NY-NJ Port Authority seeks investors for $1bn bridge

With its financing capacity stretched to its limits, the oldest public authority in New York state is gauging investor interest in financing the replacement for the Goethals Bridge linking New Jersey and Staten Island. If the PPP is successful, the Authority may consider a similar deal for New York’s LaGuardia Airport.

Faced with a long list of projects and a diminished capacity to finance them, the Port Authority of New York and New Jersey, the oldest public authority in New York State, is undertaking its first public-private partnership for a bridge project in its 89-year history.

The Authority issued today a request for information to gauge private investor interest in financing a replacement for the 82-year-old Goethals Bridge, which connects New Jersey with New York City’s Staten Island.

Goethals Bridge: getting

“Clearly, if the Port Authority had the financial capacity to do this project, we would be doing it,” Port Authority Executive Director Chris Ward said during a conference call with reporters today. “But with the prioritisation of major, major projects against the [authority’s financing] capacity of $25 billion, we have reached our maximum ability to do all of those projects.”

“And it’s for that reason that we’re going out to this creative mechanism,” Ward added.

The Authority is proposing a financing mechanism akin to availability payments, where a contractor finances the design and construction of an infrastructure project and then receives ongoing payments for its maintenance over a set period. In this case, the Port Authority would select a private group to design and build the bridge and then give that group a series of payments for maintaining the bridge over a period of 30 to 40 years, according to the request for information.

It’s really a developer coming in to build it and bring with him the financing to do the job,” Port Authority chief financial officer Paul Blanco said during the call.

New York & New Jersey Port Authority bridges and tunnels: need to prioritise.
Source: The Port Authority of New York & New Jersey

The financing for the job could be steep, as the Port Authority has previously placed the construction of the bridge at about $1 billion in its 10-year capital budget. But Ward and Blanco said they hope that, with proper incentives, the private sector could deliver the bridge for less than that amount.

Additionally, the Port Authority has applied for Federal sources of financing, including the government’s infrastructure lending programme known as TIFIA and private activity bonds, or municipal bonds used to finance privately-backed project.

“As of right now we would expect that approximately $500 million dollars would be financed in that way,” Blanco said.

Clearly, if the Port Authority had the financial capacity to do this project, we would be doing it

Chris Ward

Ward added that, based on preliminary discussion he’s had with potential bidders, there is “keen” interest for private equity funds and developers to come in and finance the project.

“We think we are going to be hitting a very strong and robust market,” he said.

Potential bidders will have until 2pm on 11 June to answer to the Port Authority’s request for qualifications. A request for qualifications is expected to be issued in August 2010 and a request for proposals in early 2011. A winning proposal is expected to be selected in late 2011.

Ward also indicated that, if the Goethals public-private partnership is successful, the Port Authority would be “willing to explore what might be done later” to modernise New York City’s LaGuardia Airport. The airport, also under the Port Authority’s management, is in such a state of disrepair that Ward said at a recent media breakfast that “it should fundamentally be torn down and rebuilt”.

“What I meant by that was that if you interviewed a thousand passengers who went through LaGuardia today, 999 of them would say ‘that’s not the first-class airport for domestic travel that New York City deserves,’” Ward said.

He added that the Port Authority does not have the financial capacity to completely modernize the airport. As with Goethals, though, the Port Authority will look to find another way to make the modernization a reality.

“We would be open at looking for other models for developing LaGuardia,” he said.