Ohio Sets Off on Its First P3 With Cleveland Bridge

CHICAGO — Ohio will embark on its first public-private partnership with the construction of a $332 million bridge in downtown Cleveland.

It’s the first of a series of possible P3s to generate revenue for the cash-strapped Ohio Department of Transportation.

Under Gov. John Kasich, who has made privatization a top priority, the state is considering P3s for a $3 billion rebuild of the aging Brent Spence Bridge in Cincinnati, a $700 million bypass in southern Ohio and the sale or lease of its non-interstate related rest stops.

The state is also eying a range of options to wring cash out of the Ohio Turnpike, including a long-term lease or securitizing future toll revenue.

“ODOT director Jerry Wray has said this isn’t your grandpa’s ODOT anymore,” said spokesman Steve Faulkner. “We have to look at things differently.”

The state decided to start with the downtown Cleveland bridge, one of two so-called Inner Belt bridges, in part because private-sector firms seem interested, Kasich said at a press conference last week announcing the project.

“This was a project where the private sector indicated an interest,” Kasich said. “I have very little doubt that this won’t go forward. It’s possible at the last minute that the markets will shut down and nobody will be interested, but not only did the companies doing the construction test the market, but we at ODOT tested it as well,” he said. “It’s a safe project and we believe it will work.”

Warning of a $1.6 billion budget shortfall, ODOT officials said in January that the state would have to postpone dozens of projects.

The second Cleveland Inner Belt bridge was pushed back to 2023. By using up-front private money, however, the state hopes to have shovels in the ground by late 2013 or early 2014, after the first span is finished.

The construction project will widen the bridges to 10 lanes from eight.

ODOT plans to issue a request for proposals from interested firms next spring, aiming to choose a final team by the fall.

The private team will pay up-front demolition and construction costs and the state will repay the costs starting around 2015 through 2019, Faulkner said.

The money will come from the pot of $100 million of revenue left over each year from ODOT’s budget, he said.

The project comes a year after the General Assembly passed a law authorizing P3s for transportation projects as part of the 2012-2013 transportation budget.

Kasich wants to privatize all state assets, from its liquor distribution system to bridge construction.

So far, the state has not received any bids from firms interested in buying or leasing Ohio’s 59 non-interstate related rest stops, Faulkner said. The department is in the process of revamping the privatization proposal “to make it a better package,” he said.

ODOT in March launched a new department devoted to pursuing P3s as a way to drum up new revenue and help plug an estimated $1.6 billion ODOT budget shortfall.

Jim Riley, a longtime private-sector consultant on P3s, heads up the department, called the Division of Innovative Delivery. So far, potential projects include the Cleveland bridge, the Brent Spence Bridge, the Portsmouth Bypass in Scioto County and an interchange for Interstate-71 in Delaware County.

KPMG is crafting a report examining the best ways to raise money from the Ohio Turnpike that is expected to be released by the end of the year.

Options range from leaving it as it is to a long-term lease to securitizing the toll revenue and bonding against that, Faulkner said.

If the state opted to securitize future toll revenue, it would transfer bonding authority to ODOT from the Ohio Turnpike Commission, which currently issues bonds for the road.

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Transportation industry Ohio
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