Major Legal Issues for Highway Public-Private Partnerships (2009)

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Legal Research Digest 51 NATIONAL COOperATIve hIghwAy reseArCh prOgrAm January 2009 subject Areas: IA planning and Administration; IC Transportation Law TRANSPORTATION RESEARCH BOARD OF THE NATIONAL ACADEMIES mAjOr LegAL Issues fOr hIghwAy pubLIC-prIvATe pArTNershIps This report was prepared under NCHRP Project 20-6, “Legal Problems Arising Out of Highway Programs,” for which the Transportation Research Board is the agency coordinating the research. The report was prepared by Edward Fishman, Esquire, Kirkpatrick & Lockhart Preston Gates Ellis LLP. James B. McDaniel, TRB Counsel for Legal Research Projects, was the principal investigator and content editor. The problem and Its solution State highway departments and transporta- tion agencies have a continuing need to keep abreast of operating practices and legal ele- ments of specific problems in highway law. This report is a new paper, which continues NCHRP’s policy of keeping departments up-to- date on laws that will affect their operations. Applications The amount of public funding available to state and local transportation agencies has failed to keep up with the increasing need to invest in highway construction, operation, and maintenance projects. Governmental agencies are constantly searching for ways to fund or fa- cilitate highway construction projects. Public- private partnerships are viewed as one way to increase the availability of funds. Congress has established a number of pro- grams that authorize the use of tolling, pricing, and public-private partnerships on Federal-aid highways. Moreover, the U.S. Department of Transportation (USDOT) has promoted public- private partnerships as a significant tool avail- able to state and local highway agencies for supplementing public funding for infrastructure and reducing traffic congestion. In light of the foregoing, there is a widespread expectation that the use of public-private partnerships in the U.S. highway sector will increase substantially in the next few years. Common legal issues are associated with the implementation of public-private highways. As of July 2008, 23 states have legislation authoriz- ing public-private partnerships. Many states do not have legislation authorizing the use of non- traditional project delivery methods for high- way projects. Although the use of toll and other pricing revenues is a common way to finance private participation in highway projects, there remain significant restrictions under federal and state law on the ability to implement such direct user fees in particular circumstances. Other po- tential legal issues arise out of limitations on public and private financing methods, environ- mental review requirements, labor and employ- ment laws, and public procurement standards. Project risks must also be allocated between the public and private sectors in the public-private partnership agreement. This digest is designed to provide a broad overview of the major legal issues that are likely to arise in the implementation of public- private partnerships in the U.S. highway sector. It should be helpful to transportation adminis- trators, attorneys, planners, financial officials, and the private transportation investment com- munity. CONTENTS I. Introduction 3 II. Different Types of Highway PPP Project Delivery Structures 4 A. Brownfield and Greenfield Projects 4 B. Innovative Contracting Techniques 4 C. Innovative Financing Techniques 6 III. Overview of Representative Projects 9 A. Chicago Skyway and Indiana Toll Road 9 B. I-15 Reconstruction in Salt Lake City 11 C. SR-91 and SR-125 in California 11 D. Pocahontas Parkway in Virginia 13 E. SH-130 and TTC-35 in Texas 14 F. Port of Miami Tunnel Project 16 G. Oregon Predevelop- ment Agreements 17 IV. Parameters of Analysis with Respect to Highway PPP Requirements 18 A. Scope of Inquiry 18 B. Summary of Existing Literature on Legal Requirements 20

V. Analysis of Major Legal Issues Associated with Highway PPP Implementation 20 A. Principal Issues Arising Out of Federal Law 20 B. Principal Issues Arising Out of State Law 25 C. State Law Procurement Issues 28 D. Environmental Review Process Requirements 31 E. Other Common Risk Allocation Requirements 32 F. Tort Liability, Condemnation, and Other Delegation Challenges 33 G. Financing Issues 34 H. Other Legal Considerations 35 I. Other Legal Issues Typically Addressed in PPP Agreements 37 VI. Summary of Lessons Learned 38 VII. Conclusion 38 CONTENTS (cont’d)