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  • Session VI: Groundbreaking Financial Tools

    • July 19, 2007

    Session VI

    Session VI: Groundbreaking Financial Tools
    Friday, July 20, 2007 8:30 AM

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    Groundbreaking Financial Tools - The Good News and the Bad
    Posted By: txdot_paul at July 20, 2007 10:44:29 AM

    Jennie Taraborelli
    It’s incredible to fathom, but there is about $700 billion available in private funds worldwide for building transportation infrastructure. However, only about $8 billion has been claimed by transportation entities in the United States. Why the reluctance to tap into this enormous revenue pool? James Bass, TxDOT’s chief financial officer, moderated a discussion that highlights the potential for creative financing initiatives. Discussion also outlined the fears many government entities face when considering these new funding options.

    Bass said the landscape for financing projects has changed. New financing options available need to be seriously considered by states and local governments to get the projects done that are needed to relieve congestion. The Texas Legislature in the past few sessions has approved bonding programs and mobility funds, pass-through financing, state bank loans, and public-private partnerships (PPP) as tools to fund transportation projects.

    The good news is that there are success stories in the pass-through financing idea. Montgomery County near Houston was the first local government to enter into a pass-through contract on five projects. The agreement was signed in 2004, bid-letting occurred in 2006, and bulldozers are now on the ground. Pass-through financing is becoming very popular. In fact, it’s becoming too popular. The state could run out of money soon to pay back the local entities the money those entities put up for the project. The state legislature addressed this problem (SB 1266) by giving local entities the power to tax and set-up local transportation funding accounts.

    Public-private partnerships are another tool to get projects done now, or to raise money needed now by leasing existing infrastructure to private companies. Some states have already done this with good results. However, some states are taking steps away from PPP. Those states are telling private investors the traditional way of funding roadways through the federal trust fund is preferred. Private investors are turning to more progressive-thinking government entities around the world to place their considerable resources. Some of the reasons states are shying away from PPPs are:

    • Fear of losing control of the transportation asset.
    • Fear of foreign ownership of infrastructure.
    • Lack of political will to go into PPP agreements with private investors.
    The money available will be invested, but it will go to progressive-thinking government entities. But which groundbreaking financial tools are the best to use in Texas, and what are the risks? What are your thoughts?

    Panel: Greg Carey, Managing Director, Goldman Sachs and Company
    Dana Levenson, Managing Director, North American Infrastructure Finance and Advisory Business, Royal Bank of Scotland
    Jennie Taraborelli, Partner, Pate Transportation Partners