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Kentucky Plans Bonds for Bridges

BRADENTON, Fla. — Kentucky Gov. Steve Beshear is proposing to fund his state’s half of the massive $2.6 billion Ohio River Bridges Project with federal funds and toll revenue bonds over the next six years.

In the state’s 2012-2018 recommended highway plan, released late last week, Beshear called for Kentucky to use $300 million in direct federal aid, $236 million of grant anticipation revenue vehicle bonds, known as Garvees, and $846.2 million of revenue bonds backed by tolls.

It is the first time Kentucky has publicly laid out a plan for how it will fund the federally designated mega-project, a joint venture with Indiana to build two new bridges across the Ohio River and reconfigure the downtown Louisville interchange known as “spaghetti junction” where Interstates 64, 65 and 71 converge.

The two states recently announced that they would split up construction of the various components because they plan to use different methods to do the work.

Kentucky plans to use a traditional construction and financing method to be funded as Beshear outlined.

“Our 2012-2018 recommended highway plan represents an aggressive investment in Kentucky’s primary road system,” he said.

The governor’s proposal still has several hurdles to clear before becoming final, including approval from the Legislature in this year’s session.

Several lawmakers have already questioned whether the Ohio River Bridges Project would take funding away from other needed transportation projects.

Indiana set aside up to $600 million for a major portion of its $1.3 billion share of the project cost years ago, using proceeds from its $3.8 billion lease of the Indiana Toll Road in 2006.

Indiana officials also plan to use tolls to supplement construction costs using a public-private partnership, and are in the process of selecting a law firm to assist it with the procurement.

Ultimately, the plan of finance proposed by both states must be approved by the bi-state Louisville and Southern Indiana Bridges Authority, as well as the Federal Highway Administration.

That will not happen until Kentucky and Indiana sort out how the tolls will be spent, according to Bridges Authority spokeswoman Christi Lanier-Robinson.

“At this point, the states are still trying to finalize details, including the revenue sharing as it relates to tolls,” Lanier-Robinson said Wednesday.

Because the project is massive, each state must also plan to fund ongoing maintenance once construction is complete, which makes determining the split of toll revenues complex.

The details are expected to be worked out soon so that a draft plan of finance can be considered by the Bridges Authority in the next few weeks.

The panel will schedule a special meeting to receive the draft, and hear more details about each state’s plans to fund and construct the project.

A second special meeting will be scheduled so that the authority can take final action on the finance options.

Though the Bridges Authority is authorized to issue bonds, it is not yet clear what agency will sell the debt.

The Ohio River Bridges Project has been planned for decades to relieve severe congestion through a major north-south freight corridor between Mobile, Ala., and Chicago.

The U.S. Department of Transportation calls the project “a major mid-America crossroads.”

It’s also a key artery for traffic moving within the Louisville metropolitan area, which includes southern Indiana.

The original project mapped out years ago was estimated to cost $4.1 billion. It received federal approval in 2003.

However, governors from both states eliminated some components a year ago in order to reduce the cost estimate to $2.6 billion.

The underlying project remains the same: to build two new bridges and reconfigure the Louisville interchange.

Though much of the right-of-way acquisition and the design work has occurred over the years, construction has stalled because Kentucky lacked the funding.

Federal officials are reviewing the project again due to the reduced scope, and are expected to approve a new record of decision in early spring, Lanier-Robinson said.

Under the recent plan announced by the states to split up the construction, Kentucky will be responsible for building a new Interstate 65 bridge, putting new decking on the existing Kennedy Bridge, and upgrading the Louisville interchange.

Indiana will build the east end portion of the project, which includes a new bridge, a new highway link between the Lee Hamilton Expressway in Indiana and Gene Snyder Freeway in Kentucky, and a tunnel in eastern Jefferson County.

The Bridges Authority will help coordinate and monitor the construction procurements of each state, and ensure that the overall project is carried out under a single financial plan, according to state officials. The authority’s ultimate role, though, still has not been determined.

State officials still believe the project is on target to begin construction later this year.

In the meantime, the Indiana Finance Authority and the Bridges Authority are taking public comments regarding the IFA’s intent to prepare two studies on the feasibility and economic impacts of its portion of the project.

The preliminary feasibility study would assess the feasibility of using a P3 to construct the new east end bridge.

The economic study would determine how the project will affect existing commercial and industrial development, potential impacts on employment and future development, and possible fiscal effects on local governments.

A meeting about the studies will be held Feb. 2 in Jeffersonville, Ind.

In addition, written public comments can be submitted online from Jan. 30 through Feb. 6 at www.bridgesauthority.com.

KPMG LLP is providing financial advice to Indiana on its procurement for the bridge project.

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