Private Returns, Public Concerns: Addressing Private-Sector Returns in Public–Private Highway Toll Concessions

Governments worldwide face increasing challenges in funding highway infrastructure with public capital. To meet the funding gap, policy makers are turning to public–private concessions for selected projects. These agreements are typically complex, long-term arrangements that entail the private sector agreeing to construct or rehabilitate a public access facility in exchange for rights to future toll revenues or other payments. In exchange for assuming concession risks, the private sector expects a commensurate return. But public procurement officials face real challenges in determining a fair distribution of risks and rewards, as well as in handling the public’s perception of such agreements. Placing strict limits on private-sector returns can undermine incentives for construction, financing, and operating efficiencies that are an integral part of the value that can be achieved through public–private concessions. Furthermore, any such limits may not even be effective unless all aspects of a concession that can generate profits, such as refinancing, are addressed and the methodology for the calculation of returns is carefully specified. This paper examines various approaches used by procurement officials to address real and perceived private-sector returns in highway concessions. While special focus is placed on revenue-sharing provisions, other concession features that affect returns are also discussed, including tender structure, bid selection, and negotiated contract terms and prohibitions. The analysis includes discussion of specific revenue-sharing provisions in two U.S. concessions and one Irish concession, as well as a general discussion of the approaches taken by several European governments to address returns in their concession programs.

Language

  • English

Media Info

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Filing Info

  • Accession Number: 01045922
  • Record Type: Publication
  • ISBN: 9780309104227
  • Files: TRIS, TRB, ATRI
  • Created Date: Feb 8 2007 4:41PM