FHWA Levels Playing Field for P3 Availability Payment Concessions
Posted in P3s

Hot on the heels of the financial close of the Presidio Parkway, the first California transportation public-private partnership (P3) availability payment deal and only the fourth in the United States, Federal Highway Administration’s (FHWA) Office of Innovative Program Delivery has issued guidance regarding the eligibility of periodic availability payments for reimbursement from federal aid funds.  Federal-Aid Funding and Availability Payments

Recognizing that availability payment concessions can offer the benefits of enhanced performance and project cost savings, FHWA will allow a portion of the state's availability payments to be reimbursed from Title 23 funds even though the state is not directly paying for the cost of construction and major maintenance.  Also, FHWA acknowledges that a component of the availability payment is profit to the private developer as consideration for taking on many of the project risks associated with project completion and life cycle costs over the 30-35 year term of a typical availability payment contract. 

Even though the availability payment is viewed as a "unitary" payment, FHWA will look into the developer's financial model to subtract those costs that are not eligible for reimbursement (regular operations and maintenance as well as TIFIA loan repayments if TIFIA is used) over the term of the concession and arrive at a formula upfront for calculating the eligible portion of the annual availability payment throughout the term of the concession.  State DOT's will now be able to consider the use of availability payment contracts vs. traditional project delivery methods without sacrificing their ability to use federal aid funds.

 

A groundbreaking project for a number of reasons, the Presidio Parkway served as the model for FHWA in developing a form of project agreement between the feds and the state, which acknowledges this approach to using federal funds to reimburse availability payments.

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