Despite Recession, Texas Continues Infrastructure Investment Through PPPs

Privately financed toll roads have certainly been a controversial issue in Texas (see here, here, here and here.) However in spite of the controversy, officials have been able to apply innovative public-private partnerships (PPPs) to improve the state’s infrastructure during the recent economic downturn.

For example, the Texas Department of Transportation (TxDOT) finalized PPPs in 2010 for two express toll lane megaprojects in the Metroplex area. The I-635 managed lanes project is a blockbuster, $4 billion, 52-year concession project that will deliver a technically complex mix of new untolled lanes and managed express toll lanes to a 13-mile stretch of the I-635 corridor in Dallas County. Construction is expected to begin by mid-2011 and open to traffic in late 2016. Motorists will have a choice of either using the managed toll lanes or remaining on the improved and rebuilt free main lanes. The new LBJ highway will feature 8 rebuilt free main lanes, additional shoulders on the outside of the main lanes, continuous frontage roads (two or three lanes wide), and 6 barrier-separated managed toll lanes located between or below all frontage roads. The state is contributing $445 million in public funds, while the concessionaire will bring the remainder of the financing to the table. The project reached commercial close in 2009 and financial close in 2010. Interestingly, the Dallas Police & Fire Pension System is on the investor team, making them the first public pension fund to be direct equity investors in toll road projects in the U.S.

The second North Texas express toll lane PPP concession, the North Tarrant Express, is a $2 billion, 52-year concession project to deliver a combination of dynamically priced managed lanes and untolled lanes on a 13 mile stretch of Northeast Loop Interstate 820 and State Highway 121/183 in Tarrant County. For a state investment of approximately $570 million, these improvements will provide $2 billion of needed infrastructure to the Fort Worth area, as well as operations and maintenance over the next 52 years, valued at $450 million. The project reached commercial close in 2009 and financial close in 2010. Like the I-635 managed lanes project, the Dallas Police & Fire Pension System is one of the direct equity investors.

TxDOT Executive Director Amadeo Saenz recently spoke with American Association of State Highway and Transportation Official’s Transportation TV. Saenz described these projects and others saying, “[PPPs] are allowing TxDOT to build several major projects that otherwise would not be built. By moving these projects forward, we can eliminate traffic congestion, give our citizens shorter commutes, and create jobs.”

Watch the full 2-minute interview below:

For more resources on PPPs in transportation, visit Reason Foundation’s transportation research archive.