The Texas Department of Transportation (TxDOT) and Blueridge Transportation Group have reached financial close on State Highway 288 (SH 288), a 10.5-mile toll lane project in Houston budgeted at $815 million.
Financial close comes a little over a year since BTG was named preferred bidder. Commercial close was achieved in early March.
When TxDOT announced the preferred bidder in March 2015, design and construction were slated for the fall of that year. Asked about this delay, TxDOT spokesperson Danny Perez told Infrastructure Investor that steps such as obtaining Legislative Budget Board approval and Office of Attorney General approval, as well as BTG securing a TIFIA (Transportation Infrastructure Finance and Innovation Act) loan were required before commercial close could be achieved.
“A privately financed project of this size can take a while to get through these processes,” Perez said.
Despite the later than expected start, TxDOT still expects the project to be completed by the second quarter of 2019.
Joe Seliga, a partner at Mayer Brown who advised TxDOT on the deal, also spoke about the unique challenges and the complexity of the project.
“The size of this project may not be at the same level of other P3s, but there was a greater level of complexity than many other P3 arrangements,” Seliga said in a phone interview on Wednesday, noting the traffic risk inherent in greenfield toll road projects.
“There was a significant amount of market interest and ultimately it led to a very positive result in terms of TxDOT being able to bring this project to fruition and to do it without a public subsidy,” Seliga added.
Some of the unique aspects of the SH 288 project are that it is a toll lane project that uses time-of-day pricing, as opposed to dynamic tolling, and that TxDOT received an upfront payment for the concession of $26 million.
Another aspect that sets the project apart is that six equity members comprise the consortium. They include InfraRed Capital, ACS Infrastructure and Shikun & Binui Concessions, each owning 21.6 percent of the consortium, followed by Northleaf with 18.0 percent, Clal with 12.1 percent and Star America owning 5.0 percent.
The project includes the construction of four tolled lanes, two in each direction within the existing SH 288 median, from US 59 to the Harris/Brazoria county line. It also includes the construction of a new Beltway 8 interchange, including construction of all eight direct ramps; reconstruction of all eight direct ramps at Interstate 610 with added access to toll lanes; and two new tolled direct ramps to the Texas Medical Center.
The upgrades to the I-610 ramps was one of the things that set BTG apart from its competitors.
TxDOT’s original plan was for the project to include the toll lanes and the interchange upgrades, but a scaled-down version was tendered that did not include the I-610 portion.
“However, BTG had included a substantial portion of the 610 interchange as an alternative technical concept (ATC) and that’s because they saw value in that additional work and the potential additional revenue that it would bring to the project,” Seliga said.
BTG has received a $357 million TIFIA loan and has issued private activity bonds worth $298.6 million. Toll revenue will be used to repay the TIFIA loan. The project will cost Texas only $17 million.
Asked whether the 52-year concession granted BTG goes into effect upon completion of the project, Seliga said: “It’s 52 years from the effective date. This means there’s an incentive really on both sides, because if you complete construction it’s better for the traveling public, it’s better for the developer but it’s also better for TxDOT since the state agency benefits from a general revenue share during the term of the concession agreement.”
While electronic tolling will initially be the only option, provisions have been included in the agreement allowing for possible future implementation of dynamic pricing or ‘pay by mail’, which allows drivers to pay after using the road instead of having a transponder. For the time being, anyone travelling without a transponder will be considered a traffic violator.
TxDOT will receive the bulk of the revenue resulting from these changes, if and when they are implemented.
“This was a unique aspect of the risk-sharing approach that we needed to address in the project,” Seliga said.