Ohio River Bridges-East End Crossing, Louisville, KY/IN
The $1.1 billion East End Crossing project will provide a new highway connection between Clark County, Indiana and Jefferson County, Kentucky, completing the I-265/KY-841/IN-265 circumferential freeway corridor in the eastern suburbs of Louisville. The project consists of a new toll bridge over the Ohio River and approaches on both sides, including a 3.3 mile extension of I-265 on the Kentucky side (featuring a 1,700-foot tunnel under a historic property) and a 4.1-mile extension of I-265/SR 265 on the Indiana side. The project also includes a 13-foot-wide pedestrian and bicycle path.
The East End Crossing is part of the larger $2.3 billion Ohio River Bridges project to augment highway capacity between Louisville and Southern Indiana. The Downtown Crossing portion of the project will rehabilitate and add a new span to the existing I-65 Kennedy Bridge in central Louisville, and will also reconstruct the Kennedy Interchange between I-65, I-64, and I-71 just south of the bridge. While each of the two projects includes road work in both states, Indiana is responsible for the entire East End Crossing project, while Kentucky is implementing the Downtown Crossing project.
The East End Crossing project is being delivered as an availability-payment design-build-finance-operate-maintain (DBFOM) concession between the Indiana Department of Transportation (INDOT), the Indiana Finance Authority (IFA), and WVB East End Partners (WVB). Equity partners in the concession company include Walsh Infrastructure; VINCI Highway SAS; and Bilfinger Project Investments. The concession includes a four-year construction period and a 35-year operation term. WVB will be compensated with milestone payments during construction and availability payments during operation.
The concessionaire will be responsible for both operations and maintenance of the new bridge and the Indiana approach, while the Kentucky approach will be constructed by WVB, but will be maintained by that state. IFA will also manage toll collection on both the East End and Downtown bridges. The Downtown Crossing project is being developed by KYTC under a design-build contract with a team led by Walsh Construction.
Vehicular traffic across the Ohio River between Louisville and Southern Indiana is currently served by the Clark (US-31) Bridge, which opened in the late 1920’s, and the Sherman Minton (I-64) and Kennedy (I-65) Bridges, which were built in the early 1960’s as part of the Interstate System. Long-range planning documents prepared in 1969, 1978, and 1993 subsequently proposed an additional river crossing, approximately eight miles to the east of the downtown bridges, to connect the I-265 beltway segments that had been built in both states. In 1996, a Major Investment Study recommended a “two-bridge solution” involving both a new downtown bridge to expand capacity on the congested I-65 and the new east end crossing, as well as the reconstruction of the Kennedy Interchange. A subsequent environmental review for the project was approved by FHWA in September 2003.
As planning efforts proceeded, it became clear that using traditional Federal and state funding sources alone for the $4.1 billion project would require construction of the new roads and bridges to be staged sequentially and spread out over almost two decades. At the behest of the governors of both states, a bi-state authority was created in 2009 and charged with developing a plan to finance and develop the project, including consideration of tolling both crossings and alternative project delivery mechanisms including P3s.
By 2011, continuing concerns about the high cost of the project prompted the bi-state authority to revisit the project design in order to reduce costs. The East End Bridge and approach roads, including the tunnel, were reduced from three to two lanes per direction, and the width of the new Downtown Crossing bridge was also reduced. These changes lowered the Ohio River Bridges Program to $2.6 billion. Given the scope of these changes and the introduction of tolling, supplemental environmental review was required, with a revised Record of Decision issued by FHWA in June 2012.
In late 2012, the two states agreed on an innovative strategy to finance and procure the overall project on a shared basis. The states would pursue separate procurements, with Kentucky taking responsibility for all elements of the Downtown Crossing project in both states, and Indiana doing the same for the East End Crossing. Although the Kennedy Bridge was expected to produce a greater share of revenues, toll proceeds on the two bridges would be split evenly between the two states.
While Kentucky would utilize design-build delivery and toll-backed debt for the Downtown Crossing, Indiana opted to utilize an availability payment DBFOM concession for the East End Crossing. The IFA began its procurement process in March 2012, selecting WVB as the P3 concessionaire in November and reaching commercial close in December. WVB East End Partners then closed its financing for the project in March 2013.
Construction on the East End Crossing began in June 2013, and the facility is expected to be opened to traffic by October 2016. Favorable construction contract bids and shorter implementation schedules have netted further reductions in the estimated cost of the project, to $1.1 billion for the East End Crossing and $2.3 billion overall.
Project Financing and Delivery
WVB East End Partners is financing the East End Crossing project with $677 million in long- and short-term tax-exempt Private Activity Bonds (PABs) and $82 million in equity. Repayment of the $194 million in short-term PABs will be covered by in milestone payments (totaling $392 million) that Indiana will make (using a combination of Federal and state funds) to WVB during construction.
The remaining $482 million in long-term PABs will be repaid with the availability payments received from IFA through 2051. The availability payments will be covered by toll revenues, using other state funds as a backstop to any shortfalls. The maximum availability payment during the first full year of operations is set at $43 million, growing over time based on a formula tied to future inflation and a pre-set rate.
The two states have also directly incurred costs (totaling $94 million for Kentucky and $220 million for Indiana) for engineering and environmental studies, right of way acquisition, and other pre-construction activities for the East End Crossing project.