It seemed as if House Bill 407 would lead to Kentucky joining the ranks of other states that have allowed private capital to fund transportation infrastructure by enacting enabling legislation for public-private partnerships (PPP; P3). The bill moved quickly and easily through the state’s two legislative chambers, with the House voting 82-7 and the Senate voting 27-9 in favour within two months of its introduction.
But when the bill arrived on Governor Steve Beshear’s desk for signing, he vetoed it.
“You read the Governor’s [veto] message and it couldn’t be stronger – he supports P3s, the legislation is pro-P3,” says John Schmidt, a partner in Mayer Brown’s infrastructure practice.
“To me, if there’s any news in Kentucky, it’s that a particular, almost inevitable political issue has, for the moment, hung up Kentucky moving forward with a piece of P3 legislation,” he continues.
In his message, Governor Beshear wrote: “I am vetoing this bill because it encumbers an otherwise well intentioned policy measure with unnecessary elements relating to a single, near term project, which should not be enshrined into permanent law.”
The near-term project is the Brent Spence Bridge, which opened in 1963 and connects Covington in northern Kentucky with Cincinnati, Ohio. The bridge was renovated in 1986, but widening it from two to four lanes meant eliminating emergency lanes.
The bridge not only carries traffic from Interstate 71 and Interstate 75, it is also one of the busiest truck routes in the US. The bridge was listed as ‘functionally obsolete’ by the National Bridge Inventory in 1998, due in large part to limited visibility and safety concerns, according to the Brent Spence Bridge Corridor website.
The Kentucky bill would prohibit the use of tolls to fund the construction of a replacement bridge, since it would be mostly people from Kentucky using the bridge to travel to Cincinnati, a large metropolitan city and Ohio’s third largest.
“If the bridge is serving primarily a population that wants to come from the Kentucky side over to Cincinnati then you could say ‘yes, it’s fair that they pay most of the price for it,’” Schmidt remarks. “On the other hand, it’s not surprising that from a Kentucky political standpoint that’s not a popular position,” he adds.
Figuring out a way to build bridges across state lines is not unique to Kentucky and Ohio. There are many examples of bi-state authorities that operate toll bridges, such as the Port Authority of New York and New Jersey which operates tolled crossings over and under the Hudson River; or the Delaware River Bridge Authority of Pennsylvania and New Jersey.
Kentucky is no stranger to bi-state projects. It is currently involved in the $2.6 billion Ohio River Bridges project, which will connect Louisville – Kentucky’s largest city – with Southern Indiana. Indiana is delivering its half of the project, East End Crossing, as a P3, while Kentucky has chosen traditional procurement for its half, the Downtown Crossing.
David Narefsky, also a partner in Mayer Brown’s infrastructure practice, points out that Kentucky didn’t take the same position on the Ohio River Bridges project where most of the traffic will flow from Indiana into Louisville.
“They are both toll bridges and the states are going to share the toll revenue basically, so you didn’t quite have the same situation about tolling,” he explains.
Aside from prohibiting the use of tolls on this particular bridge, the Kentucky bill also placed restrictions on any P3 projects involving Ohio. Those projects would have required additional legislative review.
While Kentucky will not be able to use P3s for transportation projects, at least for the time being, the door to partnering with the private sector is not closed. The state currently has procurement laws that allow it to procure P3s for social infrastructure and capital projects.
The Governor ‘s statement – “We will continue to welcome innovative ideas and proposals from the private sector to enhance and improve state assets and services,” – also seems to leave the door open to private sector engagement.