Comparing the state's current CDAs to the first generation of such contracts, created more than seven years ago, isn't exactly fair, Zapalac contends. The terms of contracts and provisions for financing and risk are dramatically different today than when they were in the mid-2000s, he notes.
"The way this one [the Highway 130 CDA] was put together would not be the same if we did it today," he says. "Every time we do these concessions, we gather input, look at the risk profile and shift it if necessary."
The latest generation of these projects has been focused on highway corridors in the DFW area. North Texas has proven an ideal location for such projects, due to the surging population growth as well as an acceptance of toll roads and managed lanes.
The North Central Texas Council of Governments partly established that mind-set early on, in the 1990s, by advocating the strategy of using toll roads and managed lanes. Michael Morris, the group's transportation director, describes the effort as "a grassroots, bottom-up approach by the elected officials."
An example of Texas' current generation of P3s is the North Tarrant Express. The $2.1-billion effort was launched in 2010 to rebuild and widen Interstate 820 and state Highway 183 across six northeast Tarrant County cities, including Fort Worth. In 2009, TxDOT awarded the project to NTE Mobility Partners, a concessionaire that includes Cintra US, a subsidiary of Ferrovial; Meridiam Infrastructure and the Dallas Police and Fire Pension System.
TxDOT provided a total of $573 million, paid on a quarterly basis to the concessionaire for the work completed the previous quarter. NTE Mobility Partners then obtained other funding sources for the job, including a $650-million Transportation Infrastructure Finance and Innovation Act (TIFIA) loan, $400 million in private equity bonds and $427 million in private equity payments. These sources augment the state payment to ensure completion of the project.
The key for financing this particular project is the use of tolled managed lanes. Drivers can use the highway's newly rebuilt regular lanes for free or pay to use the managed lanes to avoid congestion and maintain a level of service. Those funds first will be used to pay for the ongoing operations and maintenance costs and then to repay the loans and private investors over the life of the 52-year contract.
For the concessionaire, the upshot is a relatively stable, long-term return on the original investment. The members also are able to maximize the return on the project by using innovative construction methods that cut down delivery time and reduce the cost of building the road. The North Tarrant Express is currently slated to open in mid-2015.
While almost all of Texas' CDA transportation projects fit a similar mold, TxDOT also classifies as P3s design-build efforts that have no private financing or ongoing maintenance component.