Developers Cross Legs While ODOT Crosses Fingers Private Sector Showing no Early Interest in Ohio Rest Areas Development

Infrastructure Insight

If early indications are true in the state’s attempt to sell sponsorships for its highway assets, Ohio rest areas seem to be more for the weary traveler than the wary developer.

In July, it was reported there were no takers (i.e. potential developers) to the Ohio Department of Transportation’s (ODOT) offer for private-sector groups to develop, operate and maintain five rest areas across the south central and southeastern parts of the state. It was the first deadline of the state’s Rest Area SMART Program, which stands for Sponsorship, Maintenance, Advertising and Revenue Targeted, to raise road funding through private-sector money by allowing restaurants, gas stations and other commercial groups to take over select rest areas along Ohio’s non-interstate rest areas. The commercial groups would pay ODOT for rights to set up shop at the rest areas.

The Rest Area SMART Program is one aspect of ODOT’s nine-part strategy to create funding for road infrastructure. It was reported earlier this year that Ohio has a $1.6 billion need for over-budgeted construction and $10 billion in projects in development. Because of declining funds from state and federal motor fuel taxes, ODOT earlier this year announced the delay of dozens of construction projects contained in its Major New Construction Program.

It’s hoped that selling sponsorships for its highway assets could generate more than $527 million annually, which would help overcome the decrease in revenue from motor fuel taxes. Part of the problem with Ohio’s and the nation’s motor fuel tax is that the rates are fixed and don’t increase with inflation and increasing infrastructure costs. According to a December 2011 report by the Institute of Taxation and Economic Policy, because Ohio’s gasoline and diesel taxes are not indexed to inflation and have been at the fixed rates of 28 cents/gallon since 2005, the state is losing ground on the “real value” of its motor fuel taxes. This loss of potential funding is due to ongoing annual inflation and the increased motor-fuel efficiencies of the cars being driven. The nation’s federal gas tax of 18.4 cents/gallon was last increased in 1993 and has lost 40 percent of its “real value”– which relates to approximately $23 billion a year in lost value because it is not indexed.

Developers interested in participating in ODOT’s Rest Area SMART Program were asked to submit qualifications by mid-July for the two rest areas on U.S. Route 50 in Athens County, two on U.S. 33 in Hocking County and on U.S. 23 in Pickaway County. Although no one inquired before the initial deadline, ODOT isn’t deterred. ODOT plans to seek out developers showing previous interest to see if it’s the number of rest areas in the proposal, their locations or something else.

“This is a program that’s very new to Ohio,” said ODOT Spokesman Steve Faulkner. “We’re going to continue to pursue development of non-interstate rest areas.”

Ohio has been actively looking toward the private sector since the state legislature passed House Bill 114 in 2011. The law allows ODOT to enter into public-private partnerships (P3) to deliver transportation projects and services.

The Rest Area SMART Program is just one of the initiatives ODOT is exploring, as it is also looking at a Statewide Sponsorship & Naming Rights Program, leasing of the Ohio Turnpike, a Performance Based Operations and Maintenance Program and more.

“We have assets that have value,” said ODOT Deputy Director of the Division of Innovative Delivery Jim Riley. “They could be named; they could be sponsored. I always say, ‘If Progressive Field can be sponsored up in Cleveland, then why can’t you take the All-State Bridge to Progressive Field?’ We know there are a lot of assets out there that have value in them, that have impressions to the traveler…”

Riley, who brings more than 20 years of private-sector experience to ODOT, said, “You’ve got to think differently in order for (P3s) to be successful. ODOT has been delivering great projects and will continue to do design-bid-build and standards and specifications and 30, 60, 90 (year) reviews, and all these great things. But in order to deliver a P3 you have to think a little differently.”

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