Why a toll ban may be costly

The US state of Kentucky shows how a single project has the potential to derail new P3 legislation that seemed inevitable.

It appeared fairly certain that House Bill 407 would lead to Kentucky joining the ranks of other states that use public-private partnerships (PPP; P3) to maintain and upgrade their transportation infrastructure. After all, the bill moved easily through the state’s two legislative chambers, within two months of its introduction.

But when the bill arrived on Governor Steve Beshear’s desk for signing, he slapped a veto on it.

“You read the Governor’s [veto] message and it couldn’t be stronger – he supports P3s, the legislation is pro-P3,” said John Schmidt, a partner in Mayer Brown’s infrastructure practice reacting to the development.

“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 continued.

In his message, Governor Beshear said he was vetoing the 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 Kentucky bill would prohibit the use of tolls to fund the construction of a replacement bridge, since mostly Kentucky residents would use the bridge to travel to Cincinnati, Ohio’s third-largest city.

“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 said. “On the other hand, it’s not surprising that from a Kentucky political standpoint that’s not a popular position.”

Crucially, the bill would also bind future projects involving Kentucky and Ohio to the same restrictions – not something that Governor Beshear appears willing to countenance.

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 currently involved in another bi-state project: 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 explained.

The two states worked it out by creating a joint authority. Bets are now being taken on whether the same kind of arrangement will ultimately be seen again in the latest case.