funding us infrastructure
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Funding US Infrastructure Funding US Infrastructure
NW Financial Group, LLC
Infrastructure is not freeInfrastructure is not free
““You can pay me nowYou can pay me now
or pay me later”or pay me later”
Fram Oil Filter ManFram Oil Filter Man
NW Financial Group, LLC
Transportation Transportation Wheel of FortuneWheel of Fortune
NW Financial Group, LLC
Gas TaxToll Old Roads
Monetization
Toll New Roads
PPP GPS
Congestion Tax
Motor Vehicle Fees
Highway ConstituencyHighway Constituency
The The average driveraverage driver in the US: in the US:
travels 13,600 miles per yeartravels 13,600 miles per year
average gas mileage of 19.6 mpgaverage gas mileage of 19.6 mpg
purchases 706 gallons of gas/year purchases 706 gallons of gas/year
cost of 1 penny on gas tax =cost of 1 penny on gas tax =
$7.06 PER ANNUM$7.06 PER ANNUM
NW Financial Group, LLC
Cost to DriveCost to Drive IRS Cost Study allows 58.5 cents per mile in 2008 or a total of IRS Cost Study allows 58.5 cents per mile in 2008 or a total of
$7,605 per annum$7,605 per annum for an average driver for an average driver
An average driver, at 13,000 miles per year, pays less than $400 An average driver, at 13,000 miles per year, pays less than $400 per year for the right to expect paved and well maintained roads per year for the right to expect paved and well maintained roads statewide (Ohio example)statewide (Ohio example)
Per AnnumPer Annum Per MilePer MileState Gas TaxState Gas Tax $182.00$182.00 1.4 cents1.4 centsFederal Gas TaxFederal Gas Tax $130.00$130.00 1.0 cents1.0 centsDrivers LicenseDrivers License $ 24.00$ 24.00 0.18 cents0.18 centsVehicle RegistrationVehicle Registration $ 34.50$ 34.50 0.27cents0.27cents
TotalTotal $370.50$370.50 2.85 cents2.85 cents
NW Financial Group, LLC
NW Financial Group, LLC
Drivers readily spend thousands of dollars a year Drivers readily spend thousands of dollars a year on their cars, maintenance and insurance but balk on their cars, maintenance and insurance but balk at use based gas taxes to rebuild the roads they at use based gas taxes to rebuild the roads they are ridingare riding
Cost to average driver of 10 cent increase in gas Cost to average driver of 10 cent increase in gas tax would be $70 per yeartax would be $70 per year
10 cent gas tax increase would fund 10 cent gas tax increase would fund $6 Billion$6 Billion in in capital investment in a state like Ohiocapital investment in a state like Ohio
Tolls or Taxes?Tolls or Taxes?
Gas Tax vs. TollsGas Tax vs. Tolls
Assuming a car gets 20 MPG and the gas tax is 26 Assuming a car gets 20 MPG and the gas tax is 26 cents the cost is 1.4 cents cents the cost is 1.4 cents per mileper mile
The cheapest toll roads in the country cost more The cheapest toll roads in the country cost more than 5 cents per milethan 5 cents per mile
In Texas new toll roads are being priced at 14 In Texas new toll roads are being priced at 14 cents plus per mile cents plus per mile
NW Financial Group, LLC
Indiana Toll Road RevisitedIndiana Toll Road Revisited
Leveraging the Gas Tax
Annual Cost of $3.8 Billion in Leverage $195 Million
Gas Purchased by Average Driver 706 gallons/year
Indiana Drivers 6,000,000 Licensed
Value of 1 cent in Gas Tax 42$ Million
Gas Tax Increase Needed 0.046$
Cost to Average Driver 32.50$ PER ANNUM
NW Financial Group, LLC
Indiana Toll Road PPPIndiana Toll Road PPP
Gave up 75 years of revenue for 10 years of Gave up 75 years of revenue for 10 years of capital fundingcapital funding
Provided non-compete for 75 yearsProvided non-compete for 75 years
Car toll will rise from $4.65 to over $145 over the Car toll will rise from $4.65 to over $145 over the full 75 years and perhaps as much as $400full 75 years and perhaps as much as $400
Excess revenues go to corporate profits not the Excess revenues go to corporate profits not the transportation networktransportation network
NW Financial Group, LLC
NW Financial Group, LLC
Protect overall transportation systemProtect overall transportation system• Minimize siphoning for private Minimize siphoning for private
profitsprofits• Maximize recycling of positive Maximize recycling of positive
cash flowscash flows Assure reasonable user costsAssure reasonable user costs
• Oversight of toll escalation Oversight of toll escalation factorsfactors
• Protect against congestion on Protect against congestion on free road alternativesfree road alternatives
TransparencyTransparency• No rushed dealsNo rushed deals• Open and public processOpen and public process• Full disclosure of costs to Full disclosure of costs to
usersusers
So what So what isis the “Public Interest”? the “Public Interest”?
NW Financial Group, LLC
ActualActual• Accelerated DeliveryAccelerated Delivery• Risk TransferRisk Transfer• Potential Operating BenefitPotential Operating Benefit
PoliticalPolitical• Upfront DollarsUpfront Dollars• Offloading of responsibilities for operations Offloading of responsibilities for operations
and toll increasesand toll increases
Advantages of PPPAdvantages of PPP
NW Financial Group, LLC
Cost of Capital produces less valueCost of Capital produces less value
Control of public roadways is surrenderedControl of public roadways is surrendered
Control of future economic development is Control of future economic development is impactedimpacted
Loss of dollars for transportation systemLoss of dollars for transportation system• Texas SH121- $2 billion, captured the Texas SH121- $2 billion, captured the
Public Ownership DividendPublic Ownership Dividend
Disadvantages of PPPDisadvantages of PPP
NW Financial Group, LLC
Really means it is an unfeasible project based on Really means it is an unfeasible project based on tolling modeltolling model
No more than a performance management No more than a performance management contract for an asset that rarely underperforms contract for an asset that rarely underperforms when publically runwhen publically run
States are really entering into a long term annual States are really entering into a long term annual payment no different than bonding for the road payment no different than bonding for the road and owning it themselvesand owning it themselves
Concept is based on electric utility production, in Concept is based on electric utility production, in reality roads are rarely “off-line”reality roads are rarely “off-line”
Availability PaymentsAvailability Payments
NW Financial Group, LLC
Public monetization's produce more dollars than Public monetization's produce more dollars than private monetization's and keep all dollars in the private monetization's and keep all dollars in the public transportation network – public transportation network – Texas SH121Texas SH121
Overreaching in terms of leverage leads to Overreaching in terms of leverage leads to failure – failure – New JerseyNew Jersey
Public is now focused on cost to user of Public is now focused on cost to user of monetization rather than just upfront benefit – monetization rather than just upfront benefit – Chicago ParkingChicago Parking
Monetization is really a corridor tax on toll users Monetization is really a corridor tax on toll users to pay for other non toll roadsto pay for other non toll roads
The Future Environment for PPPThe Future Environment for PPP
NW Financial Group, LLC
Public capital availability is not an Public capital availability is not an issueissue
Investors accept and respect US Investors accept and respect US public enterprise toll roadspublic enterprise toll roads
Public Toll roads Public Toll roads willwill aggressively aggressively raise tollsraise tolls
Build America Bonds proves Build America Bonds proves corporate marketcorporate market
Tax exempt market still deepTax exempt market still deep
PUBLIC OWNERSHIP DIVIDENDPUBLIC OWNERSHIP DIVIDEND
PPP Lessons since 2006PPP Lessons since 2006
NW Financial Group, LLC
Very viable for project acceleration Very viable for project acceleration through a design/build approachthrough a design/build approach
Very viable for risk transfer for Very viable for risk transfer for difficult or troubled projects – difficult or troubled projects – Miami Port Tunnel, Colorado NW Miami Port Tunnel, Colorado NW Pkwy.Pkwy.
Not desirable for financing or Not desirable for financing or concession approach due to high concession approach due to high cost of equity capital cost of equity capital
And And nownow lack of high leverage low lack of high leverage low cost debt to blend down capital cost debt to blend down capital costscosts
What is the Future of PPP?What is the Future of PPP?
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