The Louisiana Public Facilities Authority is set to price $1.33 billion in toll bonds next week, as part of a public-private partnership aimed at replacing the Calcasieu River Bridge. The bonds, rated Baa3, will be backed by toll revenues. The project, managed by JPMorgan and Wells Fargo, is structured as a design-build-finance-operate-maintain and will involve the replacement of the existing bridge, which has been deemed structurally deficient, as well as widening the interstate along a 5.5-mile corridor. While the project seems promising, there are concerns about drivers using alternate routes to avoid the toll charges.
The Calcasieu Bridge Partners LLC, a joint venture of Plenary Americas US Holdings, Inc., Sacyr Infrastructure USA LLC, and Acciona Concesiones S.L., will be the developer of the project in collaboration with the Louisiana Department of Transportation and Development. Moody’s Ratings has assigned a Baa3 rating to the bonds, with a stable outlook. The developer will bear the risk of toll collections being insufficient to cover debt service payments. Despite this risk, there are examples of successful public-private partnership projects for bridges that have been cited as precedents for this venture.
There are financial concerns surrounding the project, including the uncertainty of the construction period and post-opening behavior of drivers. The bonds being subject to the alternative minimum tax (AMT) is also a point of contention. The demand for AMT bonds is not as deep as it is for non-AMT bonds. However, the low investment-grade rating and the AMT status of the bonds make them attractive to a variety of investors, including high-yield funds.
While the project shows promise, there are challenges that need to be considered. The historical aversion to tolls in Louisiana and the lack of tolling history in the region pose political challenges. The credit rating also reflects limited experience with long-term private partners for tolled facilities in the state. To mitigate risk, a ramp-up reserve of $98 million has been set up to provide insurance against underperformance during the first 10 years of tolling. Despite these challenges, Moody’s expects a debt service coverage ratio of at least 1.6 times from 2032 to 2066.
The success of the project will depend on the collaboration between public and private entities. Public-private partnerships (P3s) have proven to be successful in infrastructure projects, including bridge replacements. Learning from past projects and partnering with experienced firms can help in executing the project effectively. The acceptance of tolling by the public is crucial for the expansion of P3 projects in the region, as seen in the Belle Chasse Bridge replacement project.
The Louisiana Toll Bonds Project presents an opportunity to address infrastructure challenges and improve transportation in the region. While there are financial and political concerns surrounding the project, the collaboration between stakeholders and the proven success of public-private partnerships in infrastructure projects can lead to a successful outcome. With careful planning, risk mitigation strategies, and public acceptance of tolling, the project has the potential to be a significant step towards improving the infrastructure in Louisiana.