- Briefing Room
Operator: Ladies and gentleman, thank you for standing by. Welcome to the report on Highway P3 Concessions in the U.S. conference call. At this time, all participants are in a listen-only mode. If you should require assistance during the call, please press star then zero. I would now like to turn the conference over to your host, DJ Mason. Please go head.
DJ Mason: Thank you, Matt. On behalf of the Federal Highway Administration's Office of Innovative Program Delivery I'd like to welcome everyone to today's webinar Report on Highway P3 Concessions in the U.S. My name is DJ Mason and I'm with the U.S. DOT's Volpe Center in Cambridge, Massachusetts. And today I'll be facilitating the session and providing any technical assistance you may need. I will introduce Patrick DeCorla-Souza, the P3 program manager at the Office of Innovative Program delivery momentarily. But before he begins I would like to point out a few key features of our web-room today. On the top left side of your screen you will find the audio call-in information. If you are ever disconnected from our webinar, please use that call-in information to reconnect to our audio. Below the audio information is the list of attendees. Below that is a box titled files two where you may access a copy of today's web presentation and the full highway P3 concessions report. Simply select the file, click download files and follow the prompts on your screen. A new tab or window may open in your Internet browser to complete the download. That's normal. In the lower left hand corner is a chat box where you can submit questions to our presenters throughout the webinar. We will pause for questions periodically throughout the presentation and we may also take questions over the phone later on. If that happens, further instruction will be given at that time. If you experience any technical difficulties, please use the chat box to send a private chat message to Jordan Wainer listed as the host of this webinar conference. Our webinar is scheduled to run until 3:00 P.M. Eastern Time today. And we are recording the webinar so that anyone unable to join us may review the material at any time. Before we get started, there are a few quick polls I would like everyone to answer, if they could, to help us better understand our audience. Those are opening right now. I'll just give everyone a few moments, if you could just click to vote. All right, just a couple of seconds to finish up here. Great. I'll now close out those polls. And with that, I'll turn the webinar over to Patrick DeCorla-Souza. Patrick.
Patrick DeCorla-Souza: Thank you, DJ. And welcome everybody to this webinar on the Report on Highway P3 Concessions in the U.S. We are going to introduce to you a report by that same name. The main presenter is going to be Benjamin Perez who is the principal consultant at WSP Parsons Brinckerhoff. We will also have presenting partly Mark Sullivan who is the director of the Center for Innovative Finance Support at the Federal Highway Administration. And I will also be presenting the initial introduction and I'm the P3 program manager and I work both for the Build America Bureau and the Federal Highway Administration. So I just want to give you an outline of how this webinar will proceed. We will first go through chapters one and two which is the introduction and definitions of what we mean by P3, the federal role is in chapter three and that will be presented by Mark Sullivan. And finally, Ben Perez is going to present chapter four which will describe the evolution of the U.S. P3 market. We will not go through a very elaborate appendix which includes P3 stories and, of course, all of those are available in the report. So very quickly, let me introduce you-- I see that many of you are already familiar with P3 so fortunately we can go through this fairly rapidly. The reason we had this report written is we wanted to see how P3's have evolved over the last twenty years or so since the first P3 was-- at least in recent times was implemented in 1992. And also provide more information on each P3 project so people who are doing similar projects could look at the experience of other states in implementing these projects. This slide shows the 28 projects that have been implemented or have reached financial close since 1992. As you can see there are a variety of states that have implemented P3s but not all states have implemented P3s. So an important issue is what we mean by P3. This slide shows the progression right in the bottom left is the typical design, bid, build procurement delivery which involves the government both taking on the risk and operating the facility over the entire project life. We have other methods of delivery that involve more and more private participation which you see along the scale there and those are sometimes called P3s. But what we mean in the context of this report is the green box which is design, build, finance, operate, maintain. So it is a long term contract involving both design and construction as well as operations and maintenance. And it also includes financing. So these are called concessions. There are several types of concessions and they are categorized in this report using this nomenclature shown here. So we've got new build projects and there are two main types, real tolled concessions and availability payment concessions. And real tolled concessions involve the concession taking revenue risk, that is if toll revenue is not sufficient they are at risk. And existing toll roads have what we call long term lease concessions and into that case there's no design or construction involved because, of course, the toll road already exists. Under real tolled concessions new build we have three categories: greenfield toll roads which are basically new roads where nothing existed before; crossings, river crossings, basically which may be a bridge or a tunnel; and priced manage lanes which are lanes built within the right of way of an existing facility. So a typical tolled concession is represented here. So you've got the special purpose vehicle or the concessionaire in the center. It is financed using bank loans and equity from equity investors you see on the right and the left. It gets the toll revenues to pay back these investors from the facility that you see at the bottom. And if the revenues are not sufficient then the agency would be required to provide a subsidy upfront usually. Now, if the tolls exceed expectations most contracts require the excess revenue to be shared with the public agency. So we've talked about these three types of toll concessions. And let me go to availability payment concessions. The main difference between this slide and the one you saw previously is that the line for toll revenues that you see at the bottom from the facility goes all the way around and to the agency at the top. So the difference here is the revenue risk is born by the agency. If the revenues aren't adequate to pay the concessionaire which would be paid by an availability payment, a periodic payment usually over the life of the contract and sometimes, of course, with a milestone payment upfront. And, of course, if the revenues aren't sufficient the agency would have to make that payment through its budget. A long-term lease concession, shown here, is very similar to the toll concession, except since there is no upfront investment with regard to design and construction the concessionaire is getting a stream of revenues over the life of the contract and that has a present value which it then makes to-- it makes a payment to the agency which is equal to the present value of the revenues it expects over that project life or concession life. So with that, let me turn it over to Mark Sullivan who will talk about the federal role. Mark.
Mark Sullivan: Thanks, Patrick. Yes, I'm Mark Sullivan. This chapter in the report is all of four pages. And I'm going to take a pro rata share of this presentation and just very quickly go through these slides here on the federal role. The overall story here is that along with this delivery of P3s, along with the growth of P3s you have seen a change in the way that the federal highway program delivers some of its financial assistance programs going from simply a pay as you go program, and developing a series of financial tools, we will...
Patrick DeCorla-Souza: I can move it for you.
Mark Sullivan: Okay. Thank you, Patrick. I'm having trouble with my connection. Let's just go past there. TE-045 was initial effort to try and get away from some standard pay as you go strategies. If you move the slide, Patrick, it evolved into-- one of the things it involved into was, of course, the GARVEE bond program which was where future federal aid can be leveraged and used to support borrowing. This wasn't specifically directed towards public/private partnerships, but it certainly did move FHWA into a lot more comfort and familiarity with the bond market. To the next slide, then, the TIFIA credit program has been walked through these projects. There's going to be many, many references to TIFIA loans. TIFIA is a U.S. DOT program that provides direct credit assistance. Although it was based on the bond market it turns out that it was developed in such a way that it was very, very flexible and has been a very important tool for public private partnerships. So it has worked not only with the bond market, but also worked with private financing sources. And as you'll see has become a pretty prominent aspect of most of these P3 financings. The next slide, then, just touches on private activity bonds, whereas TIFIA came about in the late 1990s, in the mid-2000s a special allocation was created for private activity bonds for highways and freight transfer facilities to allow them to borrow funds in the tax-exempt market. And the $15 billion allocation that was given to the department to be distributed to projects that original allocation is still under authority of the DOT; about $11 billion of that initial $15 billion have been either issued or allocated to projects. You'll see PABs, again, in a number of these projects that Ben is going to describe. And then finally just one more slide, which talks about a program SEP-15. Basically, an experimental program also from the mid-2000s that allows FHWA to identify obstacles in the regular federal aid program and test some experimental ways to help deliver P3 projects. And there's been a number of cases where this was used to help the TIFIA program work with state DOT to provide TIFIA credit assistance to all of the bidders on a project. That's now a standard procedure for the TIFIA program. It also was used most recently in Pennsylvania with the rapid bridge replacement project as a way of giving some flexibility during the NEPA stage of the developers. So then, I guess, the final slide here if you could advance, Patrick...
Patrick DeCorla-Souza: Yeah, it is. It's up.
Mark Sullivan: Okay. I see, I've lost my connection. I think the last slide there is simply a list of kind of current activities with the DOT. And at that, I think will conclude my piece of this presentation and turn this back to you Patrick and you, Ben.
Patrick DeCorla-Souza: All right. Well, Ben is next. So Ben is going to talk about the evolution of the P3 market. Ben.
Benjamin Perez: Thank you, Patrick. So the whole purpose of the report is to really understand where we are today in the P3 sector and how we got here. So to develop this baseline we'll go back to the pre-P3 era in the U.S. which you see here, 26 years ago, in 1991, no P3 projects. So the first P3 project in the country was the Teodoro Moscoso Bridge down in San Juan which is real toll fixed crossing. It closed-- it reached financial close in 1992. All of the dates you'll see here are the dates these projects reached financial close, not when they opened to service. And what we're going to do is we're going to build a timeline at the top of the slide. So above the map you'll see the beginning of a timeline showing the sequencing of these P3 projects. And in this case, this is a real toll project so it's depicted in blue in the timeline. We had two real P3 toll projects that reached close in 1993, the Dulles Greenway, a new build highway in Northern Virginia, and the SR-91 Express Lanes in Orange County, California. In 1994, we had no projects and we begin a ten-year hiatus with no new P3 projects in 1994, '95, '96, '97, '98-- whoops-- I've lost connectivity. Here we go. Here we go. In 1998, we see the establishment of the TIFIA credit program, '99, 2000, 2001, '02, 2003. We now have the next project in the United States which is the South Bay Expressway in San Diego, California which is a real toll, a greenfield concession. And this notably is the first P3 project in the U.S. to be financed with a TIFIA loan. So five years after the implementation of the program we have a P3 project that benefits from it. We have a hiatus, again, in 2004 but then each year since 2005 there has been some projects that have reached financial close. And in 2005 the first long-term lease concession in the United States reached financial close which was the Chicago Skyway in Illinois. And here on the timeline you'll see that long-term lease concessions are shown in red above the map. And in 2006 we had 2 long-term lease concessions, the Indiana toll road in Northern Indiana over $3 billion and Pocahontas Parkway in Richmond Virginia. This project also included the construction of a 1.6-mile extension to the Richmond Airport. So it's a bit of a hybrid but we're still showing that project in red in the timeline. In 2007, we see the close of the Capital Beltway HOT lanes. And this project was the very first P3 to use PABs in its financing. And the combination of TIFIA and PABs has been used on nearly all real toll P3 concessions since 2007. And in my mind, the Capital Beltway HOT lanes really is the beginning of what I would think of as sort of the modern era in financing P3 concessions. In 2008 we have two projects that reached financial close the Northwest Parkway near Denver which involves a long-term lease of an existing toll road and state Highway 130 which is a $1.3 billion greenfield toll road near Austin, Texas. So here in 2008, just nine years ago, so it's not all that long ago there were 10 P3 projects in the U.S. and 40 percent of them were long-term lease concessions and 60 percent of them are real toll concessions. So 2009 was really a watershed year. It was the first year in the domestic P3 market when we see the close of an availability payment concession. In this case, there were two of them both down in Florida. The Port of Miami Tunnel which is a non-tolled facility and the 595 Express Lanes which is a price managed lane facility in Fort Lauderdale. And these projects are shown in green in the timeline above the map. In 2010 we have two real toll projects that reached close in 2010 both price managed lanes. In the Dallas Fort Worth region, we have the LBJ express and the North Tarrant Express segments one and two. And together, these two price managed lane, real toll projects in one region of Texas, the metroplex represent $4.8 billion in investment. So we're seeing the order of magnitude of the activity increasing. Here in 2011 we see the most recent long-term lease concession transaction to have reached financial close with a PR-22 and PR-5 project down in Puerto Rico, if you haven't seen it in the lower right. And this is the most recent of this type of project to have reached financial close. Now, we move on to 2012 and we have 3 highway concessions that reach financial close in this year. They include two real toll projects in Virginia, the I-95 HOT lanes and the Elizabeth River tunnels in Norfolk. Also, out on the west coast, you'll see the Presidio Parkway project appearing on the map there and this is a non-tolled availability payment concession on the approach road to the Golden Gate Bridge in San Francisco. And then we move on to 2013. We have two concessions that closed in that year, the North Tarrant Express 35W in Fort Worth which is real toll managed lane facility and the Goethals Bridge replacement between Staten Island and New Jersey. In this case, the Port Authority of New York and New Jersey chose to procure the project as an availability payment because it wanted to retain control over the toll rate on the bridge and that toll rate needed to align with its other facilities. So it was a way to use P3 procurement under that given scenario. So now we move on 2014. And 2014 was the busiest year to date in the U.S. P3 sector. We have four projects reaching financial close. They include two availability payment concessions. The I4 ultimate managed lane facility which is a huge project down in Orlando. And the I69 section five which is a non-tolled highway in Central Indiana. The third and fourth toll projects are real toll managed lane concessions, the U.S. 36 Express near Denver, Colorado and the I-77 Express in Charlotte, North Carolina. So if you step back you really see not only are there four projects, but we see them in four different states one of which is in embarking on its-- actually two of which are embarking on their very first P3 project. So 2014 was a bit of a banner year. Twenty fifteen was another busy year. We had three all availability payment concessions reaching financial close. So you really see the uptick there. If you look at the timeline in green above the map you'll see 2015 is all green. We have the Ohio River bridges east end crossing between Kentucky and Indiana near Louisville. The Southern Ohio Veteran's Memorial Highway, which is a bypass route around Portsmouth in Southern Ohio. And then the Pennsylvania rapid bridge replacement project which mark alluded to which bundle the replacement of 558 bridges around the state into a single P3 procurement. In 2016, last year, activities slowed down somewhat. We had one real toll concession reaching financial close down in Houston, the SH-288 toll lanes. So here we are. You can see in this slide all 28 P-3 projects that have reached concession, financial close, I'd call your attention to the little asterisk down in the lower left. Two of these projects have actually been purchased subsequently by the public sector, the SR-91 Express Lanes in Orange County and the South Bay Express Way in San Diego. So 28 projects, 26 of which are still operated by the public sector. So looking at the timeline below the map you'll see the three pioneering projects back in the '92-'93 window, that ten-year hiatus that we talked about. Then there's a cluster of long-term lease concession shown in red in the mid-2000s. And then beginning in 2009 availability payment concessions have become increasingly prevalent. With the exception of 2004 at least one P3 deal has reached financial close per year since 2003. Peak volume was achieved in 2014 with those four projects that we discussed. And today the flow of P3 deals seem to be slowing, but there are transactions on the horizon, two of which would include I-66 outside the beltway in Northern Virginia and I-55 which is a price managed lane concession in Illinois. So we're at a point where we could take some questions because so if there are some.
Patrick DeCorla-Souza: Well, I don't see any questions in the chat box. Folks, if you have any question feel free to type them into the chat box. And, of course, we note that some folks were having technical difficulties including ourselves here. But if you just wait until-- wait for a few seconds, the browser will refresh and you'll be able to see the webinar. So Ben I don't see any questions in the chat box. We will have time for questions towards the end. So we can also at that time open the lines, open the telephone lines and answer questions. So why don't we move forward with your presentation, Ben?
Benjamin Perez: Okay. Thank you, Patrick. So now, in this portion of the presentation we will review the outcomes of the different types of concessions that we've been looking at and we're also going to look at trends in how they've been financed. So we're going to start off with the real toll concessions. And there are fourteen of these facilities. And out of the fourteen, eleven are open to traffic and three are in construction. And it's rather noteworthy just to observe that nine of these projects are either in Texas or Virginia. So 64 percent of the real toll projects in the country are located in these two states. Concession periods for these toll projects range from anywhere from 35 to 85 years. So there's quite a lot of variety in these projects. So now I want to talk about the three different typologies of real toll concessions. So let's start with greenfield toll roads. We've seen from our experience with these three projects that they are risky and they've had mixed results for their P3 partners. So the Dulles greenway in Northern Virginia this project staved off bankruptcy with a 20-year concession extension. And it was later sold. It's had a number of near death experiences but today it's financially healthy. And the whole health of that project is predicated on the growth in population and employment in Northern Virginia. We all know that's a very buoyant area. But they can't order up robust economic growth. It either comes or it doesn't come and it usually comes over time. So over time the profile of that project has improved. The South Bay Expressway in San Diego incurred bankruptcy in 2010 and it was subsequently purchased by SANDAG in 2011. They were hoping for a lot of growth with that project. Of course, it opened in the face of the 2008 financial crisis so that was a real challenge. And then the $1.3 billion SH-130 concession incurred bankruptcy last year and it was transferred to its creditors. So you'll see that these three projects have from the perspective of their private investors quite a checkered history. However, these projects have shielded their public sponsors from financial risk and provided high quality projects to the traveling public. They are successful from the perspective of their sponsors and the public. However, it's not likely that there will be more major greenfield concessions in the future because the private sector recognizes the risk and doesn't have the same appetite that it used to for it. So let's move on and discuss the fixed crossing concessions. Now, these concessions are slightly lower in risk compared to the greenfield facilities. And this is due-- they're crossing. So there's a smaller number of alternative routes. And in many cases, there are also established traffic volumes across some of these routes. So those two factors do mitigate the risk but it is still there, very much there. So the Teodoro Moscoso Bridge which is implemented down in Puerto Rico early on was refinanced in 2003. And the concession period was extended by 17 years early this year. So that's an indication that project, you know, they had some fixes in order to make it stand on its own financial legs. Elizabeth River tunnels project extends an existing highway near Norfolk Virginia and it rehabilitates two existing tunnels and adds one new tunnel. Tolls were reintroduced on these facilities to provide revenue. Revenue risk is mitigated somewhat by the historic traffic volumes. And the first of these facilities opened last year in 2016 so that the project has not been fully completed yet. But we'll be watching that project to see how it fairs. And then moving on to the managed lane toll concessions. Now, this is really the buoyant area of the real toll concession market. With one exception, all real toll concessions to reach financial close since 2009 in the United States have involved managed lane projects. Five of these are in operation and five of them remain under construction. These projects range in costs from 119 to over $2.6 billion. So some of them are extremely large. So we discussed the SR-91 Express opened in 1995. This project was commercially successful but the facility was purchased by the Orange County Transportation Authority to annul a non-compete clause in the P3 partners agreement which preempted any parallel non-tolled highway development in the corridor. And there was a lot of congestion in the corridor and so that's why that decision was made. I mentioned the I-94, 95 Capital Beltway HOT lanes in Northern Virginia. This project had its genesis as an unsolicited proposal. It opened late in 2012. It was refinanced in 2014 due to lower than expected revenue levels. But the P3 PC partner also invested additional equity into the concession and it is now financially stable. There are four managed lane real toll concessions in Texas. State law in Texas does not allow for availability payment concessions. So that's sort of noteworthy ergo the real toll concessions. The combined value of these major highway reconstruction and capacity enhancement projects is over $7.4 billion which is quite a lot of money. Now, we're going to move on to the availability payment concessions. We've seen a sea change in the P3 sector since the first availability payment projects reached financial close in 2009. Since then, half of the P3 projects to have closed in the United States have been availability payment concessions. Four of these are open to service and five remain under construction. Availability payments are used both on tolled and non-tolled facilities. And on tolled facilities they may be used where the public sponsor wants to retain control over toll rates. We need to recognize though that in the cases like this the public sponsor retains revenue risk. And they may also be used on lower income generating projects, where toll revenues would not cover all of the costs of the project. There's considerably less risk involved with availability payments compared to real toll projects. Private partners are essentially leveraging the faith in credit of the public sector sponsor. And availability payments themselves are viewed as akin to public debt by the rating agencies. Some states have caps on the overall amount of availability payments that can be issued. Others do not. Since proposers do not need to price financial risk into their proposals, awards are based on capital and ongoing operations and maintenance costs. So what this really does is engender rigorous cost competition among proposers. If you're going to be successful in vying for an availability payment concession you really have to sharpen your pencil. And these lower risk levels were essential in the wake of the 2008 financial crisis, just to keep the P3 sector buoyant and alive. And moving on to long term lease concessions. Again, a real burst of these projects in the mid-2000s and now we haven't seen one for several years. A number of states have considered leasing existing facilities in the interim but no projects have moved forwards. So it's no necessarily clear if there will be many more of these transactions around the country. These concession periods tend to be longer compared to real toll and availability payment concessions and they actually average 82 years in length. So that's a long time. These projects have raised extremely large amount of money for their sponsors. But performance has been mixed for the private partners. So the Pocahontas Parkway in Richmond went bankrupt and was transferred to its creditors in 2013. The state has since re-leased that facility. The Indiana toll road incurred bankruptcy in 2014 and it was later re-leased. And the concession period for the PR-22 and PR-5 project was extended by ten years in 2016. And both the Chicago Skyway and the Northwest Parkway Concessions have been sold by their original P3 partners. So you see quite a bit of change in the long-term lease market. So now I'd like to move on to the financing of these different types of concessions. And as we all know P3s are financed with a combination of debt, equity and often public sector grants. A combination of debt instruments is involved over time as government credit facilities have been created and as market conditions have evolved. Financing packages also differ among the three different types of P3 concessions and these differences reflect the relative amount of financial risk transferred to the private sector and regulatory requirements. So we'll conclude by looking at trends in the financing of these different concession types over time. So here you'll see the South Bay Expressway, you might remember the first P3 project to use TIFIA. This reached financial close back in 2003, so it was prior to the financial crisis. So you'll see in this pie chart those attributes which I just described with one exception. The point here I want to make is that before the financial crisis, commercial debt was common on real toll projects. And it has not been, it's a rarity since the financial crisis. And the only project to have used commercial debt is the SH-130 which has also ended up in bankruptcy. So this is sort of the-- an early real toll financing. And looking here you see the Capital Beltway HOT lanes which you might recall I referred to as sort of the, in my mind, the first-- the contemporary type real toll financings. This is the first P3 project to use private activity bonds in the United States. And this combination of TIFIA and PABs has been used on all subsequent real toll P3 concessions in the U.S. with the exception of the SH-130. And on these slides as we continue I just want to note that the colors remain consistent. So TIFIA will always be that sort of ochre color and commercial debt will always be the green that you've seen. So when you see differences in the colors and the compositions of these pie charts that's what it signals to you. So here is the financing of the Port of Miami Tunnel which is, obviously, one of the nine availability payments to reach financial close between 2009 and 2015. And what's interesting here with the availability payments is that the lower level of financial risk affords greater flexibility in assembling financing packages, especially compared to real toll concessions. So nine projects in all. Seven out of the nine have used a TIFIA loan. Seven have included some sort of milestone construction and completion payments. And four projects such as the Port of Miami Tunnel have actually used commercial credit. So because of the lower risk profile commercial credit has been viable for availability payments even in the post 2008 environment. So just remember what that pie chart looks like and see how different this one is. This is the Goethals Bridge. And here this project is using that combination of TIFIA and PABs which is so common among real toll concessions. And then keep that image in your mind and it will click one more time. And this one is quite different. This is the Pennsylvania Rapid Bridge replacement program. And you'll see here that 71 percent of that project was financed with PABs and the project has no TIFIA loan. So there are two non-TIFIA availability payment projects have used PABs in their financing. So now let's move on and we'll conclude with the long-term lease projects. As we know, these projects leverage established toll revenues. And these revenue streams are established ergo there is somewhat less risk involved with them. So these projects have all paired significant amounts of private equity with commercial debt. And here you can see the financing of the Northwest Parkway. And this sort of higher equity to debt ratio is typical when you're dealing in the commercial credit market. Those banks would require their private partners to put up more of their own equity at risk. So that's a hallmark of the long-term lease concession financings. And also, because these projects do not involve necessarily expansions or new construction they do not qualify for the federal credit programs that the new build projects do so no TIFIA no PABs. And just to note, again, private equity contributions for these projects range from between 18 and 48 percent. So I hope that gives you a sense of the variety in the financing between the different types of P3 projects. And when you look at that map the next time I hope that this gives you some perspective of how we've gotten to where we are here at the beginning of 2017. So Patrick I'll pass it back to you.
Patrick DeCorla-Souza: All right. Thanks, Ben. So we have had a few questions in the chat box. And let me remind the audience to please put in your questions in the chat box if you have any. So the first question going up is, what is making the availability payment more prevalent?
Benjamin Perez: Well, I think what's making the availability payment more prevalent is that many private partners-- when you speak to private developers they don't all have the same philosophy or approach. And there are those in the world who-- the reality is that you can make-- there's more upside potential with a real toll at risk P3 project then an availability payment. You know, the financial bounds of the availability payment concession are really quite prescribed. But there is a growing preponderance of P3 investors who are not-- who are more risk averse and not really interested in taking that level of risk. And I think you see that also states, there are many states around the country that have wanted to advance P3 projects. They may have P3 enabling legislation. There may be interest in their state legislatures. And they have projects but they're not necessarily projects that lend themselves well to tolling or they're not necessarily projects if they are le that would be able to be self-financed by tolls. So I think for these two reasons, that's why you really do see the growing level of availability payment concessions. That said, I don't think that-- there are only so many of these projects that any given state can do because they are very similar to public debt where you're prioritizing the funding of these particular projects ahead of all of other needs over time because you have to remember that these projects, they continue. The concessions continue for 25, 30 years and those availability payments need to be made throughout that time.
Patrick DeCorla-Souza: All right. Thanks, Ben. I'll take the third question first. In terms of the gateway project in New York/New Jersey, is there an opportunity to mix PABs availability payments, GARVEE's and owner operated funds to make something of this financial magnitude get constructed?
Benjamin Perez: Well, that's an interesting question. I'm here in New York. I think that a project like that we're going to need to-- we're going to need everything we can get. And I think though that we're going to need public subsidies probably more than anything else. One, just reflecting back on what I presented I didn't really focus too much on public subsidies. But there are many of the large availability payment real toll projects where significant portion of the project has been paid for by grants from the sponsor. A project like the Capital Beltway HOT lanes $2 billion, the commonwealth of Virginia contributed $700 million to that project. But by doing so it's been able to leverage all of that private investment. So in terms of gateway, gateway is a-- first of all, what you need for a P3 is you need a revenue source. So what's the revenue source? That's what we'd need to figure out. Is there some sort of fee for train? Passenger train doesn't necessarily generate revenue as it goes through a tunnel. But the-- GARVEEs could be used but GARVEEs-- you're not able to use a GARVEE as part of a P3 financing package. A GARVEE bond leverages future federal proceeds. But it is worth noting that the commonwealth of Virginia used GARVEE bonds to help cover its publicly provided subsidy for the Elizabeth River Crossings project. So yes, you know, if New York and New jersey were going to put up some money as a subsidy it's possible that they could come from something like a GARVEE bond. So that's a very complex project. And it was a complex question but I think yes there are ways to combine these different techniques.
Patrick DeCorla-Souza: All right. Thanks, Ben. So we have on more question. It's a rather long one, broken into pieces so let me see if I can read it for you. How do we overcome myths in P3 such as that P3s work in Europe and Asia but not in the US? Funding and financing are similar. Is the mindset of most DOTs, public resistance to privatization, already paid for public infrastructure or handing over the management of public infrastructure to private corporations? I guess I'll offer it to either Mark or Ben. This is more of a general question, so would either of you like to answer?
Benjamin Perez: Well, I would just say that you've got to remember that the U.S. is a unique market because of our municipal debt sector. And the majority of infrastructure investment is paid for with municipal debt which is cheaper than commercial debt. And you don't have that situation in Europe or Asia. And there's also a cultural divide. You see a cultural divide between Northern and Southern Europe. In places, in poorer countries, it's assumed, you know-- it's recognized that these investments are expensive and the government just doesn't have money of its own to develop these projects. And it's just understood that you need some sort of a user fee. And when you have a user fee, let's say a toll, then these projects could be procured on a P3 basis. But then there are cultural differences. Here in the United States, the national highway system is paid for when it was established by Eisenhower through the federal motor fuel tax. And that just became ingrained in the culture. So I think that's really the principle hurdle to overcome and that's what distinguishes the U.S. from Europe and Asia. Mark, what do you have to add?
Mark Sullivan: Well, I would only add in kind of thinking about current discussions about how to rebuild America's infrastructure, I think that it is crucial to understand that distinction between funding and financing. That those are very different parts of the equation. And we tend to-- a conversation tends to speak as though P3s are a funding source when, in fact, they are really a project delivery method in cases where, as you've pointed out Ben, the concessionaires are willing to take on toll revenue risk, then that is a substantial benefit, I think, to the public owner. But in cases where as we move more and more towards availability payments I think you've got to look at public/private partnerships really for its benefits in innovation and lifecycle costing. And it becomes clear in that mode that the best thing for the future of public/private partnerships in the U.S. would be substantial additional public funding.
Patrick DeCorla-Souza: All right. Thanks, Mark. And I just note that R. Clark in responding to something you said Ben says the tolls and Amtrak payments can be sources of revenue for that gateway project. So I think we are pretty much running out of time. And we have run out of questions in the chat box. So let's move on to this closing. So I just want to draw everybody's attention to the appendix of the report which has lots of great information on each of these projects, four pages on each including not just the overview but also the details about financing and how the project was procured. Of course, the report unfortunately does not include some of these emerging projects that Ben mentioned one here in Virginia, Illinois, Colorado and a new project in Hampton Road. You can also find profiles of these projects on FHWA's website noted here as well as the website of the Build America Bureau. I also want to remind you that we've got lots of other great information, not just on projects but details on every aspect of P3s including revenue risk sharing and financing and lots of different topics and an analytical tool that you can play with to understand P3s better. We also offer training both introductory training as well as more advanced training in P3 evaluation in using the P3 value analytical tool. And that training, by the way, is available free of charge to state DOTs. All you have to do is give me a call and we'll set you up. Just presenting here the contact information of our speakers and my contact information. So feel free to follow up with me on any training or other technical assistance needs. I am the P3 program manager and I work for both the Build America Bureau which is in the Office of the Secretary of U.S. DOT and the Center for Innovative Finance Support which is within FHWA. So with that I think we are at the end of this presentation. Again, the slides are available on your left-hand side as well as the report for downloading. And we'll keep that up for a while so you can download the files. Before we close, I just want to thank our main presenter, Ben Perez for doing an excellent presentation here of P3s in the U.S. And my colleague Mark Sullivan from Federal Highway Administration for his insights into the federal role. And I also want to thank our assistants with this webinar DJ Mason who is with the Volpe Center staff and Matt who served as our operator. So with that let me also thank you all for attending and please do fill out this evaluation form before you leave. Thanks a lot.
Operator: And that concludes our conference for today. Thank you for your participation and for using AT&T teleconference service. You may now disconnect.