right to collect tolls on the facility. In exchange, the private partner must operate and maintain the facility and in some cases make improvements to it. The private partner must also pay an upfront concession fee for the right to operate the road and retain toll revenues.
Long term leases are procured on a competitive basis, with awards going to the qualified bidder making the most attractive offer to the sponsoring agency. The most important criterion for the award of a long term lease concession generally is the amount of the concession fee. Other criteria may include the length of the concession period and the credit worthiness and professional qualifications of the bidders.
Toll road owners considering leasing options normally undertake thorough assessments of the fair market value of lease transactions to avoid undervaluing the asset. Other policy issues can be addressed in the legal terms and conditions underpinning lease transactions to ensure fair outcomes. Public agencies considering the use of long term lease transactions should consider the following policy issues:
The implications of each of these issues vary depending on the facility involved and the means of addressing or mitigating their effects. For example, public control over toll rates can be retained. Similarly, caps can be placed on the private sector's rate of return. Regulations can be enacted to ensure that the lease proceeds are used to support transportation improvements in prescribed areas. Governments also oversee the private sector partner's performance and include capital reinvestment, availability, safety, and customer services requirements in their lease agreements. Public agencies sponsoring long term lease concessions can protect the public interest when they use these tools effectively.
The potential benefits of a long term lease concession include: