The American Road and Transportation Builders Association published a report based on Department of Transportation data in September estimating over one-third of all bridges in the US are in desperate need of repair, including 76,175 in need of complete replacement.
“The reality is we’re living off the infrastructure that our parents and grandparents, sometimes our great grandparents, paid for and built,” John Porcari, the managing director at Investcorp Corsair Infrastructure Partners, told Infrastructure Investor.
Before his role at Corsair, Porcari’s career included a decade as the Maryland Secretary of Transportation, service as deputy secretary and chief operating officer for the US Department of Transportation under the Obama administration and a year as the port & supply chain envoy for the White House during the height of the covid pandemic. He has seen PPPs from both the public and private side of the partnership, and he sees serious need for their use as bridges across the country age past their anticipated lifespan.
“We have a lot of catching up to do,” Pocari said. “We should use every available mechanism to deliver projects. And a public-private partnership is the right tool for a certain profile of projects.”
Limited federal funds
According to ARTBA’s math, the total cost of only the necessary repairs is $400 billion. The federal government has made some funds available for the mix of state and local governments and agencies responsible for many of these bridges.
There are federal funds earmarked for bridges, but they fall well short of the total calculated by ARTBA.
The Department of Transportation’s Bridge Investment Program is accepting applications for almost $15 billion in funds, targeted primarily at large bridges, to be distributed between 2023 and 2026. The Bipartisan Infrastructure Law also created the Bridge Formula Program, which seeks to provide nearly $28 billion over the same period. That’s tens of billions of dollars earmarked to do work with an estimated cost of $400 billion.
John Pickhaver, head of infrastructure and energy in the Americas for Macquarie Capital, largely agreed with Pocari. In his view, PPPs are likely to be vital tools for addressing the state of US infrastructure, but the need to co-ordinate with levels of government below the federal means local receptivity is key.
“There’s a large amount of capital available for these sorts of projects to bridge the gap where government balance sheets are constrained,” he said, noting that some of the many municipal and county level governments that own the bridges lack experience with PPPs, and “the private capital available for investment in infrastructure at the moment far outweighs the current opportunities to invest”.
Pickhaver added: “My observation is that governments that are familiar with public-private partnership models are getting more comfortable and creative in their use to get the best community outcomes.”
Large-scale problem, small-scale projects
Why does private investment in bridges lag behind other parts of US infrastructure, such as core utilities or digital infrastructure?
Part of the issue is that many US bridges taken as individual projects are too small to attract major investors. Porcari noted that many of the bridges in need of repair or replacement may represent projects of only a few million dollars, making it necessary to combine the replacement or repairs for a number of them into a single bundled contract to attract private investors.
Larger bridge projects also become more attractive for private investors when they’re bundled together, as the process enables economies of scale and more opportunity for an investor’s management expertise to shape the project and improve efficiency. When Pennsylvania wanted to replace nine “major bridges” across the state, it turned to the Macquarie Capital-led consortium to undertake the Pennsylvania Major Bridge P3 Project.
The bridges in the project are vital infrastructure carrying from 27,000 to more than 100,000 vehicle trips per day. The Pennsylvania Department of Transportation estimated a total cost of around $3 billion to repair just those bridges. A difficult sum since PennDOT noted when it began exploring a PPP that its “current highway and bridge budget for construction and maintenance is about $6.9 billion per year – less than half of the $15 billion needed to keep Pennsylvania’s highways and bridges in a state of good repair.”
Finding revenue
Another challenge is that revenue streams from bridges in the US are largely confined to availability payments. While there are certain advantages over concessions which make them attractive to investors and mollify objections to tolls, they can be challenging for local governments to fully understand and implement according to a 2018 research brief by the nonprofit In the Public Interest.
Despite the state’s desperate need to keep those bridges in good repair, the initial plan put forward by Bridging Pennsylvania Partners was not to be. A legal battle reduced the project from nine to six bridges, and completely changed the revenue structure. A financial close was eventually reached in December 2022, with Macquarie and consortium partner S&B USA Concessions contributing $202 million in equity and raising $1.8 billion in private activity bonds.
“The Pennsylvania Major Bridge P3 project was originally procured as a concession arrangement with tolling,” Pickhaver explained. “This approach resulted in some community unrest and a legal challenge after which PennDOT changed their approach to a pure availability P3 model.”
Pickhaver observed that there is often less public resistance to tolling on newly constructed bridges, but that there can be stiff resistance when repairing or replacing untolled bridges along existing routes.
A toll on time
The challenges associated with implementing a tolling programme in a bridge PPP in the US were most recently on clear display in Louisiana with the I-10 Calcasieu Bridge. Plenary, Acciona and Sacyr, the leaders of Calcasieu Bridge Partners consortium, achieved financial close on the $2.3 billion project this past August, after the state legislature initially signed off on it in December 2020.
In February 2021 the Louisiana legislature reversed course over tolling issues, deciding that the proposed rates for heavy trucks of $12.50 with a toll tag and $18.73 without were too high. The legislature ultimately returned to the plan, altering the heavy truck fares to $8.25 with a toll tag and $12.36 without.
The cost of that change, in addition to years of inflation eroding already set-aside funding, was several additional years where a key transit corridor depends on a 70-year-old bridge which predates the Interstate System itself, is too steep for present-day automotive speeds, and lacks both breakdown lanes and modern lighting.
Construction of the modern eight-lane bridge, along with upgrades to roadways on either end for a total of 5.5 miles of privately maintained transit infrastructure, will start in 2026, with an anticipated completion in 2031, at which point the current Calcasieu Bridge will finally be laid to rest. Yet one of the strongest advantages of a PPP will remain after the opening: the deal includes 50 years of maintenance for the bridge and associated roadways, handled by the private side of the public-private partnership.
Hopefully the Louisiana lawmakers of 2081 will appreciate the steps taken to preserve the infrastructure their parents and grandparents built.