Client Alert

Toll Road Update

November 2009

Recent developments in the toll road and infrastructure industries are summarized below. These developments are based on research we conducted in November.

Puerto Rico

Puerto Rico Releases List of Potential PPPs; Holds Industry Forum: After passing new PPP enabling legislation earlier this year, Puerto Rico hosted a conference on October 22-23, 2009 to introduce its new PPP program and specific PPP opportunities to the private sector. The conference was very well received by the attendees that numbered over 650 people when only about 250 people were expected. Governor Luis Fortuño spoke on the first day of the conference and received a standing ovation from the crowd. Puerto Rico's Public-Private Partnerships Authority, the body responsible for implementing the new PPP law, accepted proposals from other governmental entities for potential PPPs in order to develop an inventory of possible projects, and the conference included presentations on a number of these projects. The Puerto Rico Highway and Transportation Authority re-introduced the PR-22 project, which was subject to an earlier procurement that stalled under the prior administration. Among others, potential PPPs for PR-66, PR-52, two Bus Rapid Transit systems and a light rail system in San Juan were also discussed. In addition, presentations were given regarding possible PPPs in the energy, water and information technology sectors and for the Luís Muñoz Marín International Airport.

The full list of potential projects can be found at http://www.p3.gov.pr/Eng/Project/Projects.html and the presentations that were made at the conference can be found at http://www.p3.gov.pr/Eng/Presentations.html.

Georgia

Georgia Moving Forward with New PPP Program: Georgia's Department of Transportation (GDOT) is in the process of establishing a new PPP program that, according to GDOT, would enable the state to develop transportation projects that would not be possible without private funding. GDOT held a meeting with Georgia's State Transportation Board on November 4, 2009 to discuss the program, and the meeting included a discussion of 18 projects GDOT is considering for the PPP program. GDOT will hold a workshop for the private PPP industry on December 3, 2009 in Atlanta, and anticipates soliciting the first PPP under the new program by the middle of 2010.

The new program is being developed pursuant to Senate Bill 200 which was passed in May 2009. The bill requires GDOT to prepare a list of potential PPP projects every two years that will be submitted to the State Transportation Board and released to the public. This year's list of 18 projects includes the following, which were highlighted as "key projects" during GDOT's November 4th meeting with the State Transportation Board:

• A set of reversible lanes along the I-75/I-575 Northwest Corridor;
• A new toll road between SR-316 and Peachtree Industrial Boulevard;
• A new toll road between SR-316 and Peachtree Industrial Boulevard;
• Two managed lanes on the portion of I-285 that connects I-75N and I-85N; and
• A total of three HOT lanes along SR-400.

Other possible PPP projects include managed lanes along other interstates, a multi-modal passenger terminal in downtown Atlanta and the development of high-speed rail and intercity passenger rail. GDOT has stated that all projects developed via a PPP will be solicited by GDOT, and unsolicited proposals will not be considered.

More information on the development of the new program can be found at http://www.dot.state.ga.us/Pages/default.aspx.

Louisiana

1. New Orleans Seeks Privatization of Airport: On September 8, 2009, the Federal Aviation Administration (FAA) accepted the city of New Orleans' preliminary application for the Louis Armstrong New Orleans International Airport (MSY) to participate in the FAA's airport privatization program. MSY served 7,944,397 passengers in 2008, a 5.5% increase over the previous year's number of passengers but still 82% of its all-time high of 9,733,179 passengers in 2004. In 2005, Hurricane Katrina devastated much of New Orleans and MSY is looking to rehabilitate and improve its facilities as demand continues to rise as the city recovers.
   
   More information on MSY, including links to the preliminary application and future information on the RFQ can be found at MSY's homepage: http://www.flymsy.com/.
2. PPP Considered in Baton Rouge: The Capital Area Expressway Authority has been given the task of proposing the best way to finance a contemplated $4 billion loop around Baton Rouge. One option the public body is considering is a PPP, which would be Louisiana's first toll road PPP. A decision is expected in early 2010.

California

PIAC Discusses PPP Projects: California's Public Infrastructure Advisory Commission (PIAC), the new state body established to assist state transportation agencies implement PPPs, has met three times since July 2009 to discuss potential PPP options for California's infrastructure assets, and at least two projects have been discussed in detail: the Doyle Drive project and the Gerald Desmond Bridge Replacement.

Doyle Drive is a $955 million reconstruction of 1.6 miles of Rt. 101 with a new 6-lane road south of the Golden Gate Bridge. An industry workshop regarding the project was held on July 6th and 7th in San Francisco and, there, the state indicated that it is considering aggregating the following four components of the project into one PPP contract: a tunnel, two interchanges and landscaping around the new roadway. The preliminary schedule that was presented anticipated the decision to be made in September 2009 on whether the PPP model would be used, however no announcements have been made to date.

The Gerald Desmond Bridge Replacement would erect a new 6-lane bridge with increased vertical clearance for large cargo ships in place of the existing 4-lane bridge in Los Angeles County. The details on how a PPP would be implemented for the project have not yet been identified, but federal, state and local funds committed to the project only make up approximately half of the new bridge's $1.1 billion cost.

Florida

1. Port of Miami Tunnel Closes: The Florida Department of Transportation (FDOT) and a consortium of Bouygues Publics Travaux and Meridiam Infrastructure reached financial close on October 15, 2009 for the Port of Miami Tunnel Project. The concession provides for availability payments to compensate the concessionaire. The estimated cost of the project is approximately $900 million. Infra-Americas reports that the project costs include approximately $720 million in debt, $80 million in equity and $100 million from FDOT. The consortium received approval for a TIFIA loan of approximately $340 million. FDOT had stated earlier in 2009 that if an October financial close was achieved, boring of the tunnel could begin in 2011. The project was on the verge of collapse at the end of September 2009 when the city of Miami failed to deliver a $50 million letter of credit, but FDOT extended the original September 25 deadline to receive the letter of credit.
2. MDX Holds Industry Forum for Unsolicited Proposal: The Miami-Dade Expressway Authority (MDX) held an industry forum on October 26, 2009 to discuss an unsolicited proposal it received in April 2009 to design, build and finance improvements to the SR 836/I-395 corridor in Miami-Dade County. MDX stressed that the potential PPP is in the early planning stages and the authority is still examining a number of issues including whether private financing will be utilized and whether there will be a concession to a private partner for operation and maintenance. MDX also noted that a private partner would not be able to receive direct compensation from toll revenues as there are no plans to toll I-395 and the toll revenues from SR 836 are part of an existing pledge to senior bondholders. Rather, availability, milestone and/or final acceptance payments could be utilized. If MDX decides to move the project forward, they will issue an RFP to interested firms. 
3. Miami-Dade MPO Approves Busway Study: The Miami-Dade Metropolitan Planning Organization (MPO) voted on July 23, 2009 to adopt into its long-term strategy a plan to convert the South Miami-Dade Busway into managed toll lanes that would allow the use of cars. The MPO's next step is to begin solicitations for a development and environmental study, which is expected to last 18 to 24 months. A construction contractor would be selected once the study is completed. A preliminary study for the project proposed three alternatives for the conversion: (a) instituting a toll and adding new signals and signs, (b) adding one or two tolled lanes and flyover bridges at intersections, or (c) replacing the busway with a tolled elevated four-lane highway. The last option is estimated to cost over $1.5 billion. A PPP for the project has been discussed.
   
   Despite MPO's initial timetable an MDX board member expressed his desire to fast-track the project so construction could begin as early as summer 2010. MDX is an independent state agency that operates five expressways in Florida (four of them tolled), and which the board member has stated could help fund the busway's conversion.

Texas

1. Industry Forum Held for Grand Parkway PPP: Harris County, as the representative for a seven-county coalition in the Houston region, introduced the Grand Parkway project to the private sector on July 21, 2009. Texas legislation allows the seven counties the first right-of-refusal to develop the segments of the project within their boundaries, and to do so via the PPP model if they so choose. The counties were given a September 25, 2009 deadline to decide whether they will develop the Grand Parkway and at least two counties have decided to do so, while the other five counties decisions have gone unreported. The Texas Department of Transportation (TxDot) will have the right to develop the project if the counties decline. The Grand Parkway should not be affected by Texas' decision earlier this year to not extend the state's PPP powers.
   
   The Grand Parkway is planned as a $5 billion 180-mile highway encircling the greater Houston area and divided into 11 segments. Two segments have been partially constructed and five segments have been identified as candidates for tolled concessions. Additional segments could be developed later via PPPs as well. It was anticipated that an RFQ would be released in the second half of 2009 had the counties chosen earlier to develop the Grand Parkway as a PPP.
2. CDA Signed for DFW Connector: TxDot entered into a comprehensive development agreement (CDA) on October 6, 2009 with Northgate Constructors, led by Kiewit and Zachry Construction, to design and build the $1.2 billion DFW Connector. The CDA does not contemplate private funds or a long-term lease in connection with the project, which will expand SH 114 and SH 121. Managed and tolled express lanes and additional general purpose lanes will also be added to SH 114. Construction is expected to begin in 2010 with completion by 2014. The funds for the project include $250 million of American Recovery and Reinvestment Act funds provided by the Texas Transportation Commission. 
3. PPP Cancelled for TTC-35: TxDOT announced on October 7, 2009 that it would no longer pursue the TTC-35, the portion of the once-ambitious Trans-Texas Corridor project that would parallel I-35 between Dallas-Fort Worth and San Antonio, due to environmental concerns.

Pennsylvania

1. Pittsburgh May Lease Parking Assets: Pittsburgh's Parking Authority voted in September 2009 to issue an RFP to seek an advisor in connection with a possible lease of the city's parking garages and other parking assets, which includes over 8,800 parking spaces in garages and approximately 8,500 meters and other parking spaces. Pittsburgh's mayor is seeking at least $200 million from the possible lease in order to fund the city's pension, but that number could rise if parking assets owned by the Sports & Exhibition Authority and the Urban Redevelopment Authority are included in the lease.
   
   It is reported that Pittsburgh will select its advisor for the possible lease by November 19, 2009 and is eyeing a request for bids in April 2010, the selection of the lessee for the parking assets in August 2010 and financial close by November 1, 2010.
2. Proposed Tolling on I-80: Through a formal memorandum to the Federal Highway Administration, the Pennsylvania Turnpike Commission reopened its application for federal approval to add tolls on I-80. The commission estimates toll revenue would be over $350 million in the first year of tolling. In order to mitigate growing local opposition to the tolling scheme, the commission's plan is to set up nine toll collection points across the state and only charge passenger cars when they pass at least two of the collection points. The Commission's original application, which includes leasing I-80 from Pennsylvania's Department of Transportation and establishing a tolling system for the highway, was rejected by the federal government in September 2008.

Indiana

Study Includes PPP Option for Illiana Expressway: A long-awaited study mapping out options for building, financing and operating the proposed Illiana Expressway was delivered to Indiana legislators on July 1, 2009. The study includes possible routes for the expressway, which would run from Interstate 65 in Lake County to Interstate 57 in Illinois. The report states that the project could cost over $1 billion and also examines the PPP option for the new road. The study is being reviewed by the Legislative Illiana Expressway Study Committee, which will ultimately make a decision on whether to recommend the highway project to Governor Mitch Daniels.

Wyoming

Potential PPP for I-80: After receiving a final report on October 22, 2009 regarding options for tolling Wyoming's portion of I-80, the state's Joint Interim Committee on Transportation, Highways and Military Affairs voted to sponsor a bill to the state's legislature which would give the Wyoming Department of Transportation authority to toll I-80. The bill is expected to be introduced in the state's Senate in February 2010, and if approved, a master plan including toll rates and toll locations would be submitted to the state's legislature in 2011. The final report that was submitted on October 22nd also looked into the possible addition of a lane in each direction and the viability of forming a PPP for the project. If the legislature approves tolling, the state will have to obtain permission from the Federal Highway Administration to toll the interstate.

With traffic on I-80 expected to double in the next 30 years, especially from heavy trucks, Wyoming is concerned that state and federal money will not be enough to operate and maintain the interstate.

Alaska

PPP Considered for Knik Arm Bridge: An Alaska court struck down a decision by a joint state-city committee that would have pushed back construction on the Knik Arm Bridge to at least 2018. The Knik Arm Bridge and Toll Authority (KABATA) released an RFQ in December 2006 for the bridge, which would connect Anchorage to Mat-Su Borough. This bridge is not the famed "Bridge to Nowhere." KABATA has stated that it still may deliver the project via the conventional public route, but legislation has been passed that would permit a PPP for the bridge, which is expected to cost over $600 million. Two groups previously submitted statements of qualification for the project. The first group was led by Bougyues Travaux Public and URS Corporation, and the second by Macquarie and Kiewit.