2013 Session: 537

• Assessment of Determinants of Financial Innovations in Transportation Infrastructure
  Abstract: Traditional methods of financing infrastructure, which include gas taxation, tax-exempt bonds, and reserve funds, have not been able to meet the growing demand for infrastructure development. Financial innovations such as leaseback agreements, availability payment mechanism, and innovative bonding instruments have emerged to close the gap that exists between the available and needed financing sources. The key to expansion of financial innovations is sustainable policies based on a comprehensive understanding of the dynamics of the system. Despite their significance for addressing infrastructure challenges around the globe, the determinants of financial innovations have not been systematically explored. The objective of the study presented in this paper is to assess determinants of financial innovations in infrastructure using a System-of-Systems approach, and to demonstrate this approach in the context of the U.S. highway transportation sector. Data obtained from a case-based research approach and a survey deployed to the state Departments of Transportation in the U.S. is utilized in parallel with a network analysis to explore the status quo, key players and interactions, and the drivers of financial innovations for infrastructure. The findings, which include constructs regarding the players, practices, and activities are used to create a conceptual model relating to the drivers of financial innovations. The model along with the constructs provides an analytical tool for understanding the dynamics of financial innovations. Such understanding would lead to expansion of the creation and diffusion of financial innovation practices in the highway transportation infrastructure globally.
  Authors: Mostafavi, Ali; Abraham, Dulcy Mary; Lee, Joung
  Authors: Mostafavi, Ali; Abraham, Dulcy Mary; Lee, Joung
  Year: 2013
  Document Type: Paper
  Subject: Economics; Finance; Policy
  Session: 537
  Paper Number: 13-0662
• Private Investment and Road Pricing: The Investment Public-Private Partnership
  Abstract: Private infrastructure investment is often viewed as providing an alternative financing method given a revenue stream from a transportation facility rather than providing additional revenue. However, private investment in the form of upfront concession lease payments for newly priced roads can be used to reduce political resistance to pricing, thus generating additional facility-specific revenue. We suggest preserving a portion of the wealth generated by road pricing in perpetuity through a permanent fund, which is one type of public trust fund. Permanent funds are currently in use in Alaska, Texas, and Norway to preserve wealth originating from natural resources. Following Alaska, we propose that investment income from the fund be used to provide an annual dividend payment to all households within the area that is priced. This has several advantages relative to current proposals to reduce opposition to road pricing. In particular, it ameliorates the agency problem between citizens and elected representatives created by the free cash flows road pricing generates. It also creates direct citizen-stakeholdership in transportation infrastructure which increases public support for road pricing. The Alaskan experience suggests that this approach can also reduce income inequality, create higher personal income, and mitigate recessions.
  Authors: Geddes, Raymond Richard; Nentchev, Dimitar
  Authors: Geddes, Raymond Richard; Nentchev, Dimitar
  Year: 2013
  Document Type: Paper
  Subject: Economics; Finance; Policy
  Session: 537
  Paper Number: 13-1087
• Comparing Public-Private Partnerships with Traditional Procurement: Incorporating Considerations from Benefit-Cost Analysis
  Abstract: Value for Money (VfM) analysis processes have been used in evaluating various approaches to procure a highway project, to help government officials determine whether, from the perspective of the public agency’s financial balance sheet, a public-private partnership (P3) is likely to be preferable compared to traditional approaches to procuring the same highway project. VfM is an analysis tool that primarily focuses on the financial impacts of different procurement models from the perspective of the agency sponsoring a project. Non-financial impacts such as benefits to users or non-users of a facility are not generally considered, or are relegated to a qualitative evaluation. Quantitative VfM analysis has normally been conducted once an agency has decided to undertake a project and wishes to evaluate how to deliver it in a way that has the least financial impact on its balance sheet. Benefit-cost analysis (BCA), on the other hand, has been used by public agencies earlier in planning and project development phases to determine whether an investment is worth making. BCA is a more comprehensive tool which is capable of quantifying and monetizing non-financial impacts, such as benefits to users or non-users that may accrue from earlier delivery of a project. This paper discusses how BCA considerations may be incorporated in a more analytically comprehensive approach to comparing P3s with traditional procurement, by using some of the results from VfM analysis and adding new items that are consistent with a BCA approach. The paper illustrates the use of the approach using a hypothetical project.
  Authors: DeCorla-Souza, Patrick T.; Lee, Douglass B.; Timothy, Darren; Mayer, Jennifer R.
  Authors: DeCorla-Souza, Patrick T.; Lee, Douglass B.; Timothy, Darren; Mayer, Jennifer R.
  Year: 2013
  Document Type: Paper
  Subject: Economics; Finance; Policy
  Session: 537
  Paper Number: 13-3014
• Do State Public-Private Partnership Enabling Laws Affect Investment in Infrastructure?
  Abstract: A growing number of U.S. states and localities are pursing private investment in transportation infrastructure through public-private partnerships, or PPPs. As of late 2011, thirty states had enacted legislation enabling use of PPPs. This legislation clarifies such issues as the treatment of unsolicited PPP proposals, prior legislative approval of PPP contracts, and the mixing of public and private funds, among others. Using expert-weighting of thirteen key elements of PPP enabling laws, we develop an index reflecting the degree to which a state’s law is encouraging or discouraging of private investment. In previous work, we examined the factors that cause PPP enabling laws to be adopted, and that lead to more enabling laws. In this paper, we examine the effect of PPP enabling laws on the level of private infrastructure investment in a state. We control for a variety of factors in addition to the PPP laws in a state, and find that more favorable PPP enabling laws increases both design-build and more complex non-design build (mostly design-build-finance-operate) type of PPP contracts. We do not, however, find evidence that either more Design-Build projects or non-DB projects reduces traffic congestion as measured by the travel-time index, eliminating a potentially important source of endogeneity.
  Authors: Geddes, Raymond Richard; Wagner, Benjamin L.
  Authors: Geddes, Raymond Richard; Wagner, Benjamin L.
  Year: 2013
  Document Type: Paper
  Subject: Economics; Finance; Policy
  Session: 537
  Paper Number: 13-1588
  Practice-Ready: Yes
• Assessment of Determinants of Financial Innovations in Transportation Infrastructure
  Authors: Darani, Ali
  Authors: Darani, Ali
  Year: 2013
  Document Type: Presentation
  Subject: Economics; Finance; Policy
  Session: 537
  Paper Number: 13-0662
• Private Investment and Road Pricing: The Investment Public-Private Partnership
  Authors: Geddes, Raymond
  Authors: Geddes, Raymond
  Year: 2013
  Document Type: Presentation
  Subject: Economics; Finance; Policy
  Session: 537
  Paper Number: 13-1087
• Do State Public-Private Partnership Enabling Laws Affect Investment in Infrastructure?
  Authors: Geddes, Raymond
  Authors: Geddes, Raymond
  Year: 2013
  Document Type: Presentation
  Subject: Economics; Finance; Policy
  Session: 537
  Paper Number: 13-1588
• Comparing Public-Private Partnerships with Traditional Procurement: Incorporating Considerations from Benefit-Cost Analysis
  Authors: DeCorla-Souza, Patrick
  Authors: DeCorla-Souza, Patrick
  Year: 2013
  Document Type: Presentation
  Subject: Economics; Finance; Policy
  Session: 537
  Paper Number: 13-3014
• P3 Program Design and Decision Making: The Ohio Experience
  Authors: Riley, James
  Authors: Riley, James
  Year: 2013
  Document Type: Presentation
  Subject: Economics; Finance; Policy
  Session: 537
  Paper Number: P13-6373