On June 22, 2010 the Texas Department of Transportation’s I-635 project became the first U.S. highway public-private partnership (P3) to achieve financial close in 2010. LBJ Infrastructure Group – a Cintra-led consortium – will build, finance, maintain and operate a 17-mile corridor which includes managed lanes in the congested Dallas-Fort Worth area. This project along with the North Tarrant Express (NTE), one of three U.S. transportation P3s to close in 2009, are nationally significant for advancing the use of managed lanes to address congestion.
The projects are notable not only for their magnitude and the method in which they will be developed, but also for their unique tolling and financial characteristics. Specific precedent setting-features include:
- The projects are valued as the largest transportation greenfield P3 projects in the United States and include construction costs of $2.7 billion for the I-635 and $2 billion for the NTE.
- The projects confirm the importance of Transportation Infrastructure Finance and Innovation Act (TIFIA) and private activity bonds (PABs) as financing mechanisms. The I-635 includes the largest amount of PABs for a U.S. toll road concession. The TIFIA loans of $850 million for I-635 and $650 million for NTE are the second and third largest to close.
- The Dallas Police and Fire Pension System is an equity partner in the private developer for both projects, making it the first pension fund to invest directly in infrastructure development in the U.S.
- They are the first two projects to obtain federal tolling authorization under the United States Department of Transportation’s Express Lanes Demonstration Program.
- To the extent that toll revenues exceed specified levels, the private developer will share up to 75% of the excess toll revenues with the Texas DOT.
The I-635 and NTE validate toll concession P3s as a viable method for delivering needed transportation projects in the United States. For example, with the I-635, Texas DOT was able to leverage $489 million in public funds to deliver a project worth over $4 billion including costs for design, construction, operations and maintenance. If past is prologue, the P3 market can expect more P3 toll concessions, as well as managed lanes projects, in the future.