North Tarrant Express Segments 3A & 3B, Dallas-Fort Worth, TX
The North Tarrant Express (NTE) Segments 3A and 3B project constitutes the second phase of a planned 36-mile managed lanes network that will facilitate access from Fort Worth to the Dallas-Fort Worth (DFW) International Airport along the IH 35W corridor in Tarrant County, Texas. The facility, a critical commuter and international trade corridor, is one of the oldest and most congested in the region. The NTE will reduce congestion, improve air quality, and accommodate future traffic growth in one of the country’s fastest developing regions.
Plans for completing the NTE call for delivery of six segments. The first two – Segments 1 and 2A – were provided via a public-private partnership (P3) procurement. The $1.6 billion second phase will improve Segments 3A and 3B (totaling 12 miles), including reconstructing all of the general purpose lanes and adding up to three new toll managed lanes in each direction. Future Phase 2 improvements will expand the number of general-purpose lanes.
The new managed lanes, called TEXpress Lanes, will allow drivers to purchase congestion relief when they want to avoid travel delays on the (free) general-purpose lanes. Prices on the managed lanes will be dynamically set – as often as every 5 minutes – so as to keep traffic moving at speeds of at least 50 miles per hour. The NTE will use an electronic open-road tolling system that allows traffic to enter and exit the managed lanes without passing through toll booths.
Not long after the corridor, now known as the NTE, opened to traffic in the 1960s, traffic volumes far exceeded its design capacity. Planning for an expanded corridor began in the late 1980s and continued throughout the 1990s. However, TxDOT found that the amount it could fund was far below the project’s required size and scope. Funding from gas-tax collections, the sole source of transportation revenue in the region, was not sufficient to meet current and future transportation infrastructure investment requirements.
In the early 2000s North Texas began to explore new ways to finance and procure transportation improvements that would (1) allow for viable projects when public funds were insufficient and (2) address future travel growth through more efficient system operations. To this end, in 2003, authorizing legislation for P3s was passed. And, in 2006, the North Central Texas Council of Governments and its Regional Transportation Council approved a 19-point Regional Managed Lanes Policy. This policy, which includes guidance for private developers interested in potential managed lanes projects, provides a basic framework to help guide the development of new projects.
In 2006, TxDOT and regional and local officials initiated a P3 procurement process to expedite delivery of the NTE.
Project Financing and Delivery
In 2009, after a competitive bidding process, the Texas Transportation Commission awarded the right to deliver Segments 1 and 2A of the NTE to NTE Mobility Partners (NTEMP). As part of the same proposal, NTEMP was also awarded the “Segments 2 – 4 Comprehensive Development Agreement (CDA)” for the remaining segments of the project. The Segments 2 - 4 CDA is a 10-year agreement between TxDOT and the NTEMP that calls for NTEMP to plan improvements to the remaining portions of the NTE and to negotiate, as desired, P3 agreements to deliver those improvements.
In March 2013, TxDOT and NTEMP executed a concession agreement to design, build, finance, operate and maintain (DBFOM) Segment 3A and operate and maintain Segment 3B of the NTE. Cintra (Spain) and Meridiam (France) established the NTEMP3, a special purpose entity, to execute the concession. Both Cintra and Meridiam are among the largest international investors in and developers of public infrastructure facilities in the world. Consortium partners also include the Dallas Police and Fire Pension System and Bluebonnet Contractors, which is a joint venture between Ferrovia Agroman (a subsidiary of Cintra) and Houston-based Webber.
The concession is providing roughly 90 percent of the total financing to construct Segment 3A, with the remainder coming from TxDOT. Private equity contributions totaled $413 million, with 57 percent coming from Cintra; 33 percent from Meridiam; and 10 percent from the Dallas Police and Fire Pension System.
NTEMP3 took advantage of two Federal credit programs, administered by the U. S. Department of Transportation (USDOT), that reduce financing costs for private developers. First, they secured a $532 million loan from the TIFIA Federal credit program. Second, $274 million in tax-exempt Private Activity Bonds (PABs) were issued by Texas for the benefit of NTEMP3. The PABs were allocated to Texas by the USDOT as part of a $15 billion authorization provided by Congress. Both the TIFIA loan and the PABs will be repaid with project revenues. TxDOT and the North Central Texas Council of Governments contributed $164 million to the project’s financing package.
The NTEMP3 will construct the 5.4 mile Segment 3A while TxDOT will deliver the 3.4-mile Segment 3B on a design-bid-build basis. When complete, TxDOT will turn over operations and maintenance to NTEMP3. NTEMP3 will collect toll revenues from both segments. This dual-delivery method provides for the most efficient delivery of the project, while, at the same time, allows NTEMP3 to take on more debt financing than would otherwise be possible.
The concession agreement shifts certain risks from TxDOT (and the taxpayer) to the private developer, NTEMP3. For example, NTEMP3 has assumed the risk of lower-than projected toll revenues. NTEMP3’s profit will come from the toll revenues with excess toll revenues being shared with TxDOT for use on future North Texas transportation projects.
Texas retains ownership of the land and improvements. NTEMP3 must hand back the facility to TxDOT in a state of good repair and fully operational when the lease expires.
Bluebonnet is delivering the 3A segment via a fixed-priced design-build contract. Construction began on Segment 3B in 2013, and on Segment 3A in 2014. Segment 3B is targeted for completion in 2017, while Segment 3A has an estimated completion date in 2018.