Michigan to speed up road project with P3 funding

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DALLAS -- A decision to shift to a public-private partnership from pay-as-you-go financing for a portion of a key highway project should shave 10 years off construction, said the Michigan Department of Transportation.

MDOT announced plans for a design-build-finance model to complete its Interstate-75 modernization plan for Oakland County. The funding approach leverages upfront private investment to complete the project that would be paid back by the state over 25 years with money from gas taxes and other sources. The state still maintains control and ownership of the freeway and MDOT said that there won’t be any tolling installed to pay back the financing.

MDOT said that the P3 financing was selected because of its ability to accomplish all the necessary work while also transferring more risk to the private sector for long-term maintenance once the project is completed.

"We came out last year and announced this modernization project and we took a pay-as-you-go approach," said MDOT spokesman Rob Morosi said at a press conference Monday. "We heard from communities, motorists, and stakeholders that this was going to take too long. So we looked at a different way of financing to accelerate this project."

The project calls for the reconstruction and modernization of 18 miles of freeway between Eight Mile Road and South Boulevard by the end of 2022. Previously, the expected end was 2034. Original plans called for eight construction segments spanning 17 years due to limited funding availability. The first segment between Coolidge Highway and South Boulevard was completed this month.

The project will be broken up into two phases: the southern segment from 8 Mile to 13 Mile Roads and the northern segment from 13 Mile Road to Coolidge Highway.

The northern segment, which will likely start first, will cost about $350 million and be covered by public funds. The southern segment, which probably won't see work until 2019, will run near $1 billion and be privately financed and paid back with public funds over 25 to 30 years.

MDOT said it will issue requests for qualifications this fall for teams interested in financing and constructing the project. The department expects to select the winning teams in summer and fall 2018.

MDOT previously used P3 financing for a $125 million freeway lighting project that replaced 15,000 bulbs with efficient LED versions across bridges tunnels and roadways in metro Detroit. The project, which closed in 2015, was the first P3 in the US to reach initial financial close using private placement debt. The state partnered with Star America and Aldridge Electric.

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Public-private partnership Government finance Michigan Department of Transportation State of Michigan Michigan