I-635 / LBJ Freeway Managed Lanes, Dallas-Fort Worth, TX
The 13-mile I-635/Lyndon B. Johnson (LBJ) Freeway Managed Lanes project in the Dallas-Fort Worth (DFW) Metroplex area (Texas) will rebuild and expand the I-635/I-35E loop around Dallas. The LBJ is one of the busiest highways in Texas, and is congested virtually round-the-clock. Traffic counts are projected to continue their upward trend as some of the fastest population growth and development in the nation is occurring along this corridor.
The project, known as the LBJ Express, includes construction of six new lanes (three in each direction), partially underneath the current LBJ, that will be operated as tolled managed lanes. The existing lanes, cantilevered above the managed lanes, will be reconstructed. This innovative design allows the capacity of the facility to be almost doubled while maintaining the same footprint as the current LBJ roadway.
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 LBJ Express will use an electronic open-road tolling system that allows traffic to enter and exit the managed lanes without passing through toll booths.
The $2.6 billion project is being constructed as a public-private partnership (P3) where the private developer will lease the facility from TxDOT and will set toll rates and receive toll revenues over 52 years in return for designing, building, financing, operating, and maintaining (DBFOM) the project.
When the LBJ opened to traffic in 1969 it was designed to carry 180,000 vehicles per day. In the 1980s, demand started to exceed capacity, and in 1987 the LBJ Corridor Study was initiated. Efforts to find ways to upgrade the facility continued throughout the 1990s. However, TxDOT found that the amount it could fund was far below the project’s required size and scope. In general, funding from gas-tax collections, the sole source of transportation revenue in the region, was not sufficient to meet the 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. Also around this time, in 2003, authorizing legislation for P3s was passed. And, in 2006, the North Central Texas Council of Governments and its Regional Transportation Council (RTC) 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.
Between 2004 and 2006, the project secured significant local support. Then, in 2006, the RTC endorsed a P3 managed lanes procurement to expedite delivery of the LBJ project.
Project Financing and Delivery
In 2009, after a competitive bidding process, the Texas Transportation Commission determined that LBJ Infrastructure Group (LBJIG) provided the best value to TxDOT. The P3 agreement (known as a Comprehensive Development Agreement, or “CDA” in Texas) was agreed to by LBJIG and TxDOT.
The LBJIG is a special purpose entity established by Cintra and Meridiam to execute the concession. Cintra, a Spanish company, is a highly experienced toll road developer and operator. Meridiam is based in France and is one of the largest investors in and developers of public infrastructure facilities in the world. Consortium partners also include the Dallas Police and Fire Pension System and contractor Trinity Infrastructure LLC, which is a joint venture between Ferrovial Agroman (a subsidiary of Cintra) and Houston-based Webber.
The concession is providing roughly two-thirds of the total financing to construct the project. Private equity contributions totaled $672 million, with 52 percent coming from Cintra, 38 percent from Meridiam, and 10 percent from the Dallas Police and Fire Pension System. This is the first time a US pension fund made a direct investment in a major road project. Additionally, LBJIG 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 $850 million loan from the TIFIA Federal credit program. The flexibility provided in TIFIA’s debt service schedule was key to the successful financing of the project. Second, after receiving a Private Activity Bonds (PABs) allocation from USDOT, LBJIG issued $615 million in tax-exempt PABs through a special State conduit. The TIFIA loan, as well as the PABs will be repaid with project revenues. TxDOT contributed $490 million in a construction grant to the project.
The concession agreement shifts certain risks from TxDOT (and the taxpayer) to the private developer, LBJIG. For example, LBJIG assumed the risk of lower-than-projected toll revenues. LBJIG’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. LBJIG must hand back, to TxDOT, a fully operational facility that is in a state of good repair when the lease expires.
Trinity Infrastructure is delivering the project via a fixed-priced design-build contract. Construction started in 2011, and two sections have been opened to traffic to date; the project is expected to be completed and fully open to traffic by the end of 2015, ahead of the 2016 target date specified in the P3 agreement.