Louisiana considers PPP for $5.2bn road

The state’s treasurer is proposing the use of private capital to finance the development of Interstate 49 South, a road expansion project. Treasurer John Kennedy suggests remunerating investors via tolls on the new stretch.

Louisiana State Treasurer John Kennedy is proposing the use of a public-private partnership (PPP) to fund a $5.2 billion upgrade of the south section of Interstate 49 (I-49), a project Kennedy suggests Louisiana cannot afford to ignore, but also cannot afford to finance. 

“So where do we get the money to finish I-49 South? The state does not have it; nor could we borrow it, even if we wanted to, under our constitutional debt limit. The feds [federal government] have their own budget problems, starting with $14 trillion of sovereign debt. That leaves one possibility: someone else,” Kennedy said in a statement.

Enter PPPs. Kennedy points to the composition of an Infrastructure Investment Fund (IIF), which he describes as a vehicle to raise capital from private investors for the financing, construction, operation and maintenance of a public project, to compensate for the state’s lack of funding. He added that the 30 largest IIFs have raised more than $140 billion to invest in infrastructure, with pension funds contributing a significant portion of that amount.

Noting that “there is, of course, no free lunch” and that investors will expect a return of “usually 5 percent to 7 percent per year”, Kennedy suggests a potential I-49 South PPP could be funded via tolls, although he admits that “support for tolls or a PPP for I-49 South could be mixed, as some will see tolls as a tax increase and others will worry about allowing a private entity to manage a government asset”.

At its core, the South I-49 project is an extension, to be built as an elevated six-lane freeway from the Louisiana cities of Lafayette to New Orleans, that will “basically upgrade US Highway 90 to interstate standards,” Kennedy said. He added that about 80 percent of US offshore oil and gas supply passes through Louisiana via US Highway 90.

There is currently an I-49 North expansion that is in its final stages.