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Shadow Tolls
Practical Law Glossary Item 8-507-2177 (Approx. 2 pages)
Glossary
Shadow Tolls
A per-vehicle amount a government entity pays to a project sponsor to compensate it for operating and maintaining a public transportation project such as a road, bridge or highway. Shadow tolls are used when it may not be appropriate or economically feasible:
- To construct toll facilities or require the public to pay tolls for use of the project.
- For the government entity to make payments to the project sponsor in the form of availability payments which must be paid so long as the project is available for use even if it is not used to the extent anticipated or budgeted.
When shadow tolls are used, the project sponsor and the government entity share the risk that the project may not be used to the extent anticipated or budgeted. This is referred to as demand risk. The higher the number of vehicles that use the road, the higher the shadow tolls the government must pay to the project sponsor.
For more information on shadow tolls and public infrastructure projects generally, see Practice Notes, Public Private Partnerships: Issues and Considerations and Negotiating Concession Agreements for Public Infrastructure Projects.