Toll Bonds, P3s May Be Used in Bi-State Bridge Project

BRADENTON, Fla. — Tax-exempt toll revenue bonds and public-private partnerships may be used to finance the $4.1 billion Louisville-Southern Indiana Ohio River Bridges Project.

Various funding possibilities for the mega-project have been outlined in a 51-page updated financial plan due to the Federal Highway Administration by Dec. 31.

The updated FHA plan was approved by state transportation agencies in Indiana and Kentucky last week, including the bi-state Louisville and Southern Indiana Bridges Authority.

"This updated plan not only brings current the financial picture for this vital project, but [provides] a foundation for where we go from here," said Kerry Stemler, co-vice chairman of the bi-state authority created earlier this year to determine how to pay for the project.

The project was designated a national transportation priority during the administration of former president George W. Bush. It calls for building two new bridges across the Ohio River and reconfiguring a major downtown Louisville interchange known as "spaghetti junction" where interstates 64, 65 and 71 converge.

The financial plan anticipates that the project will be funded with a combination of state and federal transportation program funds, federal discretionary program funds and tolls.

"Current estimates indicate that at least $2.2 billion of project revenues could be needed to bridge the gap between total project costs and expected state and federal funding," the plan said. "Initial studies indicate that toll revenues could be sufficient to fill this gap."

However, the plan also said additional project revenues may be required due to the unpredictable nature of current state and federal funding.

To date, Kentucky has spent $128.1 million on the project and Indiana has spent $36.1 million. Kentucky has issued $100 million out of $231 million of grant anticipation revenue vehicle bonds, or Garvees, toward its costs.

Some funds have paid for consultants, who have completed portions of the six design elements that make up the project. In May, the bi-state authority submitted a letter to the FHA expressing interest in tolling the interstates.

Consultants are conducting investment-grade traffic and revenue studies that include variable tolling options. The strategies being considered range from bidding out traditional construction contracts to using P3s to design, build, finance, operate, and maintain the project, according to the FHA plan, which is expected to undergo further refinement.

A concession contract could accelerate construction, create additional sources of financing, offer cost guarantees, and transfer risk to the private sector, the plan said. Under a proposed schedule included in the FHA plan, construction on some portions of the project could begin as early as 2013.

Community Transportation Consultants is the general engineering firm working on the project, KPMG is financial adviser, and Wilbur Smith and Associates is conducting traffic studies.

Planning for the construction of the Ohio Bridges and reconstruction of the Louisville interchange has been under way for decades.

The FHA issued a "Record of Decision" confirming the location of the bridges and the final environmental impact statement in 2003. The agency approved the initial financial plan submitted by the two states in January 2008.

According to the U.S. Department of Transportation, the Ohio River Bridges Project will improve congestion, safety, and mobility at "a major mid-America crossroads" where three interstates converge and serve as a major north-south freight corridor between Mobile, Ala., and Chicago.

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Transportation industry Kentucky Indiana
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