Nevada picks bonds over P3 for Project Neon

The Nevada Department of Transportation has chosen bonding to finance Project Neon in Las Vegas, abandoning the P3 procurement process it had launched in July 2013.

The Nevada Department of Transportation (NDOT) has decided to go ahead with the traditional way of funding for the expansion of an interstate highway in Las Vegas, ditching its initial plan to procure the project as a public-private partnership (PPP; P3), according to the minutes from a recent NDOT board meeting.

NDOT reviewed the delivery method of Project Neon, a capital improvements project along Interstate 15 (I-15) from the Sahara Avenue Interchange to the US 95/I-515 Interchange in Las Vegas, “due to federal funding uncertainty caused by [the] federal highway bill debate.”

Based on the new analysis, the transportation board concluded that the high demand for bonds means a low interest rate for the state, bonds provide the greatest amount of flexibility against unknown outcomes, as well as the fact that bonding payments are eligible for up to 95 percent federal reimbursement compared to 64.9 percent for a P3. 

The board voted to move forward with a design-build model, a method with which NDOT said it had good experience.

Sale of the bonds will be conducted by Public Financial Management, which provided independent third party analysis of future bond sales.

NDOT had started the procurement process for Project Neon when it issued a Request for Qualifications (RFQ) in July 2013 and subsequently announced three shortlisted teams. These were: Kiewit Meridiam Neon Partners; Las Vegas Neon Ventures, teaming Macquarie with Las Vegas Paving; and Neon Mobility Group comprising ACS Infrastructure, Fengate Capital Management and Star America Fund.

Another reason NDOT scrapped P3 as a delivery method was that “P3 teams [were] concerned about appropriation risk and are now requesting progress payment(s).”

The project is estimated to cost between $1.2 billion and $1.5 billion according to local media reports. According to NDOT, Project Neon can be completed by 2020 through multiple phases, around the same time it would take to complete the project using the P3 method.

Under the new plan, NDOT will maintain control of future operations and management as well as funding.