PhillyDeals: Building bridges in a new Pa. style

Posted: July 29, 2014

In September, four groups of would-be bridge builders, led by multinational financial groups - Meridiam of France, Plenary Group of Canada, InfraRed Capital and John Laing Investments, both of Britain - and including American contractors will submit competing final proposals to PennDot to build 560 spans for the worn Pennsylvania road network.

Can private management do this work faster than the usual PennDot contractor-bidding system? At what cost?

We won't know for sure about the price until October, when PennDot reviews the bids and awards the contract to one of the groups. These contracts also include decades of maintenance and contingencies to make sure the bridges hold up.

PennDot Secretary Barry Schoch is bullish. Any idea this could end up costing more because the private sector is raising part of the money "couldn't be further from the truth," he told me last week, after I posted skeptical comments from a contractor on my blogs.

It's true, the out-of-town investors are financing early stages of the project, when the permit, utility and design work is typically finished. And they expect comfortable profits, alongside the large and small contractors who actually build the bridges.

But "over 90 percent" of the debt will be funded through federal- and state-income-tax-exempt private activity bonds, says Schoch. "We've met with the U.S. Department of Transportation, and we will have up to $1.2 billion in authority" to issue PABs, which the state hopes will more than cover the job.

These bonds use public tax breaks for private investments that the government judges to have a public purpose.

How much do PABs cost - how much do you have to pay investors to buy them - compared with the cheap state borrowing that traditionally funds road projects?

In a recent Indiana bridges project, the PABs priced "a little less than 1 [percentage point]" above state debt, Bryan Kendro, director of PennDot's Office of Policy and Public Private Partnerships, the state's point man on this deal, told me.

Kendro previously worked for U.S. Rep. Jim Gerlach (R., Pa.) as his liaison to the House Transportation Committee, and as campaign manager for U.S. Rep. Pat Meehan (R., Pa).

Schoch added that the best thing about the bridge program may be the way it will enable the state to fix "a large number of structurally deficient bridges" in three years, "instead of 10 to 15 years."

Does that risk using up all the available contractors? They won't be busier than they were during the Obama stimulus highway program, Kendro said.

Will roads hit by multiple bridge projects jam badly? PennDot will schedule work so delays are no worse than usual, the department says.

The program is modeled after multiple-bridge programs in Luzerne, Blair and Washington Counties that Kendro says "saw substantial savings." Those were small enough that they didn't need to bring in multinational investors.


JoeD@phillynews.com

(215)854-5194

@PhillyJoeD

www.inquirer.com/phillydeals

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