P3 Pursuit
Heavy infrastructure construction is familiar ground for the joint-venture members of WVB East End Partners. What's new to owner and contractor is the administration of two megaprojects by two states—each with different approaches to financing.
Kentucky's Transportation Cabinet (KYTC) took the lead in the Downtown Crossing project. Lacking significant experience in P3s, officials opted for more frequently used forms of funding in the form of Grant Anticipation Revenue Vehicle, or GARVEE, bonds and a federal line of credit through the Transportation Infrastructure Finance and Innovation Act. The East End Crossing, on the other hand, represents Indiana's latest foray into P3 financing. Daniel introduced the method in 2006 with the Indiana Toll Road leasing.
Daniel's so-called Major Moves plan engaged Statewide Mobility Partners, a joint venture between Spain's Cintra and Australia's Macquarie Infrastructure Group. The 75-year lease of 156 miles of Indiana's I-90 for $3.9 billion helped to create a half-billion-dollar trust fund for other infrastructure projects.
The two states acquired more than 100 rights-of-way parcels. Four teams—including investors from Spain, Germany, the U.K., Canada and a plethora of well-known U.S. designers, contractors and engineers—bid on the P3 for the East End Crossing, which was unusual, says Heustis. "It's even more remarkable that all four stayed in the game to the very end."
Requests for proposals, a question-and-answer period and modifying the final proposals all took place within a calendar year. Draft RFPs were due in June of 2012, and bond sales closed on March 28, 2013, says Heustis.
On the East End Crossing, "we're using the availability payment model," explains WVB CEO Rob Morphonios. Those payments will occur after substantial completion, in 2016. "What's attractive is that there's no toll risk for East End Partners," Morphonios adds. "The owner manages that separately—that means we're able to focus on performing construction and then [35 years of] operations and maintenance." Once the design-build team completes construction, a bi-state agency will handle tolling.
The bridge has a 100-year design life, with a a corrosion protection plan and a structural health monitoring system for real-time feedback on the bridge's condition. Stringent performance requirements are set for minimal rehabilitation over the 35 years, and handback requirements must show that the bridge will still have years of useful life left when returned to the grantor, says Morphonios. "We'll receive credit for avoiding lane closures while performing maintenance milestones. Over the 35-year period, we're going to be doing everything the state would do, including basic maintenance to snow removal and incident reports."
