The Untapped Value of Transportation Assets
Transportation departments own a lot of infrastructure. They could be doing more to derive revenue from it.
Under relentless fiscal pressure, transportation agencies are struggling to maintain the quality of their assets -- their roads and highways, airports, bridges, ports and real estate as well as buses, trains, ferries and fleets of cars and trucks. That is why many are looking to leading management and funding practices.
Leaders of state and regional transportation departments seeking efficiencies should start by taking a broader view of what their agencies own. The sheer scale and diversity of public-asset portfolios can make it hard to gauge their efficiency. Most states, for example, keep separate inventories of various transportation assets. By integrating all the various inventories across a state, management can gain a better top-level view of how these assets are being utilized and maintained, giving them a greater ability to detect duplication and waste and to identify opportunities to enhance the assets' value.
Avoiding the temptation to forego maintenance when money is tight is difficult. Rather than cutting maintenance, agencies should strive for more efficient management and timely maintenance to improve safety, reduce the cost of repairs and enhance asset lifespans. ISO 5500x, the revised global standards for infrastructure asset management, provides an excellent framework for delivering the most value from public-asset portfolios.
Procurement also offers great potential for savings, as agencies introduce common standards and negotiate volume discounts. Public-private partnerships and outsourcing are growing in popularity, encompassing fleet contracts; concessions for operating and maintaining roadways; back-office services such as human resources, finance and IT; and larger capital projects such as road and bridge building. For example, through well-defined performance-based contracts using multiple contractors, the Florida Department of Transportation is saving an estimated 17 percent per year in maintenance costs across a range of administrative and maintenance activities.
Even when infrastructure is well maintained, however, many transportation agencies continue to view their assets as merely a drain on their budgets. But in recent years some agencies have gotten more creative. Rest areas and welcome/visitor centers on highways may present a good opportunity for selling food, goods and services through specialized outsourced service providers as well as for corporate-branding sponsorships. Some transportation agencies are considering finding sponsors to offer roadside assistance. The Virginia Department of Transportation's three-year contract with GEICO Insurance for sponsorship of rest areas and welcome centers generated close to $6 million for the commonwealth last year.
Transportation agencies are beginning to recognize that many private companies can be receptive to similar sponsorships, as well as naming agreements and the opportunity to place advertisements in high-traffic locations such as bridges and rest areas. AT&T reached an agreement with the Southeastern Pennsylvania Transportation Authority in 2010 to pay more than $5 million over five years to rename Philadelphia's Pattison Station as the AT&T Station.
Another potential untapped revenue resource is the wealth of anonymous traffic data that transportation agencies collect, which can be valuable to private mapping or traffic-information companies or as a platform for marketing opportunities.
One particularly valuable, yet often unexploited asset, is land. A thorough review of an agency's real-estate portfolio often reveals surplus or underutilized properties or plots which could be leased, sold, developed or put to joint use. Mobile and broadband providers are particularly attractive targets and are often prepared to pay substantial sums to place towers on strategically important sites or install fiber-optic cables underneath public roads. The California Department of Transportation earns approximately $6 million a year by leasing sites for mobile communications towers.
As with any public-sector initiative, administrators must observe legal and regulatory constraints while also weighing the financial benefits against possible concerns by citizens about perceived private intrusion into public services. But while that debate goes on, tight budgets mean that transportation agencies should seek greater efficiencies and new revenue sources to meet their obligations of providing a safe and reliable transportation system.
This column represents the views of the author only and does not necessarily represent the views or professional advice of KPMG LLP.