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R40, R14, R12, O12,

This paper investigates the feasibility of and develops an economic valuation model for buyout options in Comprehensive Development Agreements (CDAs). A CDA is a form of public-private partnership whereby the right to price and collect revenues from toll roads is leased to a private entity for a finite but lengthy period of time in exchange for providing local and state governments with a quick influx of cash and/or additional infrastructure. Uncertainty associated with such long-term leases is of substantial public concern. In particular, there is a sentiment that the state and/or municipal governments may not be sufficiently compensated for the forfeited development opportunities and a possibility of lost revenue due to higher-than-expected future growth during the lifetime of the lease. An under-studied aspect of the problem is the feasibility and economic value of an option for the government to buy back the leased infrastructure at a future date prior to lease expiration. Such an option would give the public sector additional control over the future use of leased facilities and address potential concerns regarding long-run uncertainty and possible unforeseen windfalls for the private sector. The buyout option valuation model developed in the paper could help transportation policymakers in decisions on leasing public infrastructure. The paper's contributions include the analysis and feasibility assessment of buyout and revenue-sharing options, an economic consumer demand-based revenue model for purposes of simulation, and the numerical evaluation of the strategic options. The main conclusion is that buyout and revenue-sharing options tend to have a high cost relative to the value of the lease. It is therefore understandable that private sector developers are hesitant to allow such clauses to be included without significant compensation.3

Value capture refers to the process by which all or a portion of increments in land value attributed to community efforts rather than to landowner actions are recovered by the public sector. As such, it is a form of a public–private partnership. It is widely used across the country and around the world for transit applications; however, its applications to roadways have only recently emerged into discussions of roadway finance, out of motivation stemming from the transportation funding crisis. Two states have legislative provisions for enabling value capture for financing transportation. In Texas, this takes the form of a transportation reinvestment zone (TRZ). This paper presents specifications for a TRZ based on a case study approach and then applies a financial evaluation model based on those specifications to a case study corridor in El Paso, Texas, to assess preliminary revenue sources and cash flows that can be accrued for value capture bonding capacity.