LOUISVILLE -- Frequent commuters will pay $1 every time they cross designated bridges over the Ohio River after a plan to pay for the construction of an east-end bridge, a downtown bridge and to reconstruct Spaghetti Junction was agreed to Monday.
Indiana Gov. Mitch Daniels and Kentucky Gov. Steve Beshear signed a memorandum of agreement Monday morning to finance the construction of the $2.6 billion Ohio River Bridges Project. The agreement solidified the plan that had been previously presented by project planners to split the projects financing between the two states, each being responsible for half of the project cost.
Tolling policy outlined
While each state is pursuing a different method to pay for its portion of the project, both states will use tolls and the tolling revenues to cover their respective funding gaps.
To develop the financial plan Louisville and Southern Indiana Bridges Authority Executive Director Steve Schultz said rates were set at $ 2 for cars, which include passenger vehicles and Sport Utility Vehicles, $5 for smaller trucks with six wheels and $10 for semi-trucks. A $1 frequent toll rate was also offered for local commuters that will have an electronic transponder box inside their vehicle.
Kentucky Transportation Cabinet Project Manager Gary Valentine said the frequent toll user is defined in the financial plan as someone who makes 20 two-way trips per month, or 40 total trips, across the Ohio River.
Tolling is not scheduled to begin until the first bridge is open, which is expected to be the east-end bridge in 2017.
The financial plan also included tolls being placed on the existing Kennedy Bridge, but the bridges authority has still not received any word on tolling authorization from the Federal Highway Administration, Schultz said.
Once the tolls are in place, how long they will remain on the bridges is uncertain. While the plan set the tolls at a life-cycle of 40 years, they could be taken off the bridges early if provisions are met or may remain to pay for ongoing maintenance of the cross-river spans.
Schultz said tolls could be removed when three provisions have been met including, the payment of all revenue bonds in full, the termination or expiration of any availability payment agreements and the establishment of reserve funds that would be able to cover the repair, building or expansion of the roadways associated with the bridges project.
"There is a sense that once the bonds have been paid off you could see [tolls] possibly coming down, but we want to try and maintain those things and keep them maintained," said Bridges Authority Chairman Charles Buddeke. "That could involve some sort of toll, but it is undetermined at this time."
Co-chairman Kerry Stemler said there will be a contract between the two states that will regulate the increase of tolls over time, along with inflation.
Despite the outline for tolls included in the financial plan an official tolling policy has not been finalized.
"The tolls that are listed in this agreement are ranges," Beshear said.
Indiana financial plan
Indiana will be responsible for constructing the east-end portion of the project, which includes both the Kentucky and Indiana approaches and the east-end bridge.
The total cost for Indianas portion of the bridges project is just shy of $1.3 billion. The state will pay for the project through a combination of money dedicated through Indianas Department of Transportation, received in part from Major Moves. The money dedicated was set at $54 million a year, for eight years, totaling $432 million, with the remainder of $868 million to be covered through tolls.
The state will make availability payments to a concessionaire, or private entity, to finance the construction and maintenance of the east-end bridge. Ultimately, covering the bond financing payments will be the responsibility of the state, not the concessionaire, said Kendra York, public finance director for the state of Indiana.
Despite handing off control to a private entity, Daniels said the bridges will still be a regulated utility.
"We're going to do everything we can to keep the local tolling as low as possible," he said. "I don't know of a fairer way to get big projects like this done."
Daniels added that tolls being imposed on the bridges will not hamper Hoosier businesses.
"I would say their business will be so dramatically better with more bridges and more accessibility that I would predict an upside for them," he said. "The growth, the economic development that will take place down in southeast Indiana triggered by these new bridges is good for everybody. It will create jobs, it will create tax revenues."
Daniels added the timing of putting the bridges plan together couldnt have been better.
"We're doing this at a very good time because so little is happening everywhere else," he said. "We are consistently getting bids 25 percent or below the estimate. I don't know if that can happen on these bridges, but its clearly a time where people who do this work are competing very hard for any available business. That's another reason I'm so eager to move fast."
He added that with the announcement, the hope is more job announcements will also come to the state.
"The largest single reason weve been so determined to work this out is the jobs and the economic growth that I believe will come to the area," he said. "New jobs and growth won't necessarily have to wait on the completion of the bridge. The minute the market knows for sure that were going to transform the logistics and transportation access to the area, farsighted businesses will start planning and maybe even investing. We've seen this in other places. The minute there is certainty...businesses start investing."
One certainty is a large retailer locating a millionsquare-foot distribution center in River Ridge Commerce Center just north of the Interstate 265 loop that will connect Utica to Prospect, Ky. However, there has still been no announcement on which company is locating in the distribution center being constructed at River Ridge.
Kentucky financial plan
Kentucky is responsible for financing the downtown portion of the Ohio River Bridges Project, which will be responsible for constructing a new Interstate 65 bridge and its approaches, as well as the reconstruction of Spaghetti Junction.
To pay for its portion of the project Beshear said he has built into the state s transportation budget $50 million per year, over 6 years through traditional funding sources. In addition, the state has approved the sale of $236 million of GARVEE bonds, leaving a $764 million shortfall that will be covered in tolling revenues.
"While tolling is not our preferred financing option, its the only way that this project will get built given the decreased federal support for major transportation projects in states across the country," Beshear said. " The overall financing plan relies on a combination of traditional transportation funding from both states and a 50-50 split of revenues from tolls to be collected on the three new and improved bridges."
Kentuckys portion of the project is expected to take six years to complete and still needs the approval of several entities.
Shortly after the governors signed the memorandum of understanding, the Bridges Authority unanimously approved the financing plan and later Monday the Kentucky Public Transportation Infrastructure Authority, who will be issuing Kentuckys bonds for the project, also approved the agreement.
The Kentucky General Assembly will also have to sign off on the plan, which Beshear expects they will.
"That level of financing, I think, will be acceptable to the General Assembly," he said. "Ladies and gentlemen, the Ohio River Bridges Project is going to happen."