In 1953, engineers pulled off what was considered at the time a marvel in civil engineering ”“ the creation of massive, buoyant concrete caissons to support much of the weight of the planned Tappan Zee Bridge, ultimately driving down the cost of constructing the span.
This time around, New York north of Long Island and much of New England, which rely on the bridge to access America north of the George Washington Bridge chokepoint, are counting on financial engineers to float a similar miracle.
In mid-June, the state Department of Transportation quietly issued a request for proposals from finance consultants who can hammer out a plan by next January to pay for a new bridge.
With a potential cost in excess of $4 billion, those consultants may include among their recommendations a new federal program that encourages private-sector financing of highway projects.
One empire-sized hitch ”“ the state has yet to pass legislation authorizing the local use of the Public-Private Partnership Pilot Program, dubbed Penta-P for short, which is being eyeballed by planners from Washington, D.C. to Washington state has a way to shift transportation projects out of first gear.
As part of the Safe, Accountable, Flexible, Efficient Transportation Equity Act passed in 2007, private companies are authorized to borrow up to an aggregate $15 billion nationwide on a tax-exempt basis to build and operate highway infrastructure.
In each project, private companies assume financial risk ”“ in the form of equity investment, liability for debt, or promising a fixed price for construction ”“ in exchange for a financial return commensurate with the risk they take on.
For the first time last month, Australia-based Transurban Group used the program to arrange $589 million for two new lanes on Interstate 495 in Virginia, whose rates will be change according to traffic conditions.
While the concept of a toll highway “marketplace” is itself gaining momentum ”“ similar high-occupancy toll lanes are on the books in six states ”“ of equal interest nationally are the tax-exempt bonds that encouraged the companies to take on the project.
To date, the Federal Transit Administration, which compiles statistics and makes recommendations for large transportation projects, has authorize an additional $5 billion for a half-dozen projects around the country.
While Penta-P is only ramping up, planners have used the programs precepts to push along a range of previous projects, including a light-rail system in Hudson County, N.J. In awarding a single bidder responsibility for both designing and building the system, officials say the project was completed five years ahead of schedule, at a potential savings of $345 million.
The DOT had a similar outcome in mind in announcing last January a two-pronged environmental review process for the Tappan Zee Bridge/I-287 Corridor Project. By splitting the environmental review process for the project into two pieces ”“ first addressing mass transit possibilities for the bridge, then how to integrate future transit stations into communities ”“ the DOT hopes to shorten by five years the time necessary to build a new bridge or remake the current span.
The DOT reaches another significant milestone this summer, when it hires a financial consultant to figure out a way to wring costs out of the process over the next five years.
That contractor is expected to report by next January on preliminary estimates of funding needs and studies of commonly used financing strategies and “best practices” for similar major projects.
Among other tasks, the winning bidder is expected to:
Ӣ develop financing proposals and analyses;
Ӣ write legislation needed for the project;
Ӣ assess the ongoing impact of costs like labor and materials;
Ӣ evaluate toll mechanisms and other ways to generate revenue; and
Ӣ advise on obtaining financing through tax-exempt instruments.
