The North Tarrant Express (NTE) project involves the reconstruction, widening, and addition of tolled managed lanes along approximately 31 miles of roadway north and east of Fort Worth, Texas. The NTE is being delivered in two phase.
The $1.64 billion NTE 35W Project is the second phase of the North Tarrant Express. The 18-mile project includes the reconstruction, widening, and addition of tolled managed lanes along I-35W in segments: the 6.5-mile Segment 3A from I-30 in downtown Fort Worth north to I-820, the 3.6-mile Segment 3B from I-820 north to U.S. 287, and the 8-mile Segment 3C from U.S. 287 north to Eagle Parkway near Fort Worth Alliance Airport. Two tolled managed lanes will be constructed in each direction on Segments 3A and 3B, while one tolled managed lane in each direction will be added to Segment 3C. In addition, one to two general purpose lanes and new frontage roads will be added to Segment 3A by 2030. On Segments 3B and 3C, additional general purpose lanes, auxiliary lanes, or frontage roads are also contemplated by 2030.
Known as TEXpress Lanes, the new managed lanes will allow drivers without passengers in their vehicles to pay a toll when they want to avoid travel delays on the (free) general-purpose lanes. Prices on the managed lanes will be set in real time every five minutes to control the number of vehicles entering the lanes and keep traffic moving at speeds of at least 50 miles per hour.
Construction on Segment 3A began in May 2014 and was scheduled to be completed in September 2018. Construction on Segment 3B started in April 2013 and the segment was opened to traffic in July 2017. The $2.12 billion Phase I of the NTE opened in October 2014. Phase I of the project rebuilt the existing four to six main lanes and added four TEXpress Lanes, plus frontage roads and auxiliary lanes, which approximately doubled the previous capacity along 13.3 miles of I-820 (Segment 1) and SH 121/SH 183 (Segment 2A) extending east from I-35W toward Dallas-Fort Worth International Airport. Two additional non-tolled main lanes also will be added to Phase I no later than 2030 at no additional cost to TxDOT, unless TxDOT requires the developer to construct the main lanes earlier than the traffic trigger set forth in the CDA or 2030.
Planning for roadway improvements along the I-35W corridor between downtown Fort Worth at I-30 north to I-820 (what has become Segment 3A) began with a Texas Department of Transportation (TxDOT) study in 1992. TxDOT continued to advance a schematic design periodically throughout the 1990s to refine interchange configurations and to include the addition of a reversible high occupancy vehicle (HOV) lane in the median, which would be available to multiple-occupant passenger vehicles only.
A separate TxDOT study conducted in the late 1980s to early 1990s examined improvements to I-35W north of I-820 to SH 114-a corridor that now includes Segments 3B and 3C-and resulted in a series of small improvements to frontage roads and the addition of new interchanges near Fort Worth Alliance Airport.
While TxDOT endorsed expanding I-35W, little was done in the early 2000s as pay-as-you-go funding from gas-tax collections was insufficient to complete a major widening in a timely manner. In addition, regional priorities were focused on the I-820 corridor-a corridor that would become part of the first phase of the NTE. To overcome the funding constraints delaying the project, TxDOT sought to capitalize on a 2001 change in Texas transportation law that permitted the State to issue bonds against the collection of toll revenues. It began to examine tolled managed lanes rather than HOV lanes as a means to provide an ongoing revenue source against which to issue bonds.
Another significant change to Texas transportation law was enacted in 2003, permitting TxDOT to engage the private sector to finance, design, construct, operate, and maintain a toll road project on a public-private partnership (P3) agreement basis. This approach allows final design, right-of-way acquisition, and construction to take place concurrently, with access to private sector financing helping to accelerate the delivery of the project.
Following the State legislature's authorization for of P3 projects in Texas, private investors began to assess project development possibilities in the State. In March 2004, TxDOT received an unsolicited proposal from a concessionaire to reconstruct and expand the entire I-820 and SH 121/SH 183 corridor, from I-35W in Fort Worth to I-35E in Dallas County, adding tolled managed lanes. This prompted TxDOT to begin a formal process to solicit competing offers, but the department ultimately canceled the process in early 2006. Nonetheless, the seed was planted that this corridor, and potentially others in the Fort Worth region, including I-35W, could be developed on a P3 basis.
In 2006, the Texas Transportation Commission-TxDOT's governing board-approved a revised approach to procure two P3 agreements, a concession agreement for the development of at least the I-820 corridor as contemplated in the canceled procurement, and a second for a predevelopment agreement (PDA) to create a Master Development Plan for improvements to additional highway segments in the region. This multi-segment system of planned improvements, which included I-35W, was named the North Tarrant Express.
The Master Development Plan would assess the financial feasibility of the additional segments and prioritize their implementation. The winning proposer would also have the right of first negotiation with respect to any of these sections identified for development through P3 concession agreements, or otherwise identified by TxDOT as suitable for self-performance by the developer. By including the additional segments in the procurement, TxDOT hoped to generate greater interest from the private sector since a network of tolled managed lanes would be financially more attractive than a standalone facility. While it was not clear that all segments necessarily would be feasible to build using a P3 agreement, the private sector's expertise in conducting such a feasibility analysis would be helpful in identifying those projects that could potentially be feasible.
A procurement for the dual P3 agreements began in December 2006. From a field of two finalists, TxDOT awarded both P3 opportunities to North Tarrant Express Mobility Partners (NTEMP) in January 2009. NTEMP is a private consortium composed of Cintra U.S. , Meridiam Infrastructure Finance, and the Dallas Police and Fire Pension System. Cintra, a Spanish company, is a highly-experienced toll road developer and operator. Meridiam is a French firm and is one of the largest investors in and developers of public infrastructure facilities in the world. The Dallas Police and Fire Pension System is no longer a member of NTEMP.
In June 2009, TxDOT and NTEMP executed the P3 agreements and formally concluded the competitive procurement process, a milestone referred to as reaching "commercial close. " NTEMP's proposal provided the best value to the State for the construction of the NTE Phase I along the I-820 corridor. NTEMP's P3 concession will extend over a 52-year period. It began construction on Phase I in late 2010. Phase I was completed and opened to traffic in October 2014, 8 months ahead of schedule.
While negotiation of the I-820 corridor P3 agreement was taking place, TxDOT revised its schematic designs for Segments 3A and 3B along I-35W to include tolled managed lanes and began an environmental review process.
As construction on Phase I began in 2010, NTEMP also undertook its master planning work for the I-35W corridor. NTEMP refined TxDOT's initial designs for Segments 3A and 3B and prepared a plan of finance. NTEMP expected that these segments would be constructed on a P3 basis in the same manner as Phase I. In May 2010, the company informed TxDOT that it was ready to begin negotiations on a P3 agreement to build these sections of the NTE.
In July 2011, TxDOT and NTEMP agreed to a plan where NTEMP would design, build, finance, operate, and maintain Segment 3A and also operate and maintain Segment 3B, which would be financed and constructed by TxDOT. TxDOT felt that it could achieve superior value for money by delivering Segment 3B on a traditional design-bid-build basis, rather than asking NTEMP to deliver it on a design-build basis with its own financing. The plan was formalized under a new 52-year P3 agreement (Facility Agreement) executed in March 2013. The Facility Agreement did not include Segment 3C, which TxDOT initially planned to finance and construct itself at a later date. In early 2016, NTEMP submitted a request to TxDOT to develop Segment 3C (which was part of the original procurement and Master Development Plan) through a negotiated change order to the Facility Agreement for Segments 3A and 3B. The two parties expect to reach agreement on the change order by mid to late 2018. TxDOT gained environmental approvals for all three segments in 2012.
As with Phase I, the concessionaire will set the toll rates for the managed lanes and collect toll revenues from both Segments 3A and 3B (and ultimately 3C) over the life of the concession. Toll rates must be set in accordance with a regional Managed Lanes Policy established in 2006 by the North Central Texas Council of Governments (NCTCOG) and its governing board. The policy provides a basic framework to help guide the development of new projects. The P3 agreement sets out a mechanism with TxDOT requiring the concessionaire to pay TxDOT a share of toll revenues once they exceed a defined thresholds.
Financing for the $1.397 billion NTE Segment 3A was finalized in September 2013. NCTCOG is contributing $145 million in public funds and NTEMP is providing the remaining $1.252 billion. NTEMP's Segment 3A financing includes toll equipment for both Segments 3A and 3B.
Financing for the $244 million Segment 3B is primarily being provided by TxDOT in the form of traditional State and Federal funds. A small portion of NTEMP's financing will also cover Segment 3B. Financing for the proposed $700 million Segment 3C is expected in 2018 pending agreement between TxDOT and NTEMP.
NTEMP's financing package for Segment 3A includes a combination of private equity and debt. NTEMP's private equity contributions from its three partners total $442 million, and it also expects to generate $46 million in interest income. The private partners will be repaid for their initial investment and receive a return over the life of the concession from toll revenue collections.
NTEMP also capitalized on two Federal credit programs administered by the U.S. Department of Transportation that reduce financing costs for concessionaires. The company secured a $531 million loan from the Transportation Infrastructure Finance and Innovation Act (TIFIA) program, of which $524.4 million was allocated to Segment 3A and $6 million to Segment 3B. TIFIA provides low cost, flexible credit assistance to transportation projects of national and regional significance. The flexibility provided in TIFIA's debt service schedule was critical to the successful financing of the project.
In addition, NTEMP's financing includes $274 million in tax-exempt PABs that TxDOT issued on behalf of the concession company. These Private Activity Bonds, or PABs, allowed NTEMP to gain access to the tax-free municipal bond market, lowering its interest rates substantially. The TIFIA loan, as well as the PABs, will be repaid from project revenues.
The concession agreement shifts certain risks from TxDOT (and the taxpayer) to the concessionaire. For example, NTEMP has assumed the risk that toll revenues may be lower than expected. NTEMP's profit will come from the toll revenues with any amounts in excess of a certain threshold being shared with TxDOT for use on future transportation projects in the region. The State of Texas retains ownership of the land and improvements. NTEMP must hand back the facility in a prescribed state of good repair when the concession term expires on June 22, 2061 (or on another date, as agreed upon between TxDOT and NTEMP).
Construction of Segment 3B was completed in 2017. Construction on Segment 3A is anticipated to be complete in 2018. Segment 3C is expected to take approximately four years to construct, the commencement of which depends on the timing of the agreement between the P3 partner and TxDOT.
This project description was published in U.S. DOT's The Report on Highway-Public Private Partnership Concessions in the United States. 149
The $2 billion I-495 Capital Beltway High-Occupancy Toll (HOT) Lanes project expanded and improved a 14-mile section of the Capital Beltway (I-495) in Fairfax County, Virginia. In addition to adding four new managed HOT lanes (two in each direction) and reconstructing the existing general-purpose lanes, the project included the replacement of over 50 bridges and overpasses, the reconfiguration of six interchanges and the construction of three new interchanges providing direct access to the HOT lanes.
Advanced traffic management technology is being used to ensure that both the HOT lanes and the adjacent general-purpose lanes operate at maximum efficiency. Prices charged to use the HOT lanes change in real time to regulate demand and ensure that a dependable, high level of service is maintained at all times. Travelers may choose to pay for a dependable travel time on the HOT lanes, or they may elect to travel in the free general-purpose lanes, where they may experience a less predictable trip. Buses, emergency vehicles and vehicles with three or more occupants can all access the HOT lanes at no cost. Vehicles eligible for free use of the road must declare their HOV status using an E-ZPass Flex® transponder switched to the "HOV" setting. All motorists in the HOT lanes are required to have an E-ZPass electronic toll payment transponder. Tolls are collected at highway speeds and deducted from customers' pre-paid E-ZPass toll accounts. The Virginia State Police enforce vehicle occupancy requirements on the lanes, ensuring that motorists that declare HOV status with their transponder have three or more people in the vehicle.
Beginning in the late 1980s, the Virginia Department of Transportation (VDOT) undertook a number of high-profile studies to explore options for addressing chronic congestion on the Capital Beltway. These efforts resulted in short-term solutions, including truck restrictions, deployment of Intelligent Transportation System (ITS) strategies, and geometric design improvements. In the 1990s, VDOT conducted a broad range of longer-term improvement studies, including a Major Investment Study in 1994.
In early 2000, VDOT assessed a range of options for improving the Capital Beltway, including HOV lane addition alternatives and concepts for improving interchanges. Estimated costs ranged between $2.7 and $3.3 billion, and impacts included displacing hundreds of residences. Local stakeholders expressed concerns over the potential solutions.
A Draft Environmental Impact Statement (DEIS) was completed in March 2002, assessing different HOV lane addition concepts. During the ensuing public comment period, VDOT received several comments suggesting that HOT lane options be explored instead of HOV lanes.
In June 2002, Fluor Daniel (now Fluor Enterprises), a private engineering, procurement, construction, maintenance, and project management company based in Irving, Texas, submitted and unsolicited proposal to VDOT to design, build, finance, operate and maintain HOT lanes on the Capital Beltway under a P3. Fluor would finance the project by borrowing against future toll revenues generated by the managed lanes. The company also proposed a streamlined design that would eliminate the need to purchase private properties and construct the improvements within the existing publicly owned highway right-of-way. This development reduced the project cost significantly and eased public opposition to the project originally proposed by VDOT.
Under guidelines established in a 2001 amendment to the PPTA, VDOT formed an Internal Review Committee composed of agency staff to review Fluor's proposal. After finding that it was consistent with legal and policy requirements, VDOT issued a request for competing proposals. VDOT did not receive any competing offers and ultimately made the decision to accept the company's conceptual proposal for the Capital Beltway Project.
At the time that VDOT accepted Fluor's conceptual proposal, the company developed a relationship with Transurban, a private-sector Australian toll road operator. Transurban was interested in entering the American market and establishing new business. Meanwhile, Fluor was looking to act on a suggestion from VDOT to improve its position relative to toll road operation and its ability to finance the project.
The remaining steps in the procurement process were prescribed by the PPTA Act. Fluor and Transurban submitted a Detailed Proposal to VDOT in October 2003. VDOT then incorporated Fluor's design concept into the formal environmental review process. VDOT approved Fluor's detailed proposal in June 2004 and entered into negotiations in August. In October 2004, Transurban was acknowledged as a formal participant in negotiations.
In January 2005, the Commonwealth Transportation Board selected the HOT lanes plan for the Capital Beltway as its preferred alternative. An Interim Comprehensive Agreement was executed in April 2005 between VDOT, Fluor and Transurban to develop, design, finance, construct, maintain and operate the Capital Beltway HOT Lanes. The agreement acknowledged that the project would be privately funded and the State would not be responsible for any major project costs. However, through ongoing negotiations, the scope of the project continued to expand to include several major changes, including: altering the project's northern and southern termini, changing the I-66 interchange configuration, substituting direct access to Route 123 in Tyson's Corner with three new direct access interchanges and making other alignment changes to the HOT lanes.
In addition, VDOT required Fluor to support the robust public outreach efforts it had established for the Capital Beltway project. There were also federally-mandated design requirements that needed to be met, including additional sound walls and signage mounted on standalone structures.
These changes resulted in cost escalations. By May 2007, VDOT and Fluor-Transurban agreed to "freeze" the project and defer any decisions on possible scope changes so that Fluor-Transurban could establish its fixed-price cost for the design-build contract and arrange it's financing.
Ultimately, the State agreed to contribute $409 million in public funds to the project to cover the changes to the project design. In addition, the VDOT agreed to compensate Fluor-Transurban if HOV traffic levels exceeded an established benchmark. This was important because HOVs would be allowed to use the HOT lanes at no cost. It also validated VDOT's policy goal of encouraging HOV traffic on the Beltway.
In December 2007, VDOT formally awarded the DBFOM Capital Beltway concession to Capital Beltway Express, LLC-the special purpose entity established by Fluor and Transurban to implement the project. The contract period included five (non-operational) years for construction and 75 years for operations and maintenance of the facility. In addition to being a partner in Capital Beltway Express, Fluor served as the prime design-build contractor that would build the project for a fixed price. Similarly, Transurban is serving as the toll operator of the managed lanes.
The financing package for the Capital Beltway HOT Lanes included $348.7 million in at-risk shareholder equity provided by Capital Beltway Express. In addition, the company secured a $588.9 million loan from the U.S. Department of Transportation's (USDOT) Transportation Infrastructure Finance and Innovation Act (TIFIA) credit program. This program lends money to projects of national significance at low interest levels available only to the U.S. government. In addition, the company received approval from U.S. DOT to raise $589.0 million by selling tax-exempt Private Activity Bonds (PABs). The Commonwealth of Virginia issued the PABs on behalf of Capital Beltway Express. The TIFIA loan and PABs reduced the concession company's financing costs and will be repaid with project revenues during the 75-year concession period. VDOT also contributed $495 million in public funding. This was an increase above the $409 million it agreed to contribute in 2007, due to scope additions. VDOT's contribution is a subsidy and will not be repaid.
The project marked a number of precedent-setting "firsts" in transportation project delivery in the U.S. It was the first to use dynamically priced tolls to leverage a project financing package. It was also the first transportation project to use PABs in the United States.
The concession agreement shifts certain risks from VDOT (and the taxpayer) to the concessionaire. For example, Capital Beltway Express has unrestricted rights to set tolls, but at the same time has assumed the risk of lower-than-projected toll revenues. Revenues generated from the tolls are intended to cover all project costs, including debt service, operations, maintenance and administrative costs, as well as provide a reasonable return on investment.
Many contractual provisions exist to protect the public interest. For example, if the HOT lanes exceed financial expectations, excess toll revenues will be shared with VDOT. Additionally, the concession contract includes condition, performance and safety standards. Capital Beltway Express must hand the facility back to VDOT in a state of good repair at the end of the concession period. VDOT retains ownership of the land and improvements, as well as oversight of the HOT lanes.
Construction began in spring 2008, and the facility opened to traffic ahead of schedule in November 2012.
Due to a lower than expected toll revenues during the first two years of operations, Capital Beltway Express and its lenders restructured the project's debt. They used an additional $280 million in private equity from Capital Beltway Express and $150 million in existing project reserves to reduce the PAB debt-which must be repaid before the TIFIA loan-by 60 percent. This change improves Capital Beltway Express' credit structure and strengthens the creditworthiness of the TIFIA loan by reducing the project's overall debt load. The agreement was finalized in May 2014.
U.S. 36 was a four-lane divided highway that connects the City of Boulder to Denver, Colorado at its intersection with I-25. The U.S. 36 Express Lanes project reconstructed the general-purpose lanes and added one high-occupancy toll (HOT) lane in each direction along a 15-mile segment. The project also included the replacement of eight bridges; accommodations for BRT service and associated transit station improvements; a bikeway; and installation of electronic equipment.
The project was delivered in two phases. Phase 1, delivered under a design-build contract, covers the first 10 miles of the project from north of Denver to Superior/Louisville. Phase 2, continuing northwest about five miles to Table Mesa/Foothills Parkway in Boulder, has been delivered under a design, build, finance, operate, and maintain (DBFOM) P3 with the Plenary Roads Denver consortium. The P3 transfers most project responsibilities to the private partner for a 50-year period.
Colorado's 18-mile, four-lane Boulder-Denver Turnpike connects northwestern Denver to Boulder, running from Interstate 25 (I-25) in Adams County to Foothills Parkway/Table Mesa Drive in Boulder. Opened as a toll road in 1952, the roadway experienced higher than expected demand as Boulder's population grew, allowing the State to repay its construction bonds in 1967 (13 years sooner than expected) and remove the tolls a year later. Over time, the Turnpike was integrated into the longer U.S. Route 36 crossing Colorado East to West.
As the local population continued to grow over the following decades, the Colorado Department of Transportation (CDOT) increased the number of interchanges from 1 to 10, roadway demand increased, and congestion worsened. Despite showing one of the highest transit ridership rates in the Denver-Boulder Regional Transportation District (RTD), the corridor regularly faced 3-to-4-hour daily congestion delays over the last decade, carrying 80,000 to 100,000 daily vehicle trips and operating at nearly 90 percent of its capacity. Projections estimated that daily vehicle trips would grow to 165,000 by 2035, pushing the corridor past 100 percent of its operational capacity. New facilities, by contrast, are typically designed to accommodate 85 percent of their total projected demand.
Because regional population projections predicted increased travel demand, public agencies began studying infrastructure solutions as far back as the 1960s. A 1983 study, for example, evaluated rapid transit feasibility along the U.S. 36 corridor. Similarly, the RTD's 2003 U.S. 36 Major Investment Study evaluated Bus Rapid Transit and HOV lane plans. Such plans aimed to improve mobility along the U.S. 36 corridor by increasing road capacity and expanding travel alternatives. Ultimately, five improvements were deemed necessary to meet corridor capacity, congestion management, and safety requirements: 1) increased trip capacity accommodating 12,200 projected person-trips per day by 2035; 2) expanded interchange capacity; 3) congestion reduction; 4) multi-modal transit and bikeway developments; and 5) highway facility updates. Following a comment period, CDOT organized a Preferred Alternative Committee (PAC), composed of agency representatives, elected officials, and technical staff from local jurisdictions, to review project alternatives for the corridor. After seven months, the PAC recommended a Combined Alternative Package in July 2008 including the following:
The project advanced into the final environmental review stage and gained approval from FHWA and FTA in December 2009.
CDOT continues to face severe funding constraints when it comes to maintaining and expanding Colorado's transportation system. First, fuel tax revenues had stagnated. Second, strong public opposition hampered lawmakers' ability to raise any taxes, reinforced by the 1992 Taxpayer Bill of Rights (TABOR) amendment to Colorado's constitution, limiting State and local revenue and expenditure growth. As a result, CDOT estimates that transportation expansion and maintenance costs would exceed its roughly $1 billion budget by $600 million annually.
Given these funding constraints, CDOT could not procure its U.S. 36 improvement project using a DBB or DB contract. Even when CDOT and the Denver RTD pooled their resources to support a multimodal approach, they lacked sufficient resources to proceed.
Phase I involved a DB contract covering a 10-mile stretch running from Pecos Street in Denver to 88th Street in Louisville, Colorado. This phase included: 1) five bridge replacements, 2) a bikeway, 3) Bus Rapid Transit (BRT) improvements, 4) general-purpose lane reconstruction and pavement replacement, and 5) the construction of one HOT lane in each direction. Multiple government agencies provided public funding for the project, including CDOT, RTD, the Denver Regional Council of Governments (DRCOG), the city and county of Broomfield, and the city of Westminster. The project also accessed a Transportation Investment Generating Economic Recovery (TIGER) grant from the U.S. Department of Transportation to complete studies and cover costs associated with obtaining a TIFIA loan backed by the HOT lanes' toll revenues. The TIFIA process also raised the possibility for Phase II financing using a P3 structure with a private borrower. Phase I construction began in July 2012, and the facilities opened in June 2015.
For Phase II, CDOT employed VfM analyses to evaluate procurement options, namely design-build, design-build-finance-operate-maintain with availability payments, and DBFOM with revenue risk. The projected delivery schedule using a traditional procurement approach was twenty years. This was too long a time period to be an attractive option for CDOT. Similarly, CDOT rejected the availability payment model since it implied debt increases, a substantial hurdle under TABOR restrictions. This left the revenue risk DBFOM approach as the most practical option.
Fortunately, the Colorado Senate had considered alternative infrastructure financing and delivery methods, approving the Funding Advancements for Surface Transportation and Economic Recovery Act (FASTER) in March 2009. This legislation increased dedicated government revenues for transportation infrastructure and launched the High-Performance Transportation Enterprise (HPTE). This State-owned enterprise, possessed authority to engage in public-private partnerships and other alternative delivery methods. Most importantly, unlike CDOT, it was exempt from TABOR's debt financing restrictions. As part of its initial planning efforts, HPTE reviewed P3 programs in other States and assembled a list of strategic projects in Colorado that could benefit from innovative financing and procurement strategies. Phase 2 of the U.S. 36 Express Lanes was one of the projects that stood out on that list.
CDOT/HPTE began the Phase 2 procurement process in February 2012, issuing a request for qualifications (RFQ) for a DBFOM concession, to which four teams responded. Phase 2 included the design, construction and financing of the remaining five miles of U.S. 36 to Boulder, as well as the operation and maintenance of the of the managed lanes in both Phase 1 and 2, and the existing managed lanes on I-25 connecting to downtown Denver. Three P3 teams were short-listed to receive the eventual request for proposals (RFP).
CDOT issued an RFP in October 2012. The selection process weighed financial aspects heavily (65 percent), considering subsidy requirements especially. The remaining selection criteria evaluated the proposals' technical aspects (35 percent). Based on this process, HPTE selected Plenary Roads Denver as the "best value" preferred bidder in April 2013. This Special Purpose Entity (SPE) was a company created to isolate the P3 project and its parent companies from one another's risks - included The Plenary Group, Ames Construction, Inc. , Granite Construction, HDR, Transfield Services, and Goldman Sachs. The project's VfM analysis favored its selection based on the following criteria:
Plenary Roads Denver and the public partners signed the final Phase II DBFOM agreement in June 2013, giving the private partner responsibility for project design, construction, financing, operation, and maintenance over 50 years. For a 5.1-mile segment of the corridor, the private partners would expand the highway from 4 to 6 lanes by adding one high-occupancy toll (HOT) lane in each direction, improve Bus Rapid Transit (BRT), and add a bikeway. In addition, the private partner would take over operation and maintenance, including snow and ice removal, across the two HOT lanes and the four general-purpose lanes and take responsibility for Phase I debt. In the process, the P3 agreement transferred several project risks to the private concessionaire, including:
Phase II construction began in the fall of 2014, with the facility opening in March 2016.
Phase II funding totaled $258.6 million, including 8.0 percent private equity, 8.0 percent Private Activity Bonds (tax-exempt bonds issued by the private concessionaire), 23.2 percent TIFIA loans, 19.2 percent HPTE funds, 11.8 percent RTD sales tax revenue, 5.8 percent Federal funds, 7.3 percent State funds, 4.2 percent local funds. , and 12.6 percent other financing. Managed lane tolls from Phase I, Phase II, and a segment of I-25 provide revenue for debt service. Toll rates vary by time of day based on a pre-set schedule. The toll rates remain subject to the HPTE Board approval, and the private concessionaire shares revenues with HPTE when its return on investment exceeds 13.68 percent.
The Purple Line in Maryland is a new light rail transit system that will run 16.2 miles between Bethesda in Montgomery County and New Carrollton in Prince George's County. It will connect major activity centers located inside the heavily congested Capital Beltway, and provide direct connections to four branches of the Washington Metropolitan Area Transit Authority (WMATA) rail system (Metrorail), all three MARC commuter rail lines (linking Washington, Baltimore, and Frederick, Maryland), Amtrak's Northeast Corridor, and many local bus services. The five major activity centers in the Purple Line corridor are Bethesda, Silver Spring, Takoma/Langley Park, College Park, and New Carrollton. Each of these centers has a substantial employment base and surrounding residential communities, and all have an existing Metrorail station except Takoma/Langley Park.
The Purple Line will operate in an exclusive or dedicated right-of-way for 14 miles of its 16.2-mile length. Light rail vehicles (LRVs) will be given signal priority or pre-emption at most traffic intersections, and the vehicles will be electrically powered through the use of overhead catenary lines. The initial headway is 7.5 minutes during peak periods and 10 to 15 minutes during early and late periods of operation.
Institutional development in the Purple Line corridor includes the University of Maryland at College Park, which is a large employer in Prince George's County. Several Federal agencies are located in the corridor, including medical and research facilities such as the Forest Glen Annex of Fort Detrick (formerly the Walter Reed Medical Center Annex), the National Oceanic and Atmospheric Administration, the U.S. Department of Agriculture, the Internal Revenue Service, and the Food and Drug Administration.
The Purple Line Project (the "Project") also includes certain improvements that are not part of the Purple Line light rail system, including:
Since 1992, public agencies in Maryland have been studying methods for improving transportation within Montgomery and Prince George's Counties. Planning and consideration for a transit facility along the Georgetown Branch right-of-way in Bethesda and Chevy Chase (formerly a B&O Railroad freight line and currently a pedestrian trail) date back to the early 1970s and an east-west transportation link has been on the Montgomery County Master Plans for more than 20 years. The transitway along the Georgetown Branch and a line between Silver Spring and New Carrollton were combined as the Bi-County Transitway in 2003, which, with further changes and additions, became the Purple Line.
In October 2008, the Maryland Transit Administration, a modal unit of the Maryland Department of Transportation (MDOT), in coordination with the Federal Transit Administration (FTA), issued an Alternatives Analysis/Draft Environmental Impact Statement for public comment, and the Governor selected the preferred alignment in August 2009. FTA approved the Final Environmental Impact Statement in August 2013. A Record of Decision and Final Section 4(f) Evaluation were completed in March 2014.
Statutory authorization for MDOT to use public-private partnerships (P3) for development and operation of certain projects was provided by the 2013 Transportation Infrastructure Investment Act, enacted in April 2013 by the Maryland General Assembly.
MDOT/MTA chose to pursue P3 delivery for the Project through a performance-based design-build-finance-operate maintain (DBFOM) agreement after careful consideration and extensive analysis. MDOT/MTA's due diligence effort considered a wide range of policy, operational, and financial factors in assessing whether to use a P3 delivery method for the Purple Line instead of a traditional project delivery method. MDOT/MTA's analyses identified the following factors supporting use of a P3 delivery method for the Purple Line:
MDOT/MTA issued a Request for Information (RFI) in April 2013, seeking private sector input on best practices and innovative approaches to delivering and financing the Purple Line and a separate light rail project called the Red Line. The RFI asked for information regarding both traditional project delivery methods and alternative methods that could result in savings of time and money and ensure high-quality service into the future.
MDOT/MTA received 44 responses to the RFI. It held an industry forum on the Purple Line on May 15, 2013, including presentations by MTA and MDOT, followed by one-on-one meetings requested by the private sector, from May 15-18, 2013.
In November 2013, MDOT/MTA formally began the Purple Line procurement process by issuing a Request for Qualifications ("RFQ"). After evaluating the Statements of Qualification submitted in response to the RFQ, MDOT/MTA short-listed four consortia. They were:
MDOT/MTA proceeded with an industry review process with the four short-listed entities, involving issuance of three sets of draft documents, requests for written comments, and one-on-one meetings to discuss the Project and industry comments. The purpose of this process was to receive feedback from the shortlisted proposers, improve the quality of the Request for Proposals (RFP) documents, and maintain competitive tension for the solicitation.
On July 28, 2014, MDOT/MTA released the final RFP for the Project, adopting a DBFOM P3 structure. The as-issued RFP contemplated a proposal due date early in 2015. After the gubernatorial election in November 2014, the new governor asked MDOT/MTA to assess potential measures to reduce Project costs, resulting in various modifications to the RFP, additional one-on-one meetings with proposers, and extension of the proposal due date to late 2015. MDOT/MTA received technical proposals from all four short-listed entities in November 2015, with financial proposals delivered in December 2015.
Following a best value "trade-off" evaluation of technical and financial proposals, the Maryland Secretary of Transportation authorized MDOT/MTA to proceed with negotiations with PLTP. In addition to PLTP's equity partners (Meridiam Infrastructure Purple Line (70 percent), Fluor Enterprises, Inc. (15 percent), and Star America Fund GP LLC (15 percent), the PLTP team includes Atkins North America, Inc. (Lead Design), Purple Line Transit Constructors (Lead Construction) comprised of Fluor Enterprises, Inc. , the Lane Construction Corporation, and Traylor Bros. , Inc. , and Purple Line Transit Operators (Operations and Maintenance) comprised of Fluor Enterprises, Inc. , Alternate Concepts, Inc. , and CAF USA.
As required by the Maryland P3 law, on March 4, 2016, MDOT/MTA delivered a report to the Maryland General Assembly regarding the proposed transaction. After the 30-day waiting period required by law, MDOT/MTA sought approval from the Maryland Board of Public Works ("BPW"). On April 6, 2016, the BPW unanimously approved award of the contract. Financial close was achieved in June 2016, as noted below.
During the design-build phase, when and to the extent PLTP demonstrates that it has made adequate progress, the P3 agreement for the Project provides for payments to PLTP as follows:
Progress payments are made in an amount no more than 85 percent of the earned value of the design and construction work at any point in time, with PLTP financing the remainder of its costs.
Funding for the payments owing by MDOT/MTA under the contract (as well as costs outside the P3 agreement) includes local, State and Federal funds. Local funds include commitments from Prince George's County of $120 million cash, and commitments from Montgomery County of $40 million cash and nearly $170 million in-kind contributions toward the construction program. The in-kind contributions include payments for certain elements of the Project, such as the Bethesda Metro Red Line Station South Entrance, the Capital Crescent Trail, and the Silver Spring Green Trail. The University of Maryland is also providing approximately $0.5 million for the cost of a new bike path adjacent to the Purple Line that PLTP will construct.
As of March 2014, in addition to funds already spent, it was estimated that approximately $160 million of Maryland State funds would be used to support construction efforts. Federal funding includes $36 million in FTA formula funds and $900 million in FTA New Starts funds.
PLTP is financing the cost of the design-build work through private equity commitments and debt, including tax-exempt PABs, which are non-recourse to the State of Maryland, and a TIFIA loan. While TIFIA had previous experience with a transit P3 when it provided a loan to Denver RTD on the Denver Eagle P3 project, the Purple Line was TIFIA's first loan to a transit P3 concessionaire.
A portion of the PABs and the overall debt will be used to help finance some early operations and maintenance and lifecycle startup costs as well as other miscellaneous costs. While MDOT/MTA will not pay for these financing costs as they are incurred, these costs are ultimately reflected in the RSA payment paid at the end of construction and the availability payments that will be paid during the 30-year operating period.
PLTP's financing plan included:
Due to litigation challenging the environmental review for the Project filed during the solicitation process for the P3 agreement, the P3 agreement provided for the possibility that the Full Funding Grant Agreement (FFGA) for the Project might be delayed, granting PLTP the right to terminate the concession if the FFGA was not executed on or before May 17, 2018. FTA signed the FFGA in August 2017, and the litigation was finally resolved in December 2017.
During the operating period, if PLTP meets the performance requirements of the P3 agreement, it will earn monthly availability payments. MDOT/MTA can deduct up to 100% of the unadjusted operating, maintenance, capital (financing) repayment portions of the monthly availability payments for poor performance, with the exception of insurance and lifecycle payments, which are not subject to general performance deductions. The availability payments were a key part of the bid and are intended to cover repayment of PLTP's initial financing costs (including debt service and a return on its equity investment), its operating and maintenance costs, insurance, and lifecycle costs (e.g. , replacing track when it wears out or parts on the LRVs). If the Project opens early, then availability payments will commence at opening and continue for 30 years. If Project opening is delayed due to factors for which PLTP is responsible, availability payments will not start until the Project is opened, and will continue until 30 years after the contractual deadline for start of operations-resulting in a reduction in the total stream of availability payments received by PLTP.
The constituent parts of the availability payments during the operating period include a fixed price for the availability payments, paid monthly. The availability payments are subject to adjustment based on changes in federally-published inflation indices, changes in interest rates prior to financial close, impacts of "Relief Events" as defined in the P3 agreement, and deductions relating to failure to meet performance requirements. Payments for operations and maintenance, lifecycle, and insurance costs are pegged to a basket of inflation indices, while payments intended to cover other costs (e.g. , financing costs) are fixed on a nominal (year of expenditure) basis and are not linked to inflation indices. Regarding future inflation, the financial figures assumed (at the time of bid) that future inflation indices increase at 2.5% per year, meaning that the availability payments would be less (or more) than anticipated if actual inflation increases at other than 2.5% per year. Certain portions of the payment reflect "painshare/gainshare" commercial arrangements relating to power use and insurance price fluctuations.
The agreement includes provisions for early termination of the concession and calculation of amounts owing to the concessionaire upon termination. If MDOT/MTA terminates for default, under certain conditions it has the option to require a market resolicitation (where the successful new bidder determines the amount paid to PLTP's lenders and provides funding for termination payments) or to use a desktop method to determine the amount owing, with payment capped at no more than 80% of debt service.
No later than five calendar years before the end of the scheduled term of the P3 agreement or within a reasonable period before any early termination date, PLTP and MDOT/MTA will jointly identify the renewal work required for the Purple Line to meet all of the handback requirements and determine the schedule (and PLTP's estimated budget) for the performance, MDOT/MTA inspection, and PLTP completion of all such renewal work. Subject to the handback inspection provisions, PLTP must complete all renewal work on or before the end of the concession term. If PLTP is not on track for a successful handback, MDOT/MTA may begin withholding availability payments starting at five years prior to the end of the term. To further mitigate handback risk, MDOT/MTA may begin withholding a portion of the availability payments at twenty years prior to handback if MDOT/MTA's assessment concludes PLTP is not on track for a successful handback at the end of the term.
149 Available at: https://www.fhwa.dot.gov/ipd/pdfs/p3/p3-toolkit_report_on_highway_p3s_122916.pdf. [ Return to note 149. ]
