For a state like Louisiana, facing a $14 billion infrastructure backlog and a gas tax that hasn’t increased since the Berlin Wall came down, tolls are a controversial but helpful part of rebuilding aging roads and bridges.
So are public-private partnerships, according to Shawn Wilson, secretary of the Louisiana Department of Transportation and Development.
“P3s put a state like Louisiana, that has labored with either debt or lack of resources, in a very attractive position for private equity,” Wilson said.
Louisiana is one of a handful of states – Georgia is another – that is gaining a national reputation for using P3s to build high-profile infrastructure projects, many of which feature new tolls.
The state is now advancing its largest and most complex P3 so far. It’s a $1 billion replacement of the aging Calcasieu River Bridge and renovation of the adjacent nine-mile Interstate 10 corridor in southwest Louisiana.
With Gov. John Bel Edwards term-limited out of office in January 2024, Wilson said he’s pushing to finalize the deal before a new administration takes over.
“I’ve got 95 weeks left before the new governor takes over and this is not a project I want to hand off,” Wilson said.
The need for speed is why the state has opted to not pursue a Transportation Infrastructure Finance and Innovation Act loan as part of financing of the project, Wilson said.
The flexibility to accelerate projects is another reason P3s are attractive to state transportation officials, said Wilson, who is current president of the American Association of State Highway and Transportation Officials.
“The delivery model absolutely produces results much quicker for the public and we’re always concerned about perception and image,” Wilson said. “For the DOT to accelerate projects, that generally takes a long time.”
Under the tenure of Edwards and Wilson, who took office in 2016, Louisiana has enacted legislation to allow the DOTD to pursue public-private partnerships and proposed five potential deals.
Two of them, including the Calcasieu River Bridge, have advanced and Edwards is pushing lawmakers to approve a third, a new Mississippi River bridge. The two other proposals failed to generate enough bidders to take off.
“For a state the size of Louisiana, the amount of development going on seems intuitively to me to be large,” said Fitch transportation analyst Scott Monroe. Tapping an alternative delivery model for projects as complex as the Calcasieu bridge area “seems like a good solution given the amount of infrastructure renewal and repair that needs to on in the space.”
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“We are all tired of the jokes about knowing you’ve entered Louisiana when the roads get bad,” Edwards said in a March 14 speech opening the legislative session. “Every state is struggling to update their infrastructure. And since becoming governor, we’ve invested nearly $4.7 billion in projects, including 6,312 miles of our highways, in order to change that narrative.”
Like most states, Louisiana gets the bulk of its state transportation funding from its fuel tax. The state hasn’t raised the $0.20-per-gallon tax since 1990. Lawmakers have killed multiple bills proposing to raise the tax, including a fresh effort last year.
But the state’s Transportation Trust Fund will, beginning in 2023, see a regular infusion of cash from a new law that diverts a chunk of the sales tax on vehicles to the fund, a move that's expected to generate $300 million annually. The state will also get $6 billion over the next five years from the federal infrastructure package. Also last year, the Legislature sent $563 million of American Rescue Plan Act dollars to the transportation fund for capital projects.
But Louisiana has a massive backlog and a to-do list that features five megaprojects billed at $1 billion or more, Wilson said. Financing the deals will include gas-tax backed bonds, but "the state can't bond its way out" of its infrastructure needs, he said.
In addition to the Calcasieu bridge and the proposed Mississippi River bridge, the project pipeline includes renovations of I-49 South, I-49 North, and upgrades costing another $2 billion to $3 billion in the same corridor, Wilson said.
The IIJA's new discretionary programs, private activity bond allocation and other federal programs will be key to funding the projects, he said.
Louisiana
The bridge and tunnel spans the Gulf Intracoastal Waterway on Louisiana Highway 23, about eight miles northwest of central New Orleans. The state tapped several financing tools, including
Wilson said the project proved that P3s can work for mid-sized projects in rural states.
Six private consortiums responded to the state’s RFQ, a sign of significant interest, market participants said.
The Belle Chasse bridge and tunnel project was the state “getting its feet wet” with P3s, said Robert Poole, director of the transportation policy at the Reason Foundation. “It seemed to work out pretty well,” Poole said. “You look at where the action is nationally now, and Louisiana is a big one."
However, two of the state's proposed transportation P3s failed to gain traction.
In 2020, a pitch for managed lanes on I-12 around Baton Rouge failed to attract any bidders. Wilson blamed the lack of interest from private partners on the lack of tolling.
In 2021, the state floated a proposal to build a new 20-mile stretch of state highway 3241, which drew only one bid.
“We had to reject it primarily because we had just finished the Belle Chasse bridge and tunnel and we recognized that citizens might not always like tolls, and we didn’t want to create the perception that we didn’t encourage competition,” Wilson said.
The state launched
Nearly 70 years old, the I-10 bridge handles more than 80,000 vehicles a day and was designed in 1952 to handle only 37,000. The American Road & Transportation Builders Association has classified the bridge as functionally obsolete and structurally deficient.
President Joe Biden visited the bridge last year, calling it a “recipe for disaster.” “It shouldn’t be this hard or take so long to fix a bridge that’s this important,” Biden said.
In addition to the bridges and roads, the area has 34 pipelines, two railroad lines and is likely contaminated with pollutants. “It’s the most complex project that I’ve seen or the state has seen in terms of engineering technicalities,” Wilson said.
The state received
They are: Calcasieu Bridge Partners led by Plenary Americas US Holdings, Inc., Aecon Infrastructure Development Inc., and Acciona Concesiones S.L.; Calcasieu Connectors Group led by ACS Infrastructure Development, Inc., Macquarie Infrastructure Developments LLC, and John Laing Limited; I X Bridge Group that’s led by Itinera Infrastructure and Concessions Inc., DIF Infra 6, US HoldCo 4 LLC, BCP Infrastructure Fund, LP, and BCP Infrastructure Fund-A, LP; and I-10 Calcasieu Mobility Partners LLC group led by Cintra Global SE, VINCI Concessions Investments USA Inc., and Meridiam I-10 Calcasieu, LLC.
A contract award is expected in spring 2023. Plenary is the entity that won the Belle Chasse replacement.
As with Belle Chasse, the state plans to use a mix of Garvee bonds, toll-backed bonds, federal loans and private equity to finance the project.
A TIFIA loan may come into play down the road, but pursuing the federal loan on the front end could slow down the procurement, Wilson said.
“It’s a very attractive program,” he said, adding that the Edwards administration has closed on a trio of TIFIA loans. “So we had the tough decision of saying, do we exercise all the options or do we build in certainty and then still deliver the project? We’re most interested in getting this project greenlighted and then we have the option of taking advantage of the TIFIA loan on the back end.”
Meanwhile, Edwards' 2023 budget proposal dedicates $500 million for a long-talked-about Mississippi River bridge and connector in the Baton Rouge area. It could cost more than $2 billion.
Lawmakers will debate the funding in the current legislative session with some already saying they're opposed to banking the funds for what could be a years-long process. House Speaker Clay Schexnayder said he would only support the $500 million if a final location is decided by session's end in June, a decision that officials have said won’t be possible, according to local reports.
The state is reportedly eyeing 17 locations and may narrow it down to a preferred choice by the late 2023 or early 2024.
With 95 weeks left in Edwards’ term — and Wilson’s stated desire not to serve under another governor — the fate of Louisiana's next mega P3 project may end up resting with a new administration.
