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Annual Privatization Report 2013

Major PPP Highway Projects

Subsection of Annual Privatization Report 2013: Surface Transportation

Robert Poole
April 8, 2013

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Alaska: The only current project in this state is the $800 million Knik Arm Bridge, a toll bridge between Anchorage and its fastest-growing borough. The state intends to finance it via a concession based on availability payments. In 2011 the Knik Arm Bridge & Toll Authority short-listed three PPP teams and promised them a request for proposals (RFP) sometime in 2012. It also received its federal Record of Decision, clearing it to proceed. But because toll revenues alone may not be enough to cover the availability payments, the Authority has sought legislation for a $150 million reserve fund. The legislature adjourned in April 2012 without passing HB 158, so the RFP was not issued in 2012. Alaska has requested a TIFIA loan for this project.

Arizona: With broad PPP enabling legislation passed in 2009 (and fine-tuned in 2012), the Arizona DOT is studying four principal toll highway projects: managed lanes in Phoenix/Maricopa County, a new Interstate 11 between Phoenix and Las Vegas, a new north-south corridor between Phoenix and Tucson (as an alternative to I-10), and a widened SR 189 in Nogales, serving trucks crossing from Mexico. Arizona DOT applied for a slot in the Interstate reconstruction toll pilot project, to rebuild its portion of I-15, but was not selected.

California: The first PPP project under the state’s 2009 enabling law finally got under way when the state Supreme Court rejected an appeal from the California Department of Transportation (Caltrans) engineers’ union, Professional Engineers in California Government (PECG), alleging that the PPP law was unconstitutional. That permitted phase 2 of the Presidio Parkway project in San Francisco to get underway. The $365 million availability-payment project reached financial close in June 2012, enabling the Hochtief/Meridiam team to begin construction in late autumn. The project has received two TIFIA loans. Five other PPP highway projects are being pursued by Los Angeles County Metropolitan Transportation Authority, and Metro has applied for TIFIA loans for four of them. The four are: I-710 freight corridor including truck-only lanes from the port to downtown Los Angeles, the I-710 north gap closure deep-bore tunnel, an ambitious road/rail tunnel under Sepulveda Pass to relieve congested I-405, and the High Desert Corridor in northern L.A. County. LA Metro’s first PPP project will likely be a “bundle” of freeway improvements including managed lanes on I-5 in the San Fernando Valley.

Colorado: Farthest along is the US 36 managed lanes project between Denver and Boulder. Three teams have been short-listed for this project, with an RFP expected by early 2013. This project has a TIFIA loan request pending. In August 2011, Parsons Corporation made an unsolicited proposal to add managed lanes and make other improvements to the I-70 mountain corridor west of Denver. After seeking interest from competitors, Colorado DOT issued an RFP to the four interested firms in July 2012. Both Parsons and HDR submitted proposals in August, but in November, the agency rejected both proposals due to a variety of concerns. Another potential PPP project is the missing link in the Denver beltway, being sought by the Jefferson Parkway Public Highway Authority; it would connect the southern end of the Northwest Parkway with C-470 near Golden.

Florida: Two large availability payment concession projects are under construction in Florida. Work has begun on the second of two parallel tubes of the $900 million Port of Miami Tunnel as of November 2012; the first tube was completed several months earlier. The project team is led by Bouygues and Meridiam. Also moving ahead, under budget and ahead of schedule, is the reconstruction of I-595 in the Ft. Lauderdale area. This $1.65 billion project by ACS Infrastructure is reconstructing and modernizing this east-west expressway and adding three reversible express toll lanes in the median. Both projects have received TIFIA loans. Florida DOT has also applied for a TIFIA loan for its next large PPP project: adding express toll lanes to congested I-4 through Orlando. The $2 billion project will add four such lanes in the median on 20 miles of I-4. FDOT is also moving forward with the first phase of a new tolled ring road for Jacksonville, the First Coast Outer Beltway. The first 15-mile segment of this eventual $1.9 billion project, costing $400 million, is under way as a conventional procurement, upgrading an existing state highway. The subsequent 31-mile St. Johns River Crossing portion will be developed as a toll concession.

Georgia: In December 2011, as three pre-qualified teams were preparing proposals for the $1 billion West by Northwest project to add managed lanes to I-75 and I-575 in Atlanta, Gov. Nathan Deal cancelled the procurement, objecting to the alleged “loss of sovereignty” inherent in a long-term concession. Georgia DOT has reconfigured the project as a design-build-finance procurement, but without private-sector equity, the state’s contribution will be larger, thereby diverting funds from other transportation projects. The state will also be taking the toll revenue risk. The revised finance plan for what is now called the Northwest Corridor calls for up to $536 million in federal and state fuel tax money, in addition to toll revenue bonds, for what is now a $950 million project. GDOT consultant HNTB is now engaged in a year-long PPP project screening study, to be completed by July 2013.

Indiana: This state is well-known for the largest U.S. brownfield toll concession, the $3.8 billion 75-year lease of the Indiana Toll Road. Among the many uses of the net lease proceeds has been accelerating construction of the southern half of I-69 in the state between Indianapolis and Evansville (on the Kentucky border). Indiana and Illinois are operating under a bi-state Memorandum of Understanding to develop the Illiana Expressway, a 47-mile, $1.3 billion project from I-65 in Indiana to I-55 in Illinois. In October 2012 they announced the preferred route for the project, through Will County, IL (near the proposed third Chicago airport in Peotone). The toll road is expected to be developed as a PPP concession. Indiana is one of four states that took part in a federally funded Corridors of the Future study of I-70, from Kansas City to eastern Ohio. The preferred alternative includes rebuilding the corridor with truck-only lanes added in the median. The study also concluded that toll finance is the only feasible way to pay for the project, and suggested PPP procurement. Indiana is partnered with Kentucky on the t River Bridges project in the Louisville metro area. While Kentucky will build its portion conventionally, Indiana’s portion—the $763 million East End Crossing—will be done as an availability-pay PPP concession by an international consortium selected in November. Both bridges will be tolled. Finally, the state has approved East Chicago’s project of a perpetual franchise for the $250 million Cline Avenue Bridge, under which an obsolete bridge that was closed in 2009 will be replaced with a 100% privately financed toll bridge.

Illinois: The 2011 PPP enabling law permits use of this method by both Illinois DOT and the Illinois Tollway. It also allows design-build to be used, but only for PPP projects. A recent “trailer bill” gives the Tollway first dibs on PPP projects. IDOT and the Tollway are assessing possible managed lanes projects in the Chicago area and possible bridge projects.

Maine: A large engineering and construction company—Cianbro Corp.—has proposed a $2 billion, 220-mile, east-west toll road across the state. It would link the underutilized coastal port of Eastport to Cobun Gore on the Quebec border. The plan would be entirely privately financed, and would proceed using existing (mostly private) roads that would be acquired for this purpose. The legislature has approved $300,000 for a feasibility study, which the company will reimburse if the project proceeds.

Maryland: With the opening of tolled express lanes on the western half of the Capital Beltway (I-495) in northern Virginia, officials in Montgomery County, MD, just across the Potomac River, have begun talking about extending the Beltway lanes across the American Legion Bridge, onto their portion of the Beltway. And the Maryland State Highway Administration is studying possible express toll lanes extending northward from the Beltway up I-270 toward Frederick. Whether those projects would be developed as PPPs remains to be seen, since Maryland currently lacks PPP enabling legislation.

Michigan: This state does not yet have PPP enabling legislation, but is working on a toll bridge with Canada. The Detroit River International Crossing (DRIC) would supplement (and compete with) the privately owned Ambassador Bridge linking Detroit with Windsor, Ontario. The new bridge has the full support of the Canadian government, which has offered to create a public authority to finance the bridge, based on toll revenue, and possibly procure it as a PPP concession (but likely based on availability payments); all tolling will take place on Canadian soil. But Michigan Gov. Rick Snyder has been unable to obtain majority support for the bridge (or a PPP law) in the legislature. A ballot measure drafted by DRIC opponents was defeated in November 2012. It would have required a popular vote statewide and in each affected municipality for any new international bridge or tunnel requiring any state funding. While that obstacle has been overcome, the outlook for DRIC still appears uncertain, legally and politically.

New York: Three major toll bridge replacement projects are under way in the New York/New Jersey metro area. Most national attention has focused on the $5.2 billion replacement of the aging Tappan Zee Bridge across the Hudson River, north of New York City. Its owner, the New York State Thruway Authority, lacks PPP authority, and at this point it is planned as a design-build project. The state has requested a $2.9 billion TIFIA loan as part of the still-to-be-determined financing package. It could become a PPP toll concession if the legislature in 2013 enacts enabling legislation. The other two projects are being carried out by the Port Authority of New York & New Jersey, which has PPP authority. The Goethals Bridge replacement project, estimated at $850 million, is being procured as an availability-pay concession, with three proposals due in January 2013. And for the Bayonne Bridge, a $1 billion project will raise the existing bridge deck to provide 215 ft. clearance for ships, rather than the 151 ft. with the current deck. One of five prequalified teams will be selected early in 2013 to construct the new deck and remove the old one.

North Carolina: This state’s first PPP concession is for the Mid-Currituck Bridge, a seven-mile, two-lane toll bridge linking the mainland to the Outer Banks. It will be developed and operated under a 50-year toll concession by an ACS Infrastructure /Dragados team, in which the state has contributed state highway money to reduce the amount to be toll-financed. The value-for-money analysis found that while the PPP approach involves a slightly higher capital cost, it also offers greater value for the state due to significant risk transfer and lower life-cycle costs.

Ohio: This state is using a design-build-finance approach for the new Inner Belt Bridge in Cleveland. The bridge is a river crossing on I-90. The westbound replacement bridge is already under way as a conventional procurement. The $330 million eastbound span, which the state could not afford to do at the same time as the westbound one, will be accelerated thanks to the design-build-finance (DBF) contractor providing six years of gap financing. The request for qualifications (RFQ) was issued in late November 2012, with short-listed teams to be announced by February and contract execution by mid-summer 2013. Ohio DOT is also partnering with Kentucky DOT for the $2.4 billion Brent Spence Bridge over the Ohio River at Cincinnati. Tolls are being considered as a funding source, along with some form of innovative procurement.

Oregon: This state’s first toll project will be the Columbia River Crossing, a $3.5 billion project to replace the existing I-5 bridge. The current finance plan calls for $900 million from Oregon highway funds, $900 million from Washington State highway funds, and $1.4 billion from toll revenue bonds. Since Oregon intends to have the bridge include a controversial light rail line, it hopes to secure New Starts funding from the Federal Transit Administration as well.

Pennsylvania: Various toll concession projects have been proposed in this state during the years it has taken to enact enabling legislation, but none was seen as the driving force for the 2012 enactment. One project that may become the first is replacement of the Scudder Falls Bridge on I-95 between Pennsylvania and New Jersey. Although the existing bridge is operated by the Delaware River Joint Toll Bridge Commission (DRJTBC), a bi-state agency, it has never been tolled. At only four lanes, the existing bridge is functionally obsolete for a number of reasons, and the new bridge is likely to be feasible only with toll finance. In addition, the governors of both states have asked DRJTBC to do the project as a toll concession, though whether this will happen is uncertain.

Puerto Rico: The original plan, following the successful lease of PR-22 and PR-5, was to use PPP concessions for up to five greenfield toll projects, including an extension of PR-22, three new toll roads, and bus rapid transit lanes on PR-22. With a new governor elected in November 2012, whether those plans will be carried out remains to be seen.

Texas: November 2012 witnessed the opening to traffic of SH 130, Sections 5 and 6—the rural portion of the SH 130 toll road between Austin and San Antonio, providing an 85 mph alternative to congested I-35. Developed by a Cintra/Zachry team, this is the first of a number of Texas toll concession projects to be completed. In the Dallas/Ft. Worth (DFW) metro area, Cintra/Meridiam teams are under way constructing two additional tolled megaprojects, the LBJ Express Lanes on I-635 in Dallas and the initial phase of the North Tarrant Express in Ft. Worth. After a two-year moratorium on new toll concessions, the legislature in 2011 approved PPP concessions for a number of other large toll projects, though in every case allowing the local toll agency in the region the right of first refusal (referred to as “primacy” in Texas). A $1.6 billion project to reconstruct existing lanes and add express toll lanes on I-35W in Ft. Worth was approved in October 2012. This north-south project will interconnect with the east-west North Tarrant Express and will be done by the same project team. However, the planned next phases of NTE itself, to be built on SH 183, might not be done as a toll concession after all. After the Texas Department of Transportation (TxDOT) received only one bid on this $834 million project (from Cintra/Meridiam), as well as requests from other firms to do the project as an availability-pay concession instead, TxDOT in November 2012 announced it would reconsider how it procures the project. The state has already applied for a TIFIA loan for the project. Two other concession-eligible projects in the DFW metroplex will instead be handled by the North Texas Tollway Authority (NTTA), the local toll agency, which exercised its primacy option: SH 360 and the Trinity Parkway. And for the $1.1 billion project to add managed lanes to I-35E in Dallas, TxDOT opted against a concession and is going with a design-build contract, awarded in December. In the Houston metro area, several sections of the Grand Parkway will be done as conventional procurements instead of as PPP concessions. Still in contention as PPPs are projects on I-30 and SH 114 in Dallas and SH 1604 in San Antonio.

Virginia: In November 2012 the long-awaited express toll lanes on the Capital Beltway (I-495) opened to traffic, developed as a 75-year toll concession project by Fluor/Transurban. That same team gained the Virginia Department of Transportation’s (VDOT) approval for an adjoining project to convert and expand the existing HOV lanes on I-95 south of the Beltway to express toll lanes. The $925 million project achieved its financial close in July 2012, with ground-breaking the following month. The 28-mile reversible facility includes expansion of the existing HOV lanes from two lanes to three lanes north of the Prince William Parkway and a two-mile extension of the lanes south to Stafford County. Also opening in 2012 was the new Jordan Bridge in Chesapeake, replacing an unsafe lift bridge that had been closed for some years. The bridge was financed entirely privately and operates under a perpetual franchise. Financial closing was also achieved for the Midtown Tunnel project in Norfolk/Hampton Roads, under which a Skanska/Macquarie team is building a new toll tunnel tube, upgrading three existing ones, and building a missing approach road to the Martin Luther King Freeway. The $2.1 billion project was financed by a combination of sponsor equity, tax-exempt private activity bonds, a TIFIA loan, and a $308 million contribution from VDOT. A larger potential PPP concession would double the size of the existing Hampton Roads Bridge/Tunnel. VDOT has also announced that it plans to use a nonprofit corporation approach (under IRC 63-20) to finance the planned US 460 toll road, to be built by Ferrovial under a design-build contract. Despite all this activity, an effort is under way in the legislature to modify the enabling legislation via such changes as prohibiting unsolicited proposals and requiring legislative approvals of negotiated concession agreements.

Washington: This state has two conventionally procured toll megaprojects under way: replacement of the SR 520 floating bridge and replacement of the SR 99 Alaskan Way Viaduct with a deep-bore tunnel. A third project is a $1.5 billion effort to add express toll lanes to congested I-405 on the east side of Lake Washington. The state has PPP enabling legislation but thus far has not made use of it.

» Return to Annual Privatization Report 2013: Surface Transportation
» Return to Annual Privatization Report 2013 homepage


Robert Poole is Searle Freedom Trust Transportation Fellow and Director of Transportation Policy


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