Public-Private Partnerships (PPPs) in Highway and Transit Infrastructure Provision

William J. Mallett
Specialist in Transportation Policy

Growing demands on the transportation system and constraints on public resources have led to calls for more private sector involvement in the provision of highway and transit infrastructure through what are known as "public-private partnerships" (PPPs). A PPP, broadly defined, is any arrangement whereby the private sector assumes more responsibility than is traditional for infrastructure planning, financing, design, construction, operation, and maintenance. This report describes the wide variety of public-private partnerships in highways and transit, but focuses on the two types of highway PPPs that are generating the most debate: the leasing by the public sector to the private sector of existing infrastructure; and the building, leasing, and owning of new infrastructure by private entities. 

PPP proponents argue that, in addition to being the best hope for injecting additional resources into the surface freight and passenger transportation systems for upkeep and expansion, private sector involvement potentially reduces costs, project delivery time, and public sector risk, and may also improve project selection and project quality. Detractors, on the other hand, argue that the potential for PPPs is limited, and that, unless carefully regulated, PPPs will disrupt the operation of the surface transportation network, increase driving and other costs for the traveling public, and subvert the public planning process. Some of the specific issues raised in highway operation and costs include the effects of PPPs on trucking, low-income households, and traffic diversion. Issues raised in transportation planning include non-compete provisions in PPP agreements, unsolicited proposals, lease duration, and foreign control of transportation assets. 

On the question of new resources, the evidence suggests that there is significant private funding available for investment in surface transportation infrastructure, but that it is unlikely to amount to more than 10% of the ongoing needs of highways over the next 20 years or so, if that, and probably a much smaller share of transit needs. With competing demands for public funds, there is also a concern that private funding will substitute for public resources with no net gain in transportation infrastructure. The effect of PPPs on the planning and operation of the transportation system is a more open question because of the numerous forms they can take, and because they are dependent on the detailed agreements negotiated between the public and private partners. For this reason, some have suggested that the federal government needs to more systematically identify and evaluate the public interest, particularly the national public interest, in projects that employ a PPP. 

Three broad policy options Congress might consider in how to deal with PPPs in federal transportation programs and regulations are discussed in this report. The first option is to continue with the current policy of incremental changes and experimentation in program incentives and regulation. Second is to actively encourage PPPs with program incentives, but with relatively tight regulatory controls. Third is to aggressively encourage the use of PPPs through program incentives and limited, if any, regulation.


Date of Report: February 22, 2010
Number of Pages: 29
Order Number: RL34567
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North American Free Trade Agreement (NAFTA) Implementation: The Future of Commercial Trucking Across the Mexican Border

John Frittelli 
Specialist in Transportation Policy

NAFTA set forth a schedule for implementing its trucking provisions that would have opened the border states to cross-border trucking competition in 1995 and all of North America in 2000, but full implementation has been stalled because of concern with the safety of Mexican trucks. Congress first addressed these concerns in the FY2002 Department of Transportation Appropriations Act (P.L. 107-87) which set 22 safety-related preconditions for opening the border to long-haul Mexican trucks. In November 2002, the U.S. Department of Transportation announced that all the preconditions had been met and began processing Mexican applications for U.S. long-haul authority. However, a suit over environmental compliance delayed implementation further. After the suit was resolved, in February 2007, the U.S. and Mexican Secretaries of Transportation announced a demonstration project to implement the NAFTA trucking provisions. The purpose of the project was to demonstrate the ability of Mexico-based motor carriers to operate safely in the United States beyond the border commercial zones. Up to 100 Mexicodomiciled carriers would be allowed to operate throughout the United States for one year and Mexico would allow the same for up to 100 U.S.-based carriers. With passage of the U.S. Troop Readiness, Veteran's Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (P.L. 110-28), Congress mandated additional requirements before the project could begin. After failing to defund the demonstration project in the FY2008 Consolidated Appropriations Act (P.L. 110-161), Congress succeeded in terminating the demonstration project through a provision in the FY2009 Omnibus Appropriations Act (P.L. 111-8). Subsequently, Mexico announced it would retaliate by increasing import duties on 90 U.S. products. The Obama Administration has indicated it intends to propose a revamped program that will address the concerns of Congress. The FY2010 Consolidated Appropriations Act (P.L. 111-117) passed in December 2009 did not preclude funds from being spent on a long-haul Mexican truck pilot program, provided the terms and conditions stipulated in section 350 of P.L. 107-87 and section 6901 of P.L. 110-28 were satisfied. 

One truck safety statistic, "out-of-service" rates, indicates that Mexican trucks operating in the United States are now safer than they were a decade ago. The data indicate that Mexican trucks and drivers have a comparable safety record to U.S. truckers. Another study indicates that the truck driver is usually the more critical factor in causing accidents than a safety defect with the truck itself. Service characteristics of long-haul trucking suggest that substandard carriers would likely not succeed in this market. As shipment distance increases, the relative cost of trucking compared to rail increases, and thus shippers utilizing long-haul trucking are willing to pay more because they require premium service, such as precise delivery windows or cargo refrigeration. These exacting service requirements would seem to disqualify truckers with unreliable equipment or incompetent drivers. In contrast, the short-haul "drayage" carriers that Mexican long-haul carriers would displace, typically use older equipment because of the many hours spent idling awaiting customs processing at the border. If Mexican carriers do eventually receive long-haul authority, the short term impact is expected to be gradual as Mexican firms deal with a number of stumbling blocks, including lack of prearranged back hauls and higher insurance and capital costs, in addition to the customs processing delays. In the long run, use of drayage companies is likely to decline as they lose part of their market share to Mexican long-haul carriers. The most common trips for these carriers will probably be from the Mexican interior to warehouse facilities on the U.S. side of the border or to nearby cities in the border states.


Date of Report: February 1, 2010
Number of Pages: 32
Order Number: RL31738
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Surface Transportation Program Reauthorization Issues for the 111th Congress

John W. Fischer, Coordinator
Specialist in Transportation Policy

Reauthorization of federal surface transportation programs was supposed to have occurred before the end of FY2009, but Congress failed to meet that deadline. Surface transportation programs continue to operate on the basis of authority provided in Continuing Resolutions. Extension legislation may also be enacted to facilitate program continuation. For the moment, however, passage of a complete reauthorization package during the remainder of the 111th Congress appears problematic. 

This situation should not be a surprise to those familiar with the history of the reauthorization process. Especially during the last two decades reauthorization has become a difficult undertaking. This is primarily due to controversy over how and to whom federal-aid highway funds should be distributed. The most recent law, the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU or SAFETEA) (P.L. 109-59) was enacted 22 months after previous legislation had originally expired. Previous reauthorization bills also arrived well after their required reenactment dates. 

The most difficult issue to be considered during reauthorization is how to finance it. The highway trust fund and the revenue sources that feed it have been a reliable mechanism for financing highway and transit programs for five decades, but no more. Almost all transportation industry observers see a need for a larger federal contribution to national infrastructure creation in the years ahead. For a number of reasons discussed in this report, fuel taxes, which provide most of the money for surface transportation, are unlikely to provide a solid long-term foundation for this desired growth, even if Congress were to raise them modestly. The choice for policymakers, therefore, is to find new sources of income for an expanded, program, or alternately, to settle for a smaller program that might look very different than the one currently in place. 

Debate on the specifics of the highway program will focus on the donor-donee funding distribution issue, earmarking, and possible programmatic reorganization. Specific programs, such as the highway bridge program, can be expected to receive extensive congressional attention due to public concerns about the condition of the nation's transportation infrastructure. 

Transit industry advocates also seek additional funding in the reauthorization bill. Many supporters believe the nation is under-investing in public transit infrastructure and that should be significantly increased to deal with an existing backlog of projects and other future needs. Against this backdrop, Congress can be expected to look closely at existing transit program spending priorities and perhaps modify them. Other issues such as rural transit, paratransit, productivity, service optimization, and competition are likely to arise as well. 

Surface transportation program reauthorization also includes a number of programmatic and issue areas beyond those specifically associated with funding, highways and transit. Freight issues have been of growing importance in recent years and figure to get significantly more attention as part of the reauthorization debate. Highway safety, motor carrier safety, research, planning, and environmental issues will each be addressed in detail in the months ahead. 

This report provides background information for the reauthorization debate. Those seeking information on legislative proposals before Congress should consult CRS Report R40780, Surface Transportation Reauthorization Legislation in the 111th Congress: Summary of Selected Major Provisions, coordinated by John W. Fischer.


Date of Report: February 2, 2010
Number of Pages: 44
Order Number: R40053
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CRS Issue Statement on Aviation Policy

Bart Elias, Coordinator
Specialist in Aviation Policy

Aviation policy issues confronting the 111th Congress include increasingly stressed financing mechanisms to support national airspace system operations and infrastructure improvements; capacity constraints that have an increasingly negative effect on the efficiency and safety of the national airspace system; options for mitigating environmental impacts of aviation operations; and options to further improve the safety and security of the air transportation system. These issues engaged the 110th Congress in intensive legislative activity to reauthorize the Federal Aviation Administration (FAA) and other aviation programs, but disagreements prevented passage of legislation. Authorization for FAA functions and related aviation programs, as well as funding mechanisms for these activities, expired at the end of FY2007, but have been continued through a series of temporary extensions to existing revenue collection authority. The FAA Reauthorization Act of 2009 (H.R. 915) was introduced in the House on February 11, 2009, and was passed by the House on May 21, 2009. The FAA Air Transportation Modernization and Safety Improvement Act (S. 1451) was introduced in the Senate on July 14, 2009, and ordered reported favorable as amended by the Senate Committee on Commerce, Science, and Transportation on July 21, 2009. While that bill is pending further action in the Senate, a temporary extension, providing authority for aviation trust fund revenue collections and aviation programs until March 31, 2010, has been enacted (P.L. 111-116).


Date of Report: January 7, 2010
Number of Pages: 3
Order Number:IS40256
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Airport Improvement Program (AIP): Reauthorization Issues for Congress

Robert S. Kirk
Specialist in Transportation Policy

The Airport Improvement Program (AIP) has been providing federal grants for airport development and planning since the passage of the Airport and Airway Improvement Act of 1982 (P.L. 97-248). AIP funding is usually spent on projects that support aircraft operations such as runways, taxiways, aprons, noise abatement, land purchase, and safety or emergency equipment. The funds obligated for the AIP are drawn from the Airport and Airway Trust Fund (hereafter referred to as the trust fund), which is supported by a variety of user fees and fuel taxes. The AIP is one of five major sources of airport capital development funding. The other sources are taxexempt bonds, passenger facility charges (PFCs: a local tax levied on each boarding passenger), state and local grants, and airport operating revenue. Different airports use different combinations of these sources depending on the individual airport's financial situation and the type of project being considered. Small airports are more dependent on AIP grants than large or medium-sized airports. The larger airports, whose projects tend to be much more costly, are more likely to participate in the tax-exempt bond market or finance capital development projects with a PFC. 

The multi-year authorization of the AIP under Vision 100—Century of Aviation Reauthorization Act (P.L. 108-176) ended on September 30, 2007. Since then, a series of short-term extensions has authorized and provided funding for AIP. The AIP and PFC issues that have been considered during the ongoing debate regarding the reauthorization of the Federal Aviation Administration (FAA) include the national level of need for airport development and the appropriate AIP funding level; the appropriate federal role in airport development; the criteria for the distribution of funding across airports of different types and sizes; the sufficiency of AIP discretionary funding, especially for major capacity enhancing projects; airport privatization; defederalization of large airports; raising or eliminating the $4.50 ceiling now imposed on PFCs; the use and tax treatment of airport bonds; and noise mitigation funding and eligibility. 

During the FAA reauthorization debate, virtually all of the policy issues and options concerning AIP will be influenced by the broader budget issues of the adequacy of trust fund revenues and the availability of money for the FAA from the Treasury general fund. Should ample revenues be available, the reauthorization of AIP could maintain the program's structure and perhaps even increase AIP spending. A constrained-budget scenario would probably increase interest in such issues as defederalization or a tightening of program formula funding and eligibility criteria, which could provide cost savings. It could also increase interest in raising or eliminating the PFC ceiling, which could help airports fund more projects. 

This report is focused solely on AIP issues in the ongoing FAA reauthorization debate. To track the full FAA reauthorization debate, including legislative action on AIP and other FAA programs and activities, see CRS Report R40410, Federal Aviation Administration (FAA) Reauthorization: An Overview of Legislative Action in the 111th Congress, coordinated by Bart Elias.


Date of Report: January 27, 2010
Number of Pages: 50
Order Number: R40608
Price: $29.95

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