Tennessee has selected a Ferrovial-led consortium for the state's first toll lane public-private partnership after the team offered a whopping $24.8 billion concession fee as part of its bid.
That's more than three times the next-highest concession fee from competing bidders, and five times higher than the previous record, set by the
"This is by far bigger and better than we could have ever imagined for our state," Gov. Bill Lee, a Republican, said Wednesday before the Transportation Modernization Board's vote on the selection. "What we're discussing today will be America's largest and most valuable interstate choice lane project."
Two of the remaining three teams offered concession fees of $7.25 billion and $7.4 billion. The proposal from the third team, Choice Mobility Partners, required a $250 million state subsidy.
The procurement
Tennessee is the 12th state to implement express toll or "choice" lanes, a trend expanding
"Today's result will impact a national discussion about procurements of this type and how transportation is funded," Reid said after the vote. "I'm proud that once again Tennessee will lead the way with these conversations."
The I-24 Southeast Choice Lanes project will add two variably priced express toll lanes in each direction along a stretch of I-24 between I-40 in Nashville and I-840 in Murfreesboro. The concession term is 50 years.
The winning bid by DriveTN, which includes Ferrovial subsidiary Cintra and Transurban, put a $9.2 billion price tag on the project. The board separately approved the possibility of extending the lanes in the future.
Tennessee has applied for a $1.1 billion TIFIA loan.
The concession fee won't all be paid up front, Bryan Ledford, major projects bureau chief at the Tennessee Department of Transportation, told the five-member board ahead of their unanimous vote. The state will receive $1.5 billion at financial close and the remaining payments will be split between the construction period and the 50-year life of the concession.
"This is an unexpected outcome and we now go to work with the proposer and the Build America Bureau [which oversees the TIFIA program] to optimize this outcome and make sure we have a framework that's agreeable to all partners," Ledford said.
The size of the fee is based on DriveTN's prediction of the corridor's traffic demand over the 50-year life of the term, Ledford said. The predictions "diverged greatly" among the teams, he added.
Lee said he signed an executive order Wednesday establishing the Tennessee Strategic Transportation Accountability Council to oversee the concession fee, which may be put toward other transportation projects. The governor said the council would "provide transparent oversight on how to wisely invest the dollars that will be coming to the state."
Bob Poole, Reason Foundation's director of transportation policy and a proponent of P3s and user fees, has been
"I think a $24.8 billion concession fee is a big mistake," Poole said. "To be sure, most of it will be paid for by the express lanes users over the 50 year term, but no matter how one slices this, it will be the express lane customers that end up paying extra to use those lanes. This runs the risk of keeping tolls higher than what is needed for congestion relief and inadvertently making the express lanes into Lexus Lanes," he said, referring to a term used by express toll lane critics. "I see this as not positive for the continued expansion of express toll lanes around the country."
Ledford downplayed the risk of high tolls in response to a question from Reid.
"The concession value is not directly connected to user fees," he said. "User fees are connected to demand at a point in time in the future, and you're seeing a prediction of what that will be, and an offer they're basing that on," he said. "There's no guarantee — and that's their risk."
The size of the fee is unprecedented in the P3 toll lane market, said Baruch Feigenbaum, senior managing director of transportation policy at Reason Foundation. "We don't know how this will play out, but some skepticism over this deal is warranted," he said.
Feigenbaum said high concession fees don't automatically mean higher tolls, and that P3 concessionaires "tend to maximize revenue, which means they charge high tolls, both on facilities with concession fees and those without."
If the goal is to keep tolls low, Feigenbaum added, "then state DOTs should have concessionaires focus on maximizing throughput and not maximizing revenue. That may reduce the concession fees, but it would definitely reduce the tolls. But no DOT has done that to this point."
The transportation board also authorized TDOT to consider three extensions of the I-24 project, to the north, south and east. DriveTN will have the first right of proposal for the extensions, Ledford said.
The DriveTN consortium includes Cintra — the toll road and managed lanes subsidiary of infrastructure giant Ferrovial — as well as Transurban and Tikehau Star Infrastructure.
The competing teams included I-24 Choice Lanes Partners, made up of Acciona, ACS Infrastructure, and Meridiam. Its bid totaled $12.8 billion with a $7.25 billion concession fee.
Music City Access Partners, led by Plenary Americas, Sacyr, and Shikun & Binui, estimated the project at $8 billion with a $7.4 billion fee.
Choice Mobility Partners, led by ASTM North America, FCC Concesiones, and InfraRed Capital Partners, submitted a $9.4 billion bid with a $250 million subsidy from the state.
In addition to scoring the highest on the financial side of the ledger, DriveTN also won on the technical side, Ledford said.
The team proposed moving the choice lanes to the outside of the general purpose lanes "for a tighter footprint," he said, and allowing for less disruption to existing lanes during construction. The proposed schedule delivers the project more than a year ahead of TDOT's original schedule, Ledford said.
TDOT hopes to close on the project by early- to mid-2027. Construction is expected to take eight years and will be done in phases.
