Transcript Document
Funding US Infrastructure
NW Financial Group, LLC
Infrastructure is not free
“You can pay me now
or pay me later”
Fram Oil Filter Man
NW Financial Group, LLC
Transportation
Wheel of Fortune
Toll Old Roads
Gas Tax
Motor Vehicle
Fees
Monetization
Congestion Tax
Toll New Roads
PPP
GPS
NW Financial Group, LLC
Highway Constituency
The average driver in the US:
travels 13,600 miles per year
average gas mileage of 19.6 mpg
purchases 706 gallons of gas/year
cost of 1 penny on gas tax =
$7.06 PER ANNUM
NW Financial Group, LLC
Cost to Drive
IRS Cost Study allows 58.5 cents per mile in 2008 or a total of
$7,605 per annum for an average driver
An average driver, at 13,000 miles per year, pays less than $400 per
year for the right to expect paved and well maintained roads
statewide (Ohio example)
Per Annum
Per Mile
State Gas Tax
$182.00
1.4 cents
Federal Gas Tax
$130.00
1.0 cents
Drivers License
$ 24.00
0.18 cents
Vehicle Registration
$ 34.50
0.27cents
Total
$370.50
2.85 cents
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Tolls or Taxes?
Drivers readily spend thousands of dollars a year
on their cars, maintenance and insurance but balk
at use based gas taxes to rebuild the roads they
are riding
Cost to average driver of 10 cent increase in gas
tax would be $70 per year
10 cent gas tax increase would fund $6 Billion in
capital investment in a state like Ohio
NW Financial Group, LLC
Gas Tax vs. Tolls
Assuming a car gets 20 MPG and the gas tax is 26
cents the cost is 1.4 cents per mile
The cheapest toll roads in the country cost more
than 5 cents per mile
In Texas new toll roads are being priced at 14
cents plus per mile
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Indiana Toll Road Revisited
Leveraging the Gas Tax
Annual Cost of $3.8 Billion in Leverage
$195 Million
Gas Purchased by Average Driver
706 gallons/year
Indiana Drivers
6,000,000 Licensed
Value of 1 cent in Gas Tax
$
Gas Tax Increase Needed
$
0.046
Cost to Average Driver
$
32.50 PER ANNUM
42 Million
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Indiana Toll Road PPP
Gave up 75 years of revenue for 10 years of
capital funding
Provided non-compete for 75 years
Car toll will rise from $4.65 to over $145 over the
full 75 years and perhaps as much as $400
Excess revenues go to corporate profits not the
transportation network
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So what is the “Public Interest”?
Protect overall transportation system
• Minimize siphoning for private
profits
• Maximize recycling of positive
cash flows
Assure reasonable user costs
• Oversight of toll escalation
factors
• Protect against congestion on
free road alternatives
Transparency
• No rushed deals
• Open and public process
• Full disclosure of costs to
users
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Advantages of PPP
Actual
• Accelerated Delivery
• Risk Transfer
• Potential Operating Benefit
Political
• Upfront Dollars
• Offloading of responsibilities for
operations and toll increases
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Disadvantages of PPP
Cost of Capital produces less value
Control of public roadways is surrendered
Control of future economic development is
impacted
Loss of dollars for transportation system
• Texas SH121- $2 billion, captured the
Public Ownership Dividend
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Availability Payments
Really means it is an unfeasible project based on
tolling model
No more than a performance management
contract for an asset that rarely underperforms
when publically run
States are really entering into a long term annual
payment no different than bonding for the road
and owning it themselves
Concept is based on electric utility production, in
reality roads are rarely “off-line”
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The Future Environment for PPP
Public monetization's produce more dollars than
private monetization's and keep all dollars in the
public transportation network – Texas SH121
Overreaching in terms of leverage leads to
failure – New Jersey
Public is now focused on cost to user of
monetization rather than just upfront benefit –
Chicago Parking
Monetization is really a corridor tax on toll users
to pay for other non toll roads
NW Financial Group, LLC
PPP Lessons since 2006
Public capital availability is not an
issue
Investors accept and respect US
public enterprise toll roads
Public Toll roads will aggressively
raise tolls
Build America Bonds proves
corporate market
Tax exempt market still deep
PUBLIC OWNERSHIP DIVIDEND
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What is the Future of PPP?
Very viable for project acceleration
through a design/build approach
Very viable for risk transfer for
difficult or troubled projects –
Miami Port Tunnel, Colorado NW
Pkwy.
Not desirable for financing or
concession approach due to high
cost of equity capital
And now lack of high leverage low
cost debt to blend down capital
costs
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