Valuation of Buyout Options in Comprehensive Development Agreements

This project investigates the feasibility of and develops an economic valuation model for buyout options in Comprehensive Development Agreements (CDAs). A CDA is a form of public-private partnership in which the right to price and collect revenues from toll roads is leased to a private entity for a finite but lengthy period of time in exchange for providing local and state governments with a quick influx of cash and/or additional infrastructure. Uncertainty associated with such long-term leases is of substantial public concern. In particular, there is a sentiment that the state and/or municipal governments may not be sufficiently compensated for the forfeited development opportunities and the possibility of lost revenue due to higher-than-expected future growth during the lifetime of the lease. An under-studied aspect of the problem is the feasibility and economic value of an option for the government to buy back the leased infrastructure at a future date prior to lease expiration. Such an option would give the public sector additional control over the future use of leased facilities and address potential concerns regarding long-run uncertainty and possible unforeseen windfalls for the private sector. The developed buyout option valuation model can aid transportation policymakers in decisions on leasing public infrastructure. Project deliverables include: feasibility assessment of buyout options, an economic valuation model for buyout option in a CDA, and identification of methods, data, and parameters required to apply the model to evaluation of buyout options in actual (planned or existing) CDAs.

• Record URL:
  http://utcm.tamu.edu/publications/final_reports/Power_08-04-12.pdf
• 
• Supplemental Notes:
  • This research is supported by a grant from the U.S. Department of Transportation, University Transportation Centers Program.
• Corporate Authors:

  University Transportation Center for Mobility

  Texas Transportation Institute, Texas A&M University System
  College Station, TX  United States  77843-3135

  Research and Innovative Technology Administration

  1200 New Jersey Avenue, SE
  Washington, DC  United States  20590
• Authors:
  • Power, Gabriel
  • Burris, Mark
  • Vadali, Sharada
  • Vedenov, Dmitry
• Publication Date: 2009-12

Language

• English

Media Info

• Media Type: Print
• Edition: Final Report
• Features: Figures; Tables;
• Pagination: 34p

Subject/Index Terms

• TRT Terms: Economic models; Infrastructure; Leasing; Leveraged buyouts; Public private partnerships; Valuation
• Uncontrolled Terms: Comprehensive development agreement
• Subject Areas: Economics; Highways; I10: Economics and Administration;

Filing Info

• Accession Number: 01150716
• Record Type: Publication
• Report/Paper Numbers: UTCM 08-04-12
• Contract Numbers: DTRT06-G-0044 (Grant)
• Files: UTC, TRIS, USDOT
• Created Date: Feb 19 2010 10:59AM