Kentucky, Ohio Consider P3 for $3.5B Cincinnati Bridge
BRADENTON, Fla. - Kentucky and Ohio envision a public-private partnership to build the $3.57 billion Brent Spence Bridge Replacement and Renovation Project, according to a preliminary finance plan submitted to the Federal Highway Administration.
The use of a P3 is necessitated at least in part by the limited availability of current and future federal funding, the finance plan said.
"At existing funding levels, constructing the project would absorb both states' entire major new funding capacity for several years," the plan said. "Therefore, alternative delivery and funding options, including tolling, are necessary to ensure the project is built in the foreseeable future."
The Brent Spence Project has been planned since 2000. Construction is expected to begin in late 2015 or early 2016. The estimated $3.57 billion price tag includes interest and financing costs.
The project is along a 7.8-mile corridor of Interstate 75 across the Ohio River between Covington, Ky., and Cincinnati. A new double-deck bridge will be built alongside the existing 50-year-old, double-deck Brent Spence Bridge, which will be rehabilitated and reconfigured.
The two states are considering contracting with a private partner or consortium using a design, build, finance, operate and maintain approach with upfront milestone and availability payments, which makes funds available to the P3 firm after meeting certain performance standards.
"This is a starting point in our joint effort with Ohio to determine how we can best finance and deliver long-awaited improvements to the Interstate 75 corridor through Cincinnati and Northern Kentucky," said Kentucky Transportation Cabinet Secretary Mike Hancock. "This initial financial plan will be updated many times along the way."
Funding for the Brent Spence project is expected primarily to come from tolls and financial support from Kentucky and Ohio.
Toll revenues are expected to be leveraged through a combination of capital market financing and a loan from the Transportation Infrastructure Finance and Innovation Act federal financing program to the extent that TIFIA funds are available, the finance plan said.
Using a P3 for the bi-state project would require that legislation be enacted by Kentucky, which does not have a P3 enabling law. This year's legislative session begins Tuesday and runs through mid-April.
State Rep. Leslie Combs, D-Pikeville, has publicly stated that she is working on a broad P3 bill, according to Kentucky Transportation Cabinet spokesman Chuck Wolfe. Combs is chairwoman of the transportation budget subcommittee for the House Appropriations and Revenue Committee.
The Brent Spence financing would most likely include a series of milestone payments funded from the sale of non-recourse toll revenue bonds and a TIFIA loan. Debt financing on behalf of the P3 concession would advance funding for the availability payments and private equity invested by the P3 concessionaire for capital construction costs not covered by the milestone payments.
There is no toll on the current Brent Spence Bridge.
When construction is complete, toll revenues would pay back the bonds and TIFIA loan while an availability payment to the P3 developer would cover the concession's debt service and equity returns. If toll revenues fall short of the promised payments, Ohio and Kentucky would be responsible for subsidizing toll revenues to cover the gap.
The states currently anticipate that certain sections of the project will be maintained by Kentucky outside of the concession contract to facilitate governmental purpose tax-exempt financing, the finance plan said.