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Legal Update

Transportation Reauthorization Bill—Implications for Transportation P3 Projects

28 June 2012
Mayer Brown Legal Update

On June 28, 2012, the US House of Representatives and Senate reached agreement on the Moving Ahead for Progress in the 21st Century Act (S. 1813; MAP-21). This transportation reauthorization legislation will replace the expiring Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) enacted in 2005, and is expected to be passed by Congress shortly and signed into law by President Obama. For the transportation P3 market, among the key provisions in the House-Senate Conference Report are the following:

P3 Best Practices. The Conference Report requires the Secretary of Transportation to compile best practices for working with the private sector regarding transportation facilities, and also requires that the Secretary provide technical assistance upon request. Additionally, the Secretary is required to develop standard P3 transaction model contracts within 18 months and make such model documents available to state and local governments.

TIFIA. The Conference Report modifies the TIFIA credit program, including increasing funding for the program to $750 million (an approximately seven-fold increase over current levels) for fiscal year 2013 and to $1 billion (an approximately ten-fold increase over current levels) for fiscal year 2014. The Conference Report also increases the maximum share of project costs that can be funded under the TIFIA program from 33 percent to 49 percent.

Tolling. The Conference Report grants blanket authority for new capacity tolling on Interstate Highways, so long as the number of current non-HOV toll-free lanes does not decrease. Accordingly, the Express Lanes Demonstration Program previously included in SAFETEA-LU is not reauthorized. Existing “capacity pilot programs” were not addressed in the Conference Report.

Mass Transit. The Conference Report establishes P3 authority for the Federal Transit Administration similar to FHWA’s existing SEP-15 (Special Experimental Project Number 15) authority. It directs the Secretary of Transportation to develop policies and procedures to address impediments to P3s, and also requires the Secretary to coordinate, promote and provide technical assistance to public transportation P3s. In addition, the Comptroller General is directed to conduct a study regarding “contracting out” of public transportation operations. Finally, the Secretary is required to develop guidance to “promote greater transparency and public access” to public-private partnership agreements involving federal assistance under Chapter 53 of Title 49. 

Treatment of Highway P3 Projects in Apportioning Federal Highway Funding. The Conference Report does not include a provision that had been advocated by Senator Bingaman and others that excluded certain privatized highways from consideration in apportioning federal highway funding among the states. Specifically, the amendment would have eliminated the lane-miles and vehicle-miles traveled (VMT) for any "privatized" toll road as a factor in the formula used to apportion federal highway funding. (The definition of "privatized highways" under this provision included any formerly publicly operated toll road that had been transferred to a private entity that controls the operation of the highway and ownership of the revenues collected.)

Amortization of Long-Term Highway Leases. The Conference Report also does not include a provision that had been advocated by Senator Bingaman and others that would have amended the Internal Revenue Code to require the lessor of P3 highway projects to depreciate the cost of the such assets over 45 years, and to amortize the intangible "franchise right" to collect tolls for such assets over the entire length of the lease or 15 years, whichever is longer.

Other provisions of interest to the broader P3 market, but not necessarily limited to transportation P3s, include the following:

No Alternative Minimum Tax “Patch” for Private Activity Bonds. The Conference Report does not include language previously passed in the Senate that provided that tax-exempt interest on private activity bonds issued after the date of enactment, and before January 1, 2013, will not be an item of tax preference for purposes of the AMT, and that interest on such tax exempt bonds issued during this period is not included in the corporate adjustment based on current earnings.

Volume Cap Limits on Water and Sewer Bonds. The Conference Report does not contain language previously passed in the Senate that excluded exempt facility bonds issued before Jan. 1, 2018 for sewage and water facilities from annual private activity volume cap limits. 


  • David Narefsky
    T +1 312 701 7303
  • John R. Schmidt
    T +1 312 701 8597
  • Joseph Seliga
    T +1 312 701 8818
  • George K. Miller
    T +1 212 506 2590

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