On Oct. 23, the Louisiana Legislature’s Joint Transportation Committee voted against a proposal to procure the Interstate 10 Calcasieu River Bridge replacement via a public-private partnership (P3). This vote leaves the Department of Transportation and Development (DOTD) with fewer options for replacing the obsolete bridge, none as desirable as the public-private partnership proposal. Still, it is worth exploring the next alternatives for the Calcasieu River Bridge.
The two most likely alternative delivery methods were each detailed during the DOTD hearing:
- A more traditional design-bid-build pay-as-you-go approach to long-term rehabilitation of the existing bridge, leveraging the vehicle sales tax in Louisiana (and federal grants where applicable) to fund the new bridge (and rehabilitations to the existing one) or
- The creation of a public tolling authority, much like the one created in Alabama following a similar P3 rejection, to provide funding for a new bridge.
Both options require the DOTD to part with two separate funding outlays. First, a $2.75 million cancellation stipend must be paid to Calcasieu Bridge Partners in December. Stipends are often paid as part of P3s to teams that submit losing bids and, in cases like these, to the winner because the procurement was canceled. It’s a means of reducing the risk taken on by the private partner because these bid proposals can often cost tens of millions of dollars. Second, the existing I-10 Calcasieu Bridge will be rehabilitated, and interim repair work will be done. This interim repair was also included in the P3 to keep the bridge open to traffic during the construction of the replacement bridge.
The design-bid-build approach involves a prolonged construction period for rehabilitation, which, as outlined by the DOTD’s presentation, has an unknown delivery date. Why?
The cost of the bridge components is expected to grow faster than the revenue generated by the state’s vehicle sales tax. The revenue stream of $40 million a year from the vehicle sales tax will not increase year-over-year (though the Secretary of the Treasury can invest the funds), but inflation likely will. The DOTD’s proposal estimates a yearly inflation rate in the construction sector of 4%. This may have been a reasonable assumption several years ago when inflation was persistently low, but times have changed. Inflation measured by the Federal Highway Administration’s National Highway Construction Cost Index has risen by 50% in the past two years.
Rapidly increasing costs and a stagnant revenue stream have made it difficult to provide a concrete delivery date with a high degree of confidence, as shown in Figure 1.
Figure 1: Design-Bid-Build Pay-As-You-Go Project Timeline
Source: Dr. Eric Kalivoda. “I-10 Calcasieu River Bridge.” Presentation at the Louisiana Joint Transportation, Highways, and Public Works Committee, Baton Rouge, Louisiana, Oct. 23, 2023.
Under this proposal, the state and DOTD would have to contract out each component of the bridge piecemeal. They could not combine project steps as they would in a P3 or design-build procurement. Construction would start with the first package between 2031 and 2033 using $410 million in vehicle sales tax revenue. This would be followed by a pause until 2037. Louisiana would allow vehicle sales tax revenue to accumulate before proceeding to the second package of improvements. Then, the process would repeat, with a third package of improvements beginning in 2051.
Effectively, this proposal rehabilitates and replaces components of the existing bridge at a still-unknown date far exceeding the seven-year delivery date from Calcasieu Bridge Partner’s P3 proposal and at a higher cost to taxpayers.
The project’s funding would be supplemented by $950 million from a few sources, notably the state Transportation Trust Fund and a mix of federal grants and American Rescue Plan money (some of which was earmarked for the rehabilitation of the existing bridge).
The second option the DOTD provided was creating a public toll authority to fund the project. This proposal’s timeline is shown in Figure 2.
Figure 2: Public Toll Option Timeline
Source: Dr. Eric Kalivoda. “I-10 Calcasieu River Bridge.” Presentation at the Louisiana Joint Transportation, Highways, and Public Works Committee, Baton Rouge, Louisiana, Oct. 23, 2023.
This option has a delivery date (which is already an improvement over the design-bid-build option) but comes with a price tag of $2.4 billion and would require toll revenue to pay back bond buyers. Toll revenue would be supplemented by the vehicle sales tax, as outlined in the timeline, though that fixed revenue stream would have to accumulate for some time before it could cover any substantial amount of the costs. Despite this proposal’s advantages over the design-bid-build option, it still has a later delivery date and higher price than the scuttled Calcasieu Bridge Partners’ public-private partnership proposal.
It is unclear whether the proposals will widen the Interstate highway to accommodate growing traffic volumes. Calcasieu Bridge Partners’ P3 proposal planned to expand the bridge to six lanes, matching the I-10 widening and helping alleviate the natural bottleneck that would occur when three lanes of traffic are forced into two.
Louisiana has found itself in an unenviable situation. Two proposals, both worse than the public-private partnership that the Joint Transportation Committee rejected, remain. One of the key advantages offered by a P3 like the Calcasieu Bridge Partners’ proposal was the transfer of financial risks away from taxpayers. With either of the current options, if the project experiences cost overruns or delays, Louisiana’s taxpayers are on the financial hook instead of Calcasieu Bridge Partners.
With an unclear path forward, establishing a public tolling authority appears to be the better of the two options. Yet the public toll agency will run into the same political problem that the public-private partnership proposal did, which is opposition to tolling in general, as reflected in the testimony against the P3 proposal.
Whichever path Louisiana takes, unfortunately, the state’s policymakers have chosen to reject the most affordable and time-efficient option.