I-10 Calcasieu River Bridge Project

The I-10 Calcasieu River Bridge Project is a 5.5-mile corridor stretching from Ryan Street in Lake Charles to the I-210 and I-10 interchange in Westlake, Louisiana. Along with the new bridge and approaches, the project includes the interstate roadways and ramps, the I-10 service roads, and interchanges at PPG Drive, Sampson Street, and North Lakeshore/Ryan Street that connect the interstate to state roads and local streets. Sampson Street will be elevated over the railroad tracks to eliminate blockages from trains. The existing bridge over the Calcasieu River is more than 70 years old and is unable to meet the needs of current traffic volumes. The bridge is narrow, lacks shoulders, and has steep approach grades. Conversely, the new bridge will be lower and not as steep, it will have more lanes, full shoulders, and roadway lighting. The scope of the new I-10 Calcasieu River Bridge project includes: - Design and construction of a new eight-lane bridge over the Calcasieu River with three travel lanes and one auxiliary lane in each direction. - Modification and relocation of existing roadways and interchanges. - Demolition and removal of the existing Calcasieu River Bridge once traffic is transferred to the new bridge. - Operations and maintenance of the new bridge and associated roadway. - Roadside and back-office systems for toll revenue collection that is interoperable with existing Louisiana tolling systems and the Central States US Hub. - Tolling operations, including a customer service center. Innovative Financing Structure: The Calcasieu River Bridge project represents a pioneering financial structure that was designed to address a critical infrastructure need for Louisiana and a crucial component of the country’s interstate highway system. The deal involves a collaboration between the Louisiana Department of Transportation & Development (LA DOTD) and Calcasieu Bridge Partners (CBP), a special-purpose entity formed specifically for the project by Plenary Americas, Acciona, and Sacyr. The transaction was structured to leverage private capital through the issuance of tax-exempt (AMT) Private Activity Bonds (PABs), which are primarily backed by future toll revenues and milestone payments from LA DOTD. Uniquely, the LA DOTD is entitled to a share of any distributions from the project, and any such funds will be used for reducing tolls on the bridge or funding eligible capital improvements within the six-parish region surrounding the bridge. The Louisiana Public Facilities Authority served as conduit issuer for the $1,332,990,000 of Senior Lien Revenue Bonds, Series 2024 (AMT) (the “Bonds”). The transaction was structured as four term bonds with final maturities ranging between 2054 and 2066. The Bonds received a “Baa3” credit rating from Moody’s. The Bonds will be used for the comprehensive replacement of the I-10 Calcasieu River Bridge, a vital transportation artery located in Lake Charles, Louisiana, which carries the I-10 interstate highway. The existing bridge was built in 1952, and has been deemed structurally deficient and functionally obsolete, posing significant safety risks to travelers. The current bridge is also unable to handle the amount of traffic passing through this busy interstate route that ultimately connects the entirety of the Southern U.S., from Florida to California. Joe Donahue, Secretary of the Louisiana DOTD, noted that “tens of thousands of motorists cross the outdated existing bridge every day; a new bridge is long overdue”. In 2021, Joe Biden held a press conference in front of the existing bridge, saying that it, “is a perfect example of how we’ve neglected as a nation to invest in the future of our economy and the future of our people”. Bond proceeds will be used for the design, construction, and long-term maintenance of a replacement bridge, aiming to enhance safety, reduce congestion, and support economic growth by improving a critical link in the regional and national transportation network. After construction of the new bridge is complete, CBP will manage, operate, and maintain the bridge for a 50-year concession period. In addition to the Bonds, funding sources for the project also include equity contributions from CBP, future issuances of State of Louisiana General Obligation Bonds, appropriations from the Louisiana legislature, and federal grants, including funds from the American Rescue Plan Act of 2021 (ARPA) and the Infrastructure Investment and Jobs Act (IIJA). Challenges Overcome: Sourcing this quantum of financing on a brownfield toll revenue risk project was a challenge, which was further complicated by the following unique risks and factors: - Change in Governor and LA DOTD leadership between RFP submission and closing - CBP collaborated with the new administration to develop innovations that helped get the project through the approval process, including the LA DOTD equity share, additional milestone payments to reduce the toll rate for large trucks, and an expansion of the local toll discount to all privately owned vehicles in the region (regardless of size). - Pre-Financial Close Change Order – The original project design required the relocation of a railroad line by the LA DOTD. After Commercial Close, LA DOTD determined that it would be extremely challenging to relocate the railroad on time, so they issued a request for change proposal that had to be addressed before achieving Financial Close. CBP led the team through months of design reviews and negotiations to a solution that avoided a costly realignment of the project by changing the elevation of the bridge and ramps to avoid the railroad impact. By optimizing the financial structure, CBP mitigated the cost impact of the change order to a level that was fully offset by savings in the debt pricing (detailed further below). - High Construction Inflation – CBP implemented an innovative construction inflation risk-sharing mechanism with their design-build contractor to allow them to submit a fixed price for the 7-year construction period. - Volatile Interest Rate Environment – Throughout the closing period there were many points where rising interest rates threatened to exceed the project affordability threshold, but working collaboratively with the underwriters and LA DOTD, CBP was able to be patient and select an advantageous time to price the bonds, which resulted in savings for the LA DOTD on their milestone payments. - Single Credit Rating – Projects of this size and nature traditionally hold two credit ratings, but to minimize administration costs, CBP chose to pursue only one credit rating with Moody’s. Through diligent marketing of the bonds, CBP and their investors were still able to source an order book that exceeded the debt need for the project. This facilitated further reduction of bond pricing and savings to LA DOTD. The I-10 Calcasieu River Bridge has long been identified as outdated infrastructure that requires modernization and replacement. It is a crucial component of the I-10 corridor, which is a major freight route. Modernizing the bridge is essential to support the efficient movement of goods and services, bolstering the regional and national economy. Louisiana Governor Jeff Landry noted that the project represents his administration’s, “continued drive to improve and modernize Louisiana’s infrastructure”. This project is a stellar example of achieving state and federal goals of modernizing aging infrastructure to meet current and future transportation demands. The P3 financing model allowed the Louisiana DOTD to reduce its risk exposure to the project, while maintaining public oversight and private sector efficiency. The deal exemplifies a forward-thinking approach to infrastructure financing by combining public and private resources and attracting private investment in public infrastructure. Furthermore, the construction phase of the new bridge is expected to create thousands of jobs, providing a significant economic boost to the local community and the regional economy. This was also Louisiana’s second-ever P3 project, and its largest to-date. The success of this transaction sets a precedent for other state and local governments to follow, demonstrating the viability of P3 models in addressing infrastructure challenges nationwide.