Companies seek partnership with ADOT to profit on freeway, Part 2: The Methods

For an updated exploration on the topics herein and on the public-private partnership for the South Mountain Freeway, see "Freeway Could Take a Toll on Arizona" posted February 2016. 



This is part two of a series.  Please also see, "Companies seek partnership with AZDOT to profit on freeway, Part1: The Networks" at http://stopcanamex.blogspot.com
Disclosure: The author of this piece was unfamiliar with the financial concepts discussed below, prior to researching this specific public-private partnership for the Loop 202 extension.  This is meant to provide a starting place for further examination of these issues.


You're likely wondering, "No tolls?  How are private companies going to make profits fronting the money for a freeway?"  Well, here's what you need to know.  These companies' vast public-private partnership (P3) promoting networks have come up with a number of ways to make profits from joining with the public sector to work on projects that would normally be funded by tax dollars.  But wait- these projects would be funded by our tax dollars anyway, and on top of that, these companies can avoid paying some of their own taxes.  Some recent transportation P3 arrangements include something called "availability payments" which come from our local sales taxes several years down the road, TIFIA funds which are federal loans with lower interest rates than private entities can usually get, and other options such as private activity bonds which the companies don't have to pay taxes on.  This P3 arrangement is actually preferred by companies because they take on less risk than with a toll road since they're not relying on the traffic to pay the tolls; they get paid no matter what, as long as they finish it.

It appears likely that one or more of these "innovative financing solutions" may be part of the proposal put forth by the South Mountain Development Group (SMDG) to build the Loop 202 South Mountain Freeway.  This unsolicited proposal is being sold to us as a way to get the road built more quickly, even though the companies would make a profit from our tax dollars.  Not only are many opposed to the freeway whether or not it would involve a P3, it also may not even qualify for federal funds if it violates federal environmental and civil rights laws.


The South Mountain Development Group (SMDG) is made up of Kiewit Development Co., Kiewit Infrastructure West Co., Sundt Construction Inc. and Parsons Corp.  The way availability payments work is that essentially the companies and the Arizona Department of Transportation (ADOT) would come into an agreement in which SMDG fronts the money and after completing the project, they receive payments from the state years down the road, as they become available (hence the name).  When they say that SMDG would front the money, this means they are likely to put up some of their own money, but most of the funds will come from loans from banks and/or financing such as loans with lower interest rates through federal programs.  In fact the timing of this P3 proposal may have to do with a temporary increase in funding through a federal program called Transportation Infrastructure Finance and Innovation Act (TIFIA), to be discussed below.

The lack of state funds is the primary barrier to completing projects, which is a good thing for the many people who do not want damage done to South Mountain, the surrounding environment, and the community resulting from the proposed Loop 202 extension, aka the South Mountain Freeway.  With private interests putting up the funding, the construction could start that much sooner.  The companies' interests in profit may also impact our ability to oppose it.


Availability Payments

The limited information about the arrangement for this P3 can be found in various news articles. According to an Arizona Republic editorial, SMDG, "offered to front the money and design and build the freeway, with the state paying them back later."¹  Another AZ Central article provided a bit more information on this sales tax. "Because much of the project is funded by Maricopa County’s voter-backed, half-cent-per-dollar sales tax, the South Mountain Freeway has a dedicated stream of revenue that takes uncertainty away from would-be private financiers."²

The availability payments, it appears, would likely come from the Maricopa County Regional Area Road Fund into which the Arizona Transportation Excise Tax is deposited.  The sales tax extends through the end of 2025.³ 

This would not be Kiewit's first transportation project that involves availability payments on a non-toll road, and as the nation's third largest contractor, this definitely wouldn't be their first P3.  Kiewit is part of the construction of San Francisco's new Presidio Parkway P3 project. "No tolls will be collected. Instead, the legislature has agreed to annually appropriate the availability‐based payments promised to the P3 developer for the 30‐year term of the concession. That money will be used to secure about $300 million in loans to build the project, cover the developer’s profit and pay all operating expenses."⁴  Other projects in North America with Kiewit as part of the P3 have involved availability payments, often in combination with toll concessions.⁵  

Another reason to assume that availability payments are part of the SMDG plan is that Kiewit is also directly involved in promoting the availability payments arrangement and P3s as part of the Association for the Improvement of American Infrastructure (AIAI).  "The growing acceptance of the availability-pay model for delivering transportation megaprojects has drawn an alliance of major U.S. and Spanish contractors into the P3 advocacy business. Five builders and investor Star America launched the [AIAI] at a conference in New York this June. Their aim, among other things, is to put a lobbyist in key states to promote all types of P3 models—availability, revenue risk and 63-20 nonprofits."⁶  Arizona already has what is termed "broad-enabling" P3 legislation which allows for availability payments and unsolicited proposals, which means this is one of a minority of states that are the most lax about P3s.⁷

Why are these companies increasingly pushing for P3 with availability payments?  In "Highway Robbery: How 'public-private partnerships' extract private profit from public infrastructure projects," Darwin Bondgraham explains further, 

Availability payments are akin to lease payments, whereby the state pays the private developer of a highway to maintain the road for public use. Rather than collecting tolls from drivers who use the route, the state pays the private developer directly from general state revenues collected through a gasoline tax or other taxes...

P3 companies, in short, are now virtually guaranteed returns on their investments. The shift away from tolls and the growing use of availability payments means P3 investors no longer need worry about traffic flows. Guaranteed lease payments, together with the low interest rates of federally subsidized loans and tax-exempt bonds they use to pay for construction, mean sure profits.⁸

It is the combination of the availability payments and federally subsidized loans that makes these deals work so well for private companies.

TIFIA funds

The primary reason for the timing of this large-scale P3 project is likely the increased access to TIFIA funding.  Last year, Obama signed into law Moving Ahead for Progress in the 21st Century Act (MAP-21) which provides more funding for transportation projects for a limited time. In a section titled "Public-Private Partnerships," a MAP-21 Analysis report summarized, "MAP-21 makes strategic investments to attract private sector resources to transportation improvements. Specifically, it increases funding for the Transportation Infrastructure Finance and Innovation Act (TIFIA) program from $122 million per year to $750 million in FY 2013 and $1 billion in FY 2014. The measure also increases the maximum potential TIFIA share of total project cost from 33 percent to 49 percent."⁹   This report was published by American Road & Transportation Builders Association (ARTBA), whose conference sponsors include HDR (contracted to do the Environmental Impact Statement for Loop 202) and speakers include Gail Lewis of ADOT.

The Loop 202 extension may have caught the eye of SMDG members because USDOT Federal Highway Administration website lists "South Mountain Toll Road" among other examples of illustrative U.S. projects that could be funded with TIFIA.¹⁰

Keiwit's construction of the Presidio Parkway in San Francisco was also partly financed by TIFIA loans, but it likely won't be the last.¹¹  The Federal Highway Administration's website explains the appeal, "The new FHWA policy will allow those considering the availability payment public-private partnership (P3) delivery method to count on a level of Federal assistance comparable with that of a traditional public works project. Although San Francisco's Presidio Parkway was the first project in the country to use Federal-aid for availability payments, these new and expanded policy flexibilities will make it easier for other States to follow suit and take advantage of this form of innovative financing."¹²   

In "Highway Robbery," Bondgraham cautions,

Although P3s are advertised as tapping the power of private capital markets to invest in public infrastructure, the reality is that P3 investors enjoy large public subsidies. For example, private companies building P3 highway projects now routinely expect states to grant them authority to issue qualified private activity bonds (PABs). Unlike most lending in private capital markets, interest payments on PABs are exempt from federal taxes (because the cash proceeds are expected to be put to use building goods with broad public utility, rather than projects that solely benefit private parties). Since the bonds are not taxed, they allow the borrower to obtain cash at less cost. This form of financing, then, is essentially a tax cut for the investment banks and corporations with the P3 contract. The U.S. Department of Transportation also routinely grants Transportation Infrastructure Finance and Innovation Act (TIFIA) loans to P3 developers. TIFIA loans provide companies with much cheaper interest rates and more flexible terms than anything available in the private capital markets—again because the public subsidizes them.¹³  

It will be interesting if HDR comes out with a competing bid on the Loop 202 extension P3 since they have directly "consulted frequently to the Federal Highway Administration's Program Office of Transportation Infrastructure Finance and Innovation Act (TIFIA) on risk-based revenue and credit forecasts."¹⁴  They have also be involved in projects that have received TIFIA funding.

The Arizona Republic reports that Rick Norment, executive director of the National Council for Public Private Partnerships stated that they, "advise folks to take the low-hanging fruit first." He sees the Loop 202 extension as too risky for ADOT because it is a more difficult project.  However, Gail Lewis, Director of ADOT Office of P3 Initiatives and International Affairs, and Eric Anderson, MAG’s transportation director see it differently because of the new availability payments option. The companies, "know they’ll get paid back, making Loop 202 'low-hanging fruit' in Lewis’ and Anderson’s minds."¹⁵


Limitations to their funding strategy

Now, the good news is that if SMDG is counting on access to these TIFIA funds, they are in for an uphill battle to get approved.  As of right now, the EPA does not accept the current DEIS for the Loop 202 South Mountain Freeway extension.¹⁶   As it stands, the proposed freeway may not meet National Environmental Policy Act (NEPA) standards, and may violate civil rights as well.  The TIFIA statute requires that "...all projects receiving TIFIA credit assistance must comply with generally applicable Federal laws and regulations, including title VI of the Civil Rights Act of 1964, the National Environmental Policy Act of 1969..."¹⁷ 

Attorney Howard Shanker outlined the problem in a cover letter regarding comments on the Loop 202 South Mountain Freeway DEIS. "NEPA requires a fully informed decisional process through, in part, the preparation of a DEIS.  The DEIS, however, treats the crucial decision to proceed with a $3 billion tax payers' funded project not as an impending choice to be pondered, but as a foregone conclusion to be rationalized.  The DEIS provides flawed analyses, generalities, heavy-handed self-justifications.  This is a direct violation of applicable law and a gross abuse of the public trust.  No reasoned decision could be made on the basis the DEIS that, for example, improvements to existing highways or arterials would not better serve regional transportation needs; that public transportation alternatives are not viable; or that abandonment of the project is impractical."¹⁸ The organization Protecting Arizona's Resources and Children intends to fight for No Build in court if need be.¹⁹

Additionally, a Federal Title VI Civil Rights complaint was submitted to ADOT on July 30.  "The civil rights complaint alleges that ADOT violated the civil rights of Native peoples of the Gila River Indian Community by proposing and promoting the South Mountain Loop 202 Freeway that would negatively and disparately impact Gila River Indian Community tribal members by desecrating their sacred South Mountain and causing disparate health impacts."²⁰

At this point it seems that ADOT may issue a call for competing proposals, and we wait to see what happens with the Draft Environmental Impact Statement.  There are various reasons to oppose the project even if it is not a P3, although P3s pose new problems.  We are likely to see more P3 proposals, such as for the Interstate 11 connecting Phoenix with Las Vegas,²¹ and/or the North/South Corridor²² to facilitate CANAMEX freight traffic.


UPDATE 10/21/14: ADOT had recently announced in the press that they were doing a Design-Build-Maintain deal that does not involve private financing. This is an atypical approach and we are trying to make sense of it. It appears likely that ADOT will attempt to use TIFIA loans, but we are uncertain about Private Activity Bonds and Availability Payments. It is unclear what the benefit to the private companies will be. In ADOT's paperwork is the following: "Project costs will be funded through a combination of Regional Area Road Fund (RARF) revenues, Highway User Revenue Fund (HURF) revenues, and federal funds dedicated to the Maricopa County region and ADOT. To facilitate acceleration of the Project, ADOT will also utilize some combination of financing mechanisms, including but not limited to its RARF credit, HURF credit, and Grant Anticipation Notes which leverage future federal funds."


Thanks to Gila River Against Loop 202 and Darwin Bondgraham for assistance and insight for this series.

For more information: http://stopcanamex.blogspot.com See updates on the Loop 202 here.

1 http://www.azcentral.com/opinions/articles/20130726editorial-hope-from-private-sector.html^↩
2 http://www.azcentral.com/community/ahwatukee/articles/20130725south-mountain-freeway-private-money-plan.html ^↩
3 http://www.azdot.gov/Inside_ADOT/FMS/PDF/rarf11.pdf ^↩
4 http://db78bc60e308ad8dc7c2-6f6534a35fc09b927eb00e4333a7f4cf.r47.cf2.rackcdn.com/uploaded/t/0e895293_the-role-of-private-investment-in-meeting-us-transportation-infrastructure-needs.pdf^↩
5 http://www.pwfinance.net/document/research_reprints/chart%201%20US-Canada.pdf^↩
6 http://pwfinance.net/^↩
7 http://www.ncsl.org/documents/transportation/PPPTOOLKIT-AppendB.pdf^↩
8 http://www.dollarsandsense.org/archives/2012/1112bondgraham.html^↩
9 http://db78bc60e308ad8dc7c2-6f6534a35fc09b927eb00e4333a7f4cf.r47.cf2.rackcdn.com/uploaded/c/0e895333_currentissuesmap-21analysis.pdf^↩
10 http://www.fhwa.dot.gov/ipd/tifia/technical_resources/federal_credit_policy_paper/appendix_e.htm^↩
11 http://www.fhwa.dot.gov/ipd/project_profiles/ca_presidio.htm^↩
12 http://www.fhwa.dot.gov/ipd/fact_sheets/tifia_availability_payments.htm^↩
13 http://www.dollarsandsense.org/archives/2012/1112bondgraham.html^↩
14 http://www.hdrinc.com/portfolio/traffic-and-revenue-debt-service-projections-and-credit-risk-modeling-for-tifia^↩
15 http://www.azcentral.com/community/ahwatukee/articles/20130725south-mountain-freeway-private-money-plan.html^↩
16 http://www.epa.gov/region09/nepa/letters/az/south-mountain-freeway-deis.pdf^↩
17 http://www.fhwa.dot.gov/ipd/tifia/guidance_applications/program_guide_web.htm#ch3 ^↩
18 https://docs.google.com/file/d/0B30ItDvVwsixY29tZS1qMDhwZFU/^↩
19 http://azcommunitypress.org/2013/08/08/experts-conclude-that-the-south-mountain-freeway-should-not-be-built/^↩
20 https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgcPufvqRfY8Pz6UNxjL7yW5NZJYCRNXmV7ZsGZg9fQpEtz8q5juoWvle7SfKGhftjAs0lulgpJqvf0RhjVKEG6Ko3mP1kwV9FAuDO2EUBZ2R4FRVAVursAHE_xOlBBT3Zal61RinqR8AA/s640/civil+rights+south+mountain.jpg^↩
21 http://www.azdot.gov/Highways/Projects/Public_Private_Partnerships/pdf/Proposed-Arizona-Interstate-Corridor-Phoenix-Las-Vegas.pdf^↩
22 http://www.azdot.gov/Highways/Projects/Public_Private_Partnerships/PDF/North-South%20Corridor%20Proposed%20Project.pdf/^↩

Experts Conclude that the South Mountain Freeway Should Not be Built

From Arizona Community Press

Steve Brittle August 8, 2013 

By Steve Brittle
A coalition of organizations headed up by Protecting Arizona Resources and Children, Inc. (PARC), pooling their resources to stop the proposed South Mountain Freeway, submitted their hundreds of pages of comments and exhibits to ADOT in response to the Draft Environmental Impact Statement (DEIS). This is the first step in bringing the flaws in the ADOT planning and review process to light. The plan is to challenge the South Mountain Freeway in federal court and stop it.

The comments included those from a variety of health, environmental, demographic and transportation experts and consultants, who focused on the severe air pollution and adverse health impacts the freeway would certainly cause, the noise, property devaluation, risks from accidents involving hazardous materials, environmental justice, and much more.

Read more...

Companies seek partnership with ADOT to profit on freeway, Part 1: The Networks

For an updated exploration on the public-private partnership for the South Mountain Freeway, see "Freeway Could Take a Toll on Arizona" posted February 2016.  


A late July announcement from the South Mountain Development Group raised eyebrows amongst environmentalist and anti-freeway organizations across Arizona.  A group of three of the largest construction companies in the United Stated has proposed to fund and build the long contested Loop 202 extension through South Mountain.  Among those troubled by the announcement was the Sierra Club, who publicly opposed the freeway as an environmentally destructive project.

“Why did they wait to announce this until the day after the deadline for the comments on the freeway Draft Environmental Impact Statement?” asked Sandy Bahr of the Sierra Club.¹ Now that the announcement has been made, the controversial public-private partnership model is likely to gain the attention it deserves. The attention may come a bit too late, however, due to the timing of this July 25th announcement in relation to the Draft Environmental Impact Statement (DEIS) comment period, despite the proposal being submitted a few months ago. Had news of the possibility of privately funded construction come out sooner, this new type of arrangement may have brought more critical comments.

A public-private partnership or P3 (or PPP) is essentially privatization, with perhaps a friendlier face. Projects that would normally be delivered by the state, such as transportation infrastructure like highways, are taken on by private companies. In cases such as this, private companies finance the project, build it, and they often operate and maintain it. Then they get their money back in addition to profits, of course. In a P3, the public sector has more control than in a privatization situation, but it also takes on most of the risk, meaning ultimately the money still comes from the tax payers via the state, even if it's a few decades down the road--especially since tolling is not part of this proposal for the proposed South Mountain extension to the 202.

Arizona has what is considered broad-enabling P3 legislation, which passed in 2009.² Much effort has been in the works since then to move things in the direction of increased privatization. In fact there is a vast network of P3 promoters who have been pulling strings in Arizona. Unsurprisingly, some of these same P3 promoters are involved in the 202 proposal.

Going by the name South Mountain Development Group, the companies, Kiewit Development Co., Kiewit Infrastructure West Co., Sundt Construction, Inc. and Parsons Corporation submitted an unsolicited proposal to the Arizona Department of Transportation (ADOT) in February to build the Loop 202 extension. "Unsolicited," while technically correct, is a misleading term due to the longstanding relationships between public (such as ADOT) and private interests, and their pro-P3 organizations. You can see the push for P3s coming out of networks such as these:

•  Sundt sponsored P3 conferences in Phoenix on several occasions, and attending at least one in 2010 was a representative from Kiewit, a representative from HDR (the engineering firm contracted to do the Environmental Impact Statement for Loop 202), and Gail Lewis of the P3 Office for ADOT as speakers.³

• Kiewit is on the board of a pro-P3 organization called the Association for the Improvement of American Infrastructure (AIAI). According to their website, AIAI "is a non-profit organization formed in the District of Columbia to help shape the direction of the national Public Private Partnership marketplace."⁴


• ADOT's John Halikowski is co-chair with Arizona-Mexico Commission's (AMC) Jim Kolbe in the newly founded Arizona organization called the Transportation and Trade Corridor Alliance (TTCA). The TTCA, which includes members of the Arizona Commerce Authority (ACA), was described as "heavily private-sector" by Gail Lewis, Director, ADOT Office of P3 Initiatives and International Affairs. AMC and ACA are also pro-P3 organizations with private and public membership.⁵ 


• Also a member of the TTCA, as well as the ACA, is Mary Peters, former Federal Highway Administrator for the U.S. Department of Transportation. She is also on the board of HDR. Participating with her in ACA is Doug Pruitt, former CEO of Sundt. 


• A consulting firm, Tom Warne & Associates, lists Kiewit, Parsons, ADOT, HDR, and others as clients.⁶  Tom Warne writes a newsletter that regularly discusses P3s.  He was awarded as a the American Road & Transportation Builders Association (ARTBA) P3 Division Entrepreneur of the Year.  Mary Peters also won this award.⁷


• HDR is a 2013 sponsor of the ARTBA Conference, at which Gail Lewis of ADOT recently spoke.  According to their website, "ARTBA approached the National Conference of State Legislatures (NCSL) to develop a toolkit to help educate lawmakers navigate the challenges of enacting and improving P3 enabling statutes."⁸

And there are yet more webs to untangle. The timing of the announcement of this new P3 may be related to HDR's involvement. HDR is the corporation that the Arizona Department of Transportation (ADOT) contracted to do the DEIS. HDR is an engineering and consulting firm which also happens to be a major proponent of P3s, claiming 35 years of experience delivering P3s and offering their expertise to others through their consulting services.⁹  HDR is part of The Transportation Transformation Group which "is an unprecedented alliance of state government, finance, academic and private industry leaders who aspire to transform American transportation policy into a goal-based arrangement that maximizes flexibility to enhance the roles of the state and local public sectors and their private partners to solve the growing problems of congestion and mobility." This group includes a variety of notorious financial institutions like Goldman Sachs, Citi, JP Morgan, etc.¹⁰

While ADOT has many consultants, HDR is likely to be a highly influential one. It is unclear whether it is the consultant referred to in the minutes of ADOT's Citizen's Transportation Oversight Committee meeting in 2011, but it certainly could be (Tom Warne and Associates is another possibility). "Gail Lewis, Director, ADOT Office of P3 Initiatives and International Affairs, provided an update concerning P3 projects and processes... ADOT’s Steering Committee has been helpful getting P3 integrated into the process. An outside consultant is helping to formulate, guide, evaluate and negotiate programs as they come forward."¹¹

While there could be a conflict of interest, it is possible that HDR could put in a bid for a P3 to build Loop 202 extension as well. There is at least one other P3 in Colorado for which they put in a bid that Kiewit also put a competing bid in for.¹² Alternatively, HDR may not have seen any value in the Loop 202 project, thus why they did such an incompetent job on the EIS.

Opponents of the Loop 202 extension have pointed out that the freeway is intended more as a truck bypass. Few Arizonans have even heard of the CANAMEX Corridor, the NAFTA trade route that runs from Mexico through Arizona and four other states to Alberta, Canada. It utilizes existing roads but in order to fulfill its purpose to move more merchandise between nations, it needs to grow much larger, involving more road construction including the proposed Interstate 11 between Phoenix and Las Vegas. While the Loop 202 isn't part of the current official CANAMEX route, it would certainly serve the freight and commercial truck traffic that comes through Phoenix. Tax payers are less likely to want to pay for something that isn't meant for the local community, particularly if it's done without their knowledge.

Steve Brittle of the local environmental non-profit Don't Waste Arizona, pointed out, among several issues of concern, that, "trucks originating in Mexico will be fueled with diesel that doesn't meet the CARB diesel standards adopted by Arizona over a decade ago. In Mexico, there is no regulation about the sulfur in diesel fuel. In Arizona, the law was changed to allow only diesel fuel to be sold that has had 98% of the sulfur removed." He writes that the state had this information, as well as the stats on how many trucks come in from Mexico. Yet these models of Mexican truck traffic were not considered in air quality models in the DEIS. ADOT and HDR also know that the purpose of the 202 extension is to facilitate trade traffic coming in from Mexico. Why did this not make its way into the DEIS, especially considering HDR's involvement in P3s and trade?

While the population growth projections in the DEIS may have been influenced by the anticipated megapolitan called the Sun Corridor resulting from increased CANAMEX trade, it wouldn't be useful to HDR and ADOT to discuss the negative impacts to health and the environment. Why is it so certain that they know about it? Again, HDR put together this DEIS, with Mary Peters on their board. Mary Peters is well aware of CANAMEX since she was part of the CANAMEX Corridor Coalition as ADOT Director. Tom Warne of the consulting firm for HDR, ADOT, Kiewit, etc. was also in the CANAMEX Corridor Coalition as UDOT Director at the same time.¹³ Worthy of mention is that Arizona Representative Russell Jones, who introduced P3 legislation, is on the Governor's CANAMEX Task Force and part of the Arizona-Mexico Commission (AMC). AMC is said to be the godfather of CANAMEX by Jim Kolbe, their CANAMEX expert.¹⁴

These officials have recently been building their careers on pro-P3 efforts as part of a plan to build trade infrastructure designed to benefit international corporations, not to accomplish goals for the quality of life for the local community. The various companies take an interest in this trade corridor for differing reasons.

The significance of the existing massive network of pro-p3 companies and organizations is that they see tremendous potential for profit so they have built relationships with people in the public sector (politicians and transportation and commerce officials) by providing those officials with the resources they need to accomplish the goals of the P3s. Financial institutions see profit opportunities; the various companies that do the actual design, construction, etc. see dollar signs; and public sector folks see possibilities for career advancement.

Why the Loop 202 South Mountain Freeway and why now? It's likely it has something to do with new federal legislation. "President Obama signed into law the “Moving Ahead for Progress in the 21st Century Act”, or MAP-21, July 6, 2012. It authorizes federal highway and transit investment through September 30, 2014 and provides a historic expansion of the Transportation Infrastructure Finance and Innovation Act (TIFIA) program as well as a number of other important policy reforms."¹⁵ Darwin Bondgraham writes, "The U.S. Department of Transportation... routinely grants Transportation Infrastructure Finance and Innovation Act (TIFIA) loans to P3 developers. TIFIA loans provide companies with much cheaper interest rates and more flexible terms than anything available in the private capital markets—again because the public subsidizes them."¹⁶  A hypothetical "South Mountain Toll Road" is listed among other examples of possible projects that could be funded with TIFIA, as seen on the USDOT Federal Highway Administration website.¹⁷

Private companies are salivating for grants and low interest rates on loans for public projects, but they also intend to get their money back and then some. An arrangement involving something called availability payments is an increasingly common way for P3s to make money for companies. They get paid back by the state after they've completed the project. "The ultimate source of project financing, then, is always the public, either through tolls or taxes. Why then allow private banks, drawing from private capital markets, to serve as intermediaries? Private financing simply permits the insertion of the financial interests of investment banks and private-equity funds into the long-term wealth-producing potential of public infrastructure. By allowing private investors to fund the construction of a project, the state allows these parties to impose their monopolistic claims on future flows of tax or toll revenues" [my emphasis].¹⁸ (This will be examined further in Part 2).

In reference to the TTCA, which clearly exists to facilitate CANAMEX infrastructural development, ADOT Director and chair of TTCA, John Halikowski stated, “Our job is not to lead the horse to water. Our job is not to make the horse drink. Our job is to make the horse thirsty.”¹⁹ This is a very telling quote that says a lot about the philosophy of at least one high-ranking Arizona transportation official. The citizens of Arizona, the horse in Halikowski's view, are not thirsty for massive transportation infrastructure, yet the goal of the TTCA is to sell us a story that convinces us that this is for our own good. But we see urban sprawl all around us. Empty subdivisions on the fringes of Maricopa County as one example. Arizona is a natural desert that does not need the increased development that private businesses hunger for. There are federal contracts and TIFIA loans that need to be awarded before September 30, 2014 and they are on a deadline, after all.

There are many reasons to oppose this freeway extension.  “The off-reservation alignment would gouge a 40-story high, 200-yard wide cut into South Mountain, which is sacred to all O’odham and Pee-Posh.”²⁰ According to the Gila River Against Loop 202 website, the main concerns are public health, air quality, ground water, loss of land, and desecration of Muhadag Do’ag (aka South Mountain) and other sacred places.²¹

Opposition to the freeway is strong and justified whether or not it would involve private partners. The issue is whether the pro-P3 entities have the power to push this project, and what the consequences would be. Are the P3 arrangements and CANAMEX something the public knows about or even wants? Would this set a precedent for increasing privatization?


See updates on the Loop 202 here.
Read "Companies seek partnership with ADOT to profit on freeway, Part 2: The Methods" on how the P3 companies will make their money if this is not a toll road.


Thanks to Gila River Against Loop 202 and Darwin Bondgraham for assistance and insight for this series.

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Sources:
1 Environmentalists fighting against proposed South Mountain ... - http://www.bizjournals.com/phoenix/news/2013/07/30/environmentalists-fighting-against.html ^↩
2 http://www.ncsl.org/issues-research/transport/public-private-partnerships-for-transportation.aspx ^↩
3 http://www.ace4aec.com/course/2010-annual-public-private-partnership-conference-10-10-2010 ^↩
4 http://aiai-infra.info/membership_current.html^↩
5 https://www.azmag.gov/Documents/RC_2012-07-25_MIN.pdf^↩
6 http://www.tomwarne.com/clients/transportation-policy/^↩
7 http://www.artbap3.org/past-award-winners/^↩
8 http://www.ncsl.org/issues-research/transport/public-private-partnerships-for-transportation.aspx/^↩
9 http://www.hdrinc.com/public-private- ^↩
10 http://trans2group.com/ ^↩
11 http://bounced.azdot.gov/ADOT_and/CTOC/PDF/2011/min011811.pdf (p4) CITIZEN’S TRANSPORTATION OVERSIGHT COMMITTEE Arizona Department of Transportation Minutes January 18, 2011 ^↩
12 http://infrapppworld.com/2013/03/two-final-proposals-submitted-for-us-36-managed-lanes-toll-concession-project.html ^↩
13 http://www.westgov.org/wieb/meetings/board1000/briefing/canamex.pdf ^↩
14 http://votesmart.org/candidate/biography/28207/russ-jones ^↩
15 http://www.artbap3.org/resources/ ^↩
16 http://www.dollarsandsense.org/archives/2012/1112bondgraham.html ^↩
17 http://www.fhwa.dot.gov/ipd/tifia/technical_resources/federal_credit_policy_paper/appendix_e.htm ^↩
18 http://www.dollarsandsense.org/archives/2012/1112bondgraham.html ^↩
19 Thirst in the Sun Corridor - http://stopcanamex.blogspot.com/2013/06/thirst-in-sun-corridor.html ^↩
20 http://nosouthmountainfreeway.wordpress.com/2011/05/23/submit-written-no-build-comments-to-adot-about-the-loop-202/ ^↩ 
21 http://gilariveragainstloop202.wordpress.com/whats-at-stake/ ^↩