HOW THE PUBLIC INTEREST IS PROTECTED IN THE SKYWAY AND TOLL ROAD TRANSACTIONS
John Schmidt
Mayer, Brown, Rowe & Maw LLP
1. STRICT OPERATING STANDARDS
- Spelled out in detail - covering all aspects of operations and maintenance
- Strong enforcement mechanisms: arbitration and judicial order; self-help
if necessary; take back the road if continuing default
- Arguably not needed because of private operator's own incentives
2. CONTINUED APPLICATION OF ALL PUBLIC POLICIES
- MBE/WBE contracting; "living wage"; "Buy Indiana";
Chicago hiring preference; etc
- Transactions no escape from public policies
- May go further in protecting employees - e.g. Midway Airport legislation
requires job offers on comparable terms
- Allows broad political consensus support - including unions
3. TOLL LIMITS
- Specifics vary: Chicago had stepped increases to 2017, then formula;
Ind had initial increase, formula starting in 2010
- Importance of clarity: no surprises for public
- Specific limits affect price, but not viability of privatization
4. CAPITAL OBLIGATIONS COME AHEAD OF DEBT
- Lease spells out operator obligation to carry out capital improvements
over term - upfront (e.g. $250M Ind expansion just begun); further expansion
triggers; continued high engineering standards
- Operator has only lessee interest to mortgage-lease obligation to
make capital improvements has priority over any debt
- Public gets not just upfront cash but assured high level maintenance
for extended term
PRIVATIZING EXISTING INFRASTRUCTURE CAN BE MASSIVE SOURCE OF NEEDED
TRANSPORTATION CAPITAL
- U.S. toll roads/bridges represent $200B+ - public capital no longer
needed in these assets - can be redeployed to meet other needs
- Privatizing existing assets is far easier politically than building
new toll roads/bridges
- Privatizing existing airports and other transportation assets can
provide similar source of upfront and continuing capital in other areas
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