A proposed toll road that would run from north-east Illinois to Indiana is poised to be the most closely watched public-private partnership (PPP; P3) development in America in 2014.
But the rationale behind the bullishness on ‘Illiana’ has to be viewed within the context of the US Midwest and its budding profile as a hub for private investment in public infrastructure.
To start, Illiana is on course to do what the ‘Ohio River Bridges Project,’ itself a bi-state ‘mega-project’ involving transportation infrastructure in the region, failed to do.
The $2.6 billion Ohio River Bridges deal is the project most similar to Illiana. Jointly undertaken by US states Kentucky and Midwest neighbour Ohio, it reached financial close by the end of 2013.
Ohio River Bridges and Illiana in fact have a legislative connection: in 2010, Governor Mitch Daniels passed enabling legislation letting his home state Indiana toll each project.
Similarly, Illiana is being carried out by both Illinois and Indiana. Like Ohio River Bridges, each state is responsible for funding and procuring its respective half of the project.
That degree of cross-state cooperation is commendable. Building internal consensus within a single agency is hard enough. For that, the Kentucky Transportation Commission (KYTC) and Ohio Department of Transportation (ODOT) deserve credit for leading by example.
However, Illiana – on the strength of its project delivery – is a proposition materially different from Ohio River Bridges.
Unlike Kentucky and Ohio, the Illinois Department of Transportation (IDOT) and Indiana Department of Transportation (INDOT) are united on the sensitive issue of private capital: each state opted for a PPP in order to deliver its half of Illiana.
Contrast that with Ohio River Bridges, which in the end disappointed the P3 industry when Kentucky chose a design-build approach for its Louisville-based portion of the overpass.
‘Hoosier’ state Indiana, which in 2006 leased the Indiana East-West Toll Road for $3.8 billion, chose an ‘availability payment’ deal for the ‘East End Crossing,’ its portion of the bridge.
Kentucky, on the other hand, decided to fund its ‘Downtown Bridge’ with public money.
Echoing once more the Ohio River Bridges Project, Illiana has been subject to ‘political will’ in the Midwest.
But Illiana, in addition to the decision by both Illinois and Indiana to separately pursue alternative financing and procurement of the 47-mile ‘greenfield’ toll road, seems to have won over local officialdom.
In Illinois, where a 35-mile stretch of Illiana, beginning from Interstate 55 (I-55) would be located, the Chicago Metropolitan Agency for Planning (CMAP) put up the most opposition to the project.
But by October, CMAP had consented to Illiana. This local approval should ensure the federal government will give its blessing.
The use of private capital to undertake Illiana is winning over the conservative-leaning local government. Dan Coats, Republican Senator from Indiana, hailed the P3 for the 12-mile portion of Illiana in his state as a “creative solution”.
Indiana, as with the East End Crossing P3, will structure its Illiana contract using availability payments. Illinois is also set to enact availability payments. Private sector appetite for Illiana as a ‘revenue risk’ or ‘traffic risk’ toll road project was nil.
Both IDOT and INDOT released their Requests for Qualifications (RFQs) for Illiana in November.
For Illinois, the response was positive. Bidding consortia included SNC-Lavalin Group, Cintra, ACS Infrastructure Development, Plenary Group, Meridiam Infrastructure and Walsh Construction.
At press-time, INDOT was awaiting the result of its RFQ. Interestingly, both Illinois and Indiana chose to proceed with procurement prior to receiving federal approval.
Given the robust private sector interest, Illiana should continue to provide optimism for US P3s in the New Year.