Valuation of Buyout Options in Comprehensive Development Agreements
Record Type: UTC

This project investigates the feasibility of and develops an economic valuation model for buyout options in Comprehensive Development Agreements (CDA). 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 rather long 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 an 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 developed buyout option valuation model can aid transportation policymakers in decisions on leasing public infrastructure. Project deliverables include: • feasibility assessment of buyout options • an economic valuation model for buyout option in a CDA • identification of methods, data, and parameters required to apply the model to evaluation of buyout options in actual (planned or existing) CDAs.
Start date: 2008/9/1
End date: 2009/10/31
Status: Completed
Contract/Grant Number: DTRT06-G-0044
Secondary Number: 00021
Total Dollars: 85272
Source Organization: University Transportation Center for Mobility
Date Added: 03/07/2008
Index Terms: Comprehensive development agreement (Cda), Planning and design, Leveraged buyouts, Policy, Policy making, Infrastructure, Public private partnerships, Research projects,

University Transportation Center for Mobility
http://utcm.tamu.edu
Texas Transportation Institute
Texas A&M University System
3135 TAMU
College Station, TX 77843-3135
USA
Phone: (979) 845-2538
Fax: (979) 845-9761

Tooley, Melissa S
Phone: (979) 845-8545
Fax: (979) 845-9761
Email: m-tooley@tamu.edu

Texas A&M University, College Station
http://agecon.tamu.edu/
Department of Agricultural Economics
2124 TAMU
College Station, TX 77843-2124
USA

Power, Gabriel
Phone: (979) 845-5911
Fax: (979) 845-6378
Email: gpower@ag.tamu.edu