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Why Do U.S. States Adopt Public-Private Partnership Enabling Legislation?

Ben Wagner INFO 4470
by

Benjamin Wagner

on 15 May 2011

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Transcript of Why Do U.S. States Adopt Public-Private Partnership Enabling Legislation?

What are public-private partnerships (PPPs)? Chicago Skyway is a 7.8 mile toll bridge outside of Chicago leased to a private consortium for 99 years in return for an upfront payment to the city of $1.83 billion The Indiana Toll Road is 157 miles long and connects the Ohio Turnpike in the East with the Skyway in the West. In 2006 it was leased to the Indiana Toll Road Concession Company for 75 years in return for an upfront payment of $3.85 billion. The State Route (SR) 91 Express Lanes in Orange County, California operate entirely within the median of SR-91. They were privately financed, built, and operated until their sale to the Orange County Transportation Authority (OCTA) in 2003. Tolls are congestion priced so traffic is always in free-flow. The Port of Miami Tunnel (POMT) will bypass the congested downtown to provide access to the Port of Miami. The concessionaire will earn its return through annual "availability payments," so no tolls will be charged. What are PPP enabling laws? "Public-private partnerships (P3s) are contractual agreements formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery and financing of transportation projects." - FHWA, P3 Defined, http://www.fhwa.dot.gov/ipd/p3/defined/index.htm Demand variables http://www.fhwa.dot.gov/ipd/p3/state_legislation/index.htm http://www.azleg.gov/legtext/49leg/1r/bills/hb2396s.pdf http://www.ncsl.org/default.aspx?TabId=20321 Resources FHWA Website, State P3 Legislation Arizona's House Bill 2396, passed in 2009 National Conference of State Legislatures "PPP Toolkit" “There will not be another consortium that will proceed in any state where they have to put their bids in first and then gain legislative approval to lease the asset.” - John Durbin, former Director of the Pennsylvania Turnpike Commission Authorize a state, usually through an agent such as the state DOT, to enter into PPP agreements with private sector entities. Why are they important? Research question: what factors lead states to adopt PPP enabling legislation? Population growth Source: U.S. Census Bureau Population Estimates, http://www.census.gov/popest/estimates.html Travel Time Index Source: Texas Transportation Institue: 2010 Urban Mobility Report, http://mobility.tamu.edu/ums/ Flaws: see http://www.ceosforcities.org/news/entry/2958/2010-umr-remains-a-flawed-and-misleading-guide-to-urban-transportation Vehicle Miles Traveled (VMT) Per Capita Source: FHWA Highway Statistics Series, Table VM-2, http://www.fhwa.dot.gov/policyinformation/statistics/2008/ Highway Performance Monitoring System Field Manual, http://www.fhwa.dot.gov/policy/ohpi/hpms/fieldmanual/ Justification: From Delaware House Bill (HB) 177, passed in 1995:

(d) In addition to alleviating the strain on the public treasury and allowing the State to use its limited resources for other needed projects, public-private initiative projects also do all of the following:

(3) More quickly reduce congestion in existing transportation corridors and provide the public with alternate route and mode selections (emphasis added).

This excerpt is taken from Indiana’s HB 1008, passed in 2006:

There is a public need for timely development and operation of transportation facilities in Indiana that addresses the needs identified by the department, through the department’s transportation plan and otherwise, by accelerating project delivery, improving safety, reducing congestion, increasing mobility, improving connectivity, increasing capacity, enhancing economic efficiency, promoting economic development, or any combination of those methods.

Another example is taken from North Carolina’s HB 644, passed in 2002:

The General Assembly finds that the existing state road system is becoming increasingly congested and overburdened with traffic in many areas of the state; that the sharp surge of vehicle miles traveled is overwhelming the state's ability to build and pay for adequate road improvements; and that an adequate answer to this challenge will require the state to be innovative and utilize several new approaches to transportation improvements in North Carolina. Fiscal Health Variables Justification: State debt outstanding per capita Source: U.S. Census Bureau Annual Survey of State and Local Government Finances, http://www.census.gov/govs/estimate/about_the_survey.html Methodology: http://www.census.gov/govs/estimate/how_data_collected.html Political Variables Justification: http://online.wsj.com/article/SB10001424052748704526504575635111807229380.html Union opposition: state highway engineers are suing to stop the Presidio Parkway PPP in San Francisco Composition of state legislature: Republican party is associated with a business friendly and market-oriented environment that is less likely to support tax increases in order to finance infrastructure projects. "Partnerships were not a part of the bill when the House voted on it the first time. Rep. Ron Amstutz, R-Wooster, chairman of the House Finance Committee, said the inclusion of public-private partnerships by the Senate caused House Democrats to vote against the bill." - http://www.examiner.com/government-in-columbus/kasich-signs-6-8b-transport-bill-as-ta-report-shows-10-of-buckeye-bridges-bad Union membership Source: http://www.unionstats.com/ Methodology: http://unionstats.gsu.edu/UnionStats.pdf Democrats in State House Source: Almanac of American Politics, 1988 - 2008 (published biennially by National Journal Group) Traditional Finance Variables Justification: California’s Assembly Bill (AB) 680, passed in 1989, contains this statement:

(b) Public sources of revenues to provide an efficient transportation system have not kept pace with California's growing transportation needs, and alternative funding sources should be developed to augment or supplement available public sources of revenue. Gas tax receipts per capita Source: FHWA Highway Statistics Series, Table MF-1, http://www.fhwa.dot.gov/policyinformation/statistics/2008/ Controls Percent of bordering states with laws Personal Income per capita Source: 2010 Statistical Abstract of the United States, Table 664, http://www.census.gov/compendia/statab/2010/cats/income_expenditures_poverty_wealth/personal_income.html Cash-strapped states need to find creative ways to finance infrastructure projects We should expect to see darker areas (higher population growth) passing legislation Let's take a look at our Cox coefficient for population growth We should expect to see darker areas (more congestion) passing legislation Let's take a look at the Cox coefficient on travel time index We should expect to see darker areas (higher VMT) passing legislation Let's take a look at the Cox coefficient on VMT per capita Based on intuition we should expect to see states with more debt (darker states) pass legislation, but based on the previous graph it looks like states that pass legislation have lower levels of debt (lighter states) Let's take a look at the Cox coefficient (hazard ratio) for debt per capita We should expect to see lighter states (less union membership) passing legislation Let's take a look at the Cox coefficient (hazard ratio) for union membership We should expect to see lighter states (less Dems) passing legislation Let's take a look at the Cox coefficient (hazard ratio) for state Dems We should expect to see lighter states (light yellow, yellow, orange, red from lightest
to darkest) passing legislation Let's take a look at the Cox coefficient (hazard ratio) for gas taxes per capita We should expect to see darker states (wealthier states) passing legislation Let's take a look at the Cox coefficient (hazard ratio) for personal income per capita http://www2.census.gov/govs/state/09_methodology.pdf Conclusions:
-Traffic congestion seems like an important
predictor of the passage of state PPP legislation;
this could be because legislatures are responding to a need
to reduce congestion, but it may be that more congested areas
present greater profit opportunities to the private sector
-Political factors, such as the percentage of Democrats in the state House of Representatives, seem important in predicting the passage of PPP legislation. This indicates a partisan element to public-private partnerships in general.
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