Testimony on Public Private Partnerships by Suzi Schmidt, Chairman, Lake COunty Board, to the Senate Appropriations Committee II
By Guest Author- July 20, 2006
Mr. Chairman and members of the Committee, my name is Suzi Schmidt and I am the Chairman of the Lake County Board. The possible privatizing of the Illinois Tollway is a very important issue to Lake County and I thank you for this opportunity to testify.
The Need for Additional Transportation Investments
The appropriateness of alternative capital financing for additional transportation construction has been supported by the Lake County Board. However, the proposed granting of long-term leases of existing infrastructure has prompted the Transportation Committee of the Board to discuss the issue and strive to determine how this will affect the residents and businesses in our County. The County recognizes the need for balancing the protection of the driving public while capturing the strengths of the private sector for planning, design, construction and financing of capital transportation projects.
Investments in Transportation Only: Endowment Fund
Public private ventures to capitalize on existing transportation facilities with revenues dedicated solely to transportation planning, design and construction purposes could be supported with careful policy discussions. The County would strongly oppose any attempt to privatize an existing facility where the resultant proceeds are used for purposes other than transportation. This opposition would exist if any of the proceeds were used for any on-going operations expenses including transportation.
Specific policy conditions to a lease agreement should include the establishment of a transportation endowment fund in which the proceeds stemming from the long term lease of existing transportation infrastructure are used to plan, design and construct improvements to existing transportation infrastructure or to construct new transportation infrastructure. This endowment fund would allow the interest proceeds to provide for yearly investments in the transportation system. The endowment fund must provide assurances that, should a breach of contract, such as failure to maintain, occur with the private lessee or owner, the public body will be in a position to re-posses the facility at no additional cost to the public using the depreciated reserve account in the endowment fund. As the years left in the lease shorten, the amounts freed up from lowering of the depreciated asset could also provide for increased transportation investment.
Financial Oversight Public Body to be in Control
The management of the public policy aspects of any such lease agreement will require the creation of a Financial Oversight Authority Public Body to regulate the public/private venture. This is the “public” in a public/private partnership. This entity would assure that the public protections built into the lease are met and the transportation funds generated by the endowment are transferred yearly into the appropriate transportation implementing agencies. Without the use of an endowment fund to spread out the proceeds of the lease over a term of many years, it is folly to think that all of the needed transportation improvements can be completed in a short period of time.
Regional and User Equity
Another condition of the leasing of a public facility would recognize what we call “regional equity.” The driving public are the ones providing the funds we are talking about here. If we asked them: Would they pay X dollars amount more to fund the specific items the proceeds would be used for, what would they say? The existing policy/political establishment apparently does not have the fortitude to make these transportation funding decisions even in the face of the well known need to make transportation investments. Therefore, we feel that, in the long term, the public cannot rely on the same existing policy/political establishment to guide the transportation investments over the extremely long term of these leases. An independent Financial Oversight Authority Public Body that is tied to the implementation terms of the lease is critical.
A statutory formula such as 80% of all net funds stemming from the sale or lease need to be returned to the geographic area where the facility is located is one example of attaining regional equity. Also the statutory policy needs to reflect “maintenance of effort” from certain funds. This would insure that if the geographic area of the state is to receive a share of the proceeds only to have their usual share of state funding re-apportioned to other areas, this is in effect a “no sum game” and is not acceptable.
We understand that transportation funding has always been done on a system basis. It is unfortunate that more frequent but smaller increases in revenues has not been the path followed rather than fewer but more dramatic increases. We would expect a business operator to follow the business model of more frequent increases; however, the users of the Tollway, in the case we are talking about today, need to be protected from unreasonable toll increases. The toll increases must be limited to a maximum of the regional cost of living as stipulated in a contract and certified by the Financial Oversight Authority .
Where Should Additional Funds be allocated in Lake County?
Lake County fully understands the need for more transportation funding. The Lake County Year 2020 Transportation Priority Plan identifies numerous capacity improvements that are needed on State and County roadways. In addition, the 2005 Lake County Transportation Summit and this year's Public Input Forums have prioritized the crushing financial need for improvement on State Highways. These include projects such as:
- The IL 120 Improvements that will come out of the on-going IL 120 Corridor Planning Council efforts.
- The US Route 41 Improvements that will come out of the anticipated US Rte 41 Corridor Planning Council efforts
- US Highway 45 in central Lake County (Mundelein to Lindenhurst )
- And numerous, numerous others. We specifically direct you to the County web site where the public input regarding both highway and transit improvements that we received from this year’s Public Input Forums has been posted. Click here to access the site.
The County believes that if, in the future, you review the proposal for long-term leases or sale of existing infrastructure, input from counties and cities is essential for the state to seriously consider and weigh whether public/private partnerships are the best approach for Illinois. Working together we can protect the system’s public users and our communities while providing our citizens with the infrastructure and services that they expect and deserve.
Again thank you for the opportunity to testify before this committee, and Lake County looks forward to assisting you in this important decision.