BRADENTON, Fla. Kentucky and Indiana are deciding this week how much drivers will have to pay to use the massive $2.6 billion Ohio River Bridges Project.
The two states are splitting the cost of the project, with Kentucky planning to finance the remainder of its $1.3 billion share of the cost by selling bonds in the next few months. Indiana has put together a public-private partnership to finance its part of the project.
At a meeting Thursday, a bi-state panel is expected to set initial toll rates, though toll collections won’t begin until 2017 when the bridges are expected to open.
The rates are expected to be set in line with an investment-grade traffic and revenue study by the consulting firm Steer Davies Gleave, which was considered by the Kentucky Public Transportation Infrastructure Authority on Aug. 30.
“The investment-grade study predicts how much revenue could reasonably be generated from tolls, which are needed to help fill the gap in traditional highway funding and cover Kentucky’s share of project costs,” Kentucky transportation officials said.
The study assumed rates for vehicles paying tolls instantly with transponders would range from $2 for cars, $5 for box and panel trucks, and $10 for tractor trailers. The electronic tolls are expected to offer a $1 discount for “frequent commuters,” though the criteria for a discount still must be determined by the bi-state toll panel.
Two other tolling categories deal with drivers who don’t use transponders, and rely on video camera identification of their license plates to receive invoices for tolls.
For drivers who register their license plates and establish pre-paid accounts, proposed tolls would be $3 for cars, $6 for medium trucks, and $11 for heavy trucks. For motorists who don’t establish accounts, proposed rates are $4 for cars, $7 for medium trucks, and $12 for heavy trucks.
To keep pace with inflation, the Steer Davies Gleave study assumed that the rates will increase by 2.5% annually.
“The study and initial toll rates provide the essential information that financial investors will need when Kentucky sells bonds this fall to complete its financing of the bridges project,” officials said.
The study is also a prerequisite to obtain a low-interest federal loan under the Transportation Infrastructure Finance and Innovation Act.
Kentucky and Indiana are already at work on their respective projects, and the Bluegrass state is poised to complete its financing before the end of the year.
Using a traditional construction and financing approach, Kentucky is building a new bridge next to the existing Kennedy Bridge carrying Interstate 65, and rehabilitating the Kennedy Bridge between Louisville and Jeffersonville, Ind.
The project also will rebuild a busy interchange in Louisville known as “spaghetti junction” where various Interstates converge.
To finance the project, Kentucky plans to use a combination of resources, including state appropriations, federal funds, a low-interest TIFIA loan, Grant Anticipation Revenue Vehicle revenue bonds, and bonds backed by tolls.
The state issued $100 million of Garvees in 2010 for the project, and another $207.7 million of Garvees this July.
Public Financial Management Inc., the state’s financial advisor, recommended the issuance of a $461 million bond anticipation note in October in its presentation to the Kentucky Public Transportation Infrastructure Authority.
The BANs would be taken out with TIFIA loan proceeds in July 2017.
“The finance team has been working vigorously with the TIFIA office aiming towards closing the TIFIA loan at the end of September or early October,” PFM said.
Representatives from Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s came to Louisville on April 3 and 4 to meet with the finance team and visit Kentucky’s Ohio River Bridges project site, said PFM, which also noted that interest rates have gone up more than 120 basis points in the last five months.
PFM also recommended the issuance of $313 million of toll revenue bonds in November, and said the toll bonds and TIFIA loan have received two preliminary investment grade ratings.
On Aug. 29, Kentucky was invited to submit a TIFIA loan application, which is the next step in the underwriting and approval process, according to a letter from Sylvia Garcia, deputy assistant secretary for management and budget at the U.S. Department of Transportation who is overseeing the TIFIA program.
Indiana is well under way on its East End Crossing project, building a new bridge to connect Prospect, Ky., to Utica in southern Indiana. The crossing will complete a loop around the greater Louisville area.
The Indiana Finance Authority priced $702 million of private activity bonds in mid-March on behalf of its P3 partner, WVB East End Partners LLC.
The IFA and the Indiana Department of Transportation will make $392 million in milestone payments through the construction period, expected to end in 2020. The state will then make additional availability payments that will be used to pay off the bonds through the life of the project, in 2050.
Toll revenues coming from Indiana’s bridge are separate from the P3 agreement, and will flow to the state.
The Ohio River Bridges Project, one of the largest public works projects in the country, is a federally designated “mega-project” that has been a joint effort of the two states for more than a decade.
It was designated a priority national transportation project by the George W. Bush presidential administration.
The project will improve congestion, safety, and mobility at “a major mid-America crossroads” where three interstates converge, according to the USDOT.
It also serves as a major north-south freight corridor between Mobile, Ala., and Chicago.
In 2003, the Federal Highway Administration released what is known as a “record of decision” approving sites for the project as well as an environmental impact statement.
In the years since the first FHA decision, the project has received federal grants and state funding.
Initially estimated to cost $4.1 billion, the governors of both states ordered the project scaled back in recent years, and pared the total cost down to $2.6 billion. A revised record of decision was approved by federal officials in mid-2012.
A bi-state management team composed of the Kentucky Transportation Cabinet and the Indiana Department of Transportation has overseen initial project work completed by the general engineering consultant, Community Transportation Solutions, and six design teams.
A comprehensive Web site with information about each state’s project is at www.kyinbridges.com.