Toll Road Leasing Programs: Ready to Roll?

States have recently, and with growing enthusiasm, embraced the use of public-private partnerships ('PPPs') as a highly effective method for addressing the significant capital needs associated with developing, expanding, and/or operating major roadway systems. Some of the largest roadway PPP deals to date have utilized leasing structures, and many states have enacted, or are in the process of enacting, legislation authorizing and encouraging leasing as a method to privatize toll roads. Leasing allows for an innovative teaming approach to the development and operation of various transportation-related assets, from design and construction through operation and toll collection. Leasing not only allows public sector officials to take advantage of private sector innovation and efficiencies, but it also provides a vehicle by which states can create large pools of money ' sometimes in the billions of dollars ' to address immediate and significant capital requirements without raising property or income taxes on their residents.

Under a typical roadway lease concession, a private operator assumes responsibility for operating and maintaining (and sometimes developing or expanding) a given roadway system for a specified term, oftentimes in exchange for an upfront concession fee paid to the state. The state may not only receive this very significant upfront concession payment, but may also continue to receive future payments through a long-term revenue sharing arrangement. In turn, the operator is authorized to retain for its own use all tolls and other user charges earned by operation of the roadway, and frequently retains the right, over the duration of the lease, to establish the level of tolls and user charges, subject to an agreed pricing formula.