Update 10-7-2014: Read the CRS Insights publication here.
Following the bankruptcy of the Indiana Toll Road, lawmakers will reassess the role of private investment in the nation’s transportation infrastructure, a September 29 publication from the Congressional Research Service (CRS) reports.
When the Indiana Toll Road Concession Company took on the 157-mile toll road across northern Indiana, it agreed to accept the traffic demand risk, putting at stake future revenue from a drop in traffic. Traffic did slow following the 2008 recession, and interest rate swaps increased the ITRCC’s debt. The company filed for bankruptcy in September.
The report cites the financial restricting of San Diego’s South Bay Expressway, SH-130 in Texas and the Pocahontas Parkway in Richmond, Va., after traffic volume projections fell short.
“These financial problems have not stopped the creation of P3s in highway transportation,” CRS said. “The private sector, however, has become much more reluctant to risk its own money on estimates of future demand, a reluctance that is likely to be reinforced by the problems with the Indiana Toll Road lease.”
As private sector companies push for availability payments to offset the risk of revenue shortfalls, P3 deals may become less attractive to the public sector.
“In a toll road or bridge P3 with availability payments, responsibility for project funding ultimately stays with the public sector, which bears the loss if too few motorists pay the tolls charged to cover the cost,” according to CRS.
The report comes on the heals of a report from the House Transportation and Infrastructure Committee, released in mid-September, recommending changes to transportation funding in order to make P3s a more viable option for local and state governments.