New dawn in Arizona

There isn’t a single toll road in Arizona. But with the state in dire need of roadwork, that statement seems certain to become a thing of the past.

Bolstered as of April by a law created to better accommodate tolling, and faced with the unshakeable realisation that, as Gail Lewis puts it, “we don’t have money” to fix and upgrade its vast highway system, the Arizona Department of Transportation (ADOT) is for the first time pursuing tolling in earnest.

ADOT is developing a nascent deal pipeline, including a potential lease of State Road 189 (SR 189) and a “greenfield” interstate connecting Phoenix and Las Vegas, while seeking to fulfill the early promise offered by three-year-old legislation enabling public-private partnerships (PPPs) in the Canyon State.

That legislation, House Bill 2396 (HB 2396), went into effect in July 2009 and, despite a growing clamour to privatise some surface transportation in Arizona, has sat unused—until now.

“Tolling is being considered for every project we have in our pipeline,” confirms Lewis, a tested Arizona public servant and P3 director for the department.

And, unlike in 2009 when it signed HB 2396 into law, Arizona is keen to incentivise the private sector.

FREE REIGN

By the early-mid 2000s, similarly highway-dependent California and Texas had embraced PPPs to modernise surface transportation. Arizona, meanwhile, remained a laggard. Then in 2009, Governor Jan Brewer approved HB 2396—giving the Southwestern US state free reign to use PPPs.

However, the scope and flexibility for which HB 2396 was applauded proved detrimental: the law was not considered tolling friendly, and private capital remained unimpressed. That would remain the case until February, when House Bill 2358 (HB 2358) arrived.

HB 2358, put forward by Representative Karen Fann, was specific to tolling, especially amenable for electronic tolling, and took penalisation into account. In April, Brewer signed HB 2358 into law. HB 2396 will buttress the new edict, and for ADOT, the timing couldn’t be better.

A month later, Arizona received a $21.6 million grant from the US Department of Transportation (US DOT) TIGER (Transportation Investment Generating Economic Recovery) programme for its Interstate 15 (I-15) project. But it was a second federally funded project that made consideration of tolling imperative.

Washington is funding a plan to enlarge and modernise the Mariposa Land Port of Entry in Nogales, Arizona. The port is a crucial trade route, bringing winter produce into the US from Mexico, but Lewis says adjacent SR 189 is inadequate to accommodate increased volume from south of the border.

“We’re going to have a big, nice, new port and just a little, sad road,” thus defeating the purpose of improving Mariposa Port, Lewis notes.

As a result, ADOT has embarked on a plan to examine tolling SR 189, Lewis says. In addition, the department is also exploring leasing a 45-mile north-south corridor from Phoenix to Tucson, as well as constructing a brand new interstate from Phoenix to Vegas.

“They are the two biggest cities to not be connected by an interstate in America,” Lewis points out.

For now, the department is moving ahead with its first-ever PPP, nominally a road transportation project. ADOT is determining a private partner to build centralised traffic management in Flagstaff.

In Lewis, ADOT has a well travelled government worker whose interest in project finance earned her the role of P3 director. A Columbia University graduate, Lewis spent time in academia, working for Arizona State University from 1990 to 2012, before going to work for former Governor Janet Napolitano.

For Napolitano (now US Secretary of Homeland Security), Lewis served as policy adviser for economic development and transportation until 2007, when she leveraged her transportation background to get posted with ADOT.

Although ADOT is in the early stage of its incipient PPP program, the department has made securing alternative project financing a strategic goal through 2017, and Lewis is hopeful PPPs can help Arizona maintain its crucial highway network. As she’s the first to admit, the state has little other recourse.