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Alternative Financing for State Highway Rest Areas

The Client

Minnesota Department of Transportation, Safety Rest Area Program

The Challenge

With declining appropriations and competing transportation priorities, MnDOT wanted to explore opportunities for new revenue sources to help repair and maintain the department's network of about 54 state and interstate highway Class I safety rest areas (SRA). Inadequate funding could require MnDOT to close some rest areas.

The Approach

MAD proposed a two-phase project. In the first phase, MAD conducted an assessment that a) confirmed the existence of untapped economic value in the SRA facilities and b) assessed the interest of selected vendors in a sponsorship and advertising program. To complete Phase 1, MAD prepared and presented a report to the client's alternative finance team identifying a range of travel and tourism-related options identified by potential sponsors and advertisers and discussed whether to proceed with Phase 2.

In Phase 2, MAD, with assistance of the client's alternative finance team, prepared and presented potential net revenue projections of the findings to MnDOT Division Directors and other upper management staff. MAD sought input and feedback on developing a business plan for an SRA Sponsorship and Advertising Program to generate additional revenues for the support and maintenance of the SRAs.

The Results

During this engagement, MAD:

  • estimated needed revenues for the SRA program
  • conducted 30-plus interviews with vendors and five states (Florida, Ohio, Virginia, Georgia, Texas) that had, or were in the process of implementing, similar programs
  • identified critical success factors and scored other state programs
  • identified two different revenue models that could be pursued. One was a 'guaranteed revenue' model that assured the client it would receive revenues; the second was a shared revenue model in which the client would share in the success of a contracted vendor
  • developed revenue estimates and cost projections for each revenue generation model
  • drafted a Sponsorship and Advertising Program policy requiring that a revenue program would comply with existing state and federal transportation rules, regulations and policies

At the conclusion of the project, the client was presented with a request for proposals (RFP) to solicit vendors for a SRA Sponsorship and Advertising Program.

The Consultant

Jim Jarvis
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