Cintra, Meridiam, Dallas cops/fire pension concessionaire for TX/I-635 toll lanes

March 2, 2009
By Peter Samuel

TxDOT has announced that a Cintra/Meridiam/Dallas police/fireman's pension system team are the preferred investors in a 52 year toll concession to finance, build, operate and toll "The New LBJ" or I-635 Managed Lanes Project, an expansion to 14 travel lanes from 8 of the major east-west expressway across the northern part of Dallas.Operating under the project corporate name  LBJ Development Partners it is essentially the same team that just last month was selected for the North Tarrant Express project to the northwest of Dallas.

A TxDOT official told us they are aiming at a commercial 'close' on the contract by late April, following a close on the North Tarrant Express project late March.

The 635 project involves complete rebuilding of 15.5km (9.7 miles) of I-635 and 5.8km (3.6 miles) of intersecting I-35E to provide 2 frontage road lanes, 4 tax supported general purpose lanes and 3 toll managed lanes in each direction along with ramps and interchanges - a total of 21km (13.2 miles) of centerline roadway.

Elevated or depressed

A lot of the length of the project the tolled roadways will be elevated (on 35E and at each end on 635) or subsurface (on 8km or 5 miles of 635 where it will be in trench with the new tax supported lanes cantilevered over to avoid the need for extra right of way acquisition.

An earlier plan to put several miles of the new I-635 toll lanes in a pair of mined tunnels was abandoned in favor of the present entrenched/cantilever design - less costly to build and operate.

In a future phase the toll lanes are planned to be extended further east and southeast (clockwise) along I-635, but scaled down progressively in size.

$19m/lane-mile addition

Cost of design and construction of the first phase is expected to be around $1,500m. The project will produce an extra 130 lane-km or 80 lane-miles of expressway-standard travel lanes so the unit cost could be regarded as $11.5m/lane-km ($19m/lane-mile.) But the whole roadway will be rebuilt so it could be viewed as 14 lanes for the money and then it comes to 295 lane-km (185 lane-miles) and the cost is only $5m/lane-km ($8m/lane-mile). Adding in the frontage roads and you'd drive the lane-km/mile costs down even further.

Spanish armada

The Cintra-led group was chosen over a Dragados/ACS-led group called LBJ Mobility that included Kiewit, Zachry, Granite, SICE, Sauer, Aecom, Iridium and ING. Macquarie was part of the winning Cintra-led group but pulled out as part of its scaling back of its investments worldwide. Ferrovial Cintra's major shareholder and WW Webber are also involved in the Cintra team.

Concession terms

The concession agreement called in TxDOT terminology a comprehensive development agreement (CDA) provides for tolling in Schedule Mode (CA91 Express Lanes style) or Dynamic Mode (CA/I-15 style). Schedules cannot be changed more frequently than monthly and dynamic tolls more frequently than every 5 minutes.

Toll rates are to be set for each segment and direction "to encourage and stimulate demand while maintaining average speeds at or above 50mph," the concession says. (Exh 4, p7)

Damages if traffic slow

The concessionaire (called 'developer') is liable for damages where average speeds in the managed lanes fall below 50mph (80km/hr) CDA p137  The concessionaire is excused in case of incidents beyond his control.

There is a sliding scale of damages payments to TxDOT if Average Speeds in the toll lanes are less than 50mph.

- in the 45mph to 50mph band the concessionaire pays TxDOT 25% of the tolls collected during that time

- in the 40mph to 45mph band the damages payment is 50% of the tolls to TxDOT

- 35mph to 40mph TxDOT gets 75% of tolls

- when average speeds are <35mph the concessionaire has to turn over 100% of tolls collected in damages payment

Toll rate caps related to traffic

However an annex lays down a formula for adjusting a Base Toll Rate Cap to be initially 75c/mile. After 180 days if average vehicle volume is consistently >3300 cars/hr on 2-lanes or >5100 cars/hr on 3-lanes or average speeds are <50mph the Base Toll Rate may be increase by a Demand Factor of between 1.0 and 1.25. If average hourly volume is <2500 on 2-lanes or <4000 on 3-lanes the Base Toll Rate may be reduced by a Demand factor of between 1.00 and 0.75.

The Base Toll Rate Cap of 75c/mile is adjusted based on an escalation factor of 2.5% every 5 years.  Exh 4 p8

The concession requires that the speed of every vehicle be measured and recorded and a detailed schedule of reports of performance be made to TxDOT every week.

TxDOT to pay HOV tolls

TxDOT has had studies done in which all vehicles in the managed or tolled lanes are tolled and in which high occupancy vehicles (HOV3+) go free. The concession is written as if a toll is collected from all vehicles regardless of occupancy. If HOVs get a discount TxDOT pays the concessionaire the difference between the prevailing toll and the amounts charged to HOVs - called an HOV Discount.

Profit sharing

The concession has a profit sharing schedule with six bands based on a blended nominal after-tax internal rate of return for equity which starts at 12% and steps up being 50% at 23%, though the available exhibit says the table will be replaced with another in the executed concession contract. Exh 7  p8

There is an elaborate disputes resolution procedure laid out.

Termination terms

Termination of the concession for "convenience" or through TxDOT default requires the concessionaire be paid the greater of fair market value and the senior debt termination amount plus reimbursement for demobilizing and terminating subcontracts. This is outlined in great detail in Exhibit 23.

We don't see any restrictions mentioned in the CDA on expansion of competitive capacity.

Vehicle classification is axle-based.

Separate toll rates may be calculated for each of the three operating segments thought TxDOT's traffic study doesn't suggest this will be needed in the early years of the project.

Segments

Toll segments are:

- on I-35E: Loop 12 to I-635 5.8km (3.60 miles)

- on I-635: Luna Rd to DNT 8.1km (5.02 miles)

- on I-635: DNT to US75 7.5km (4.63 miles)

Traffic & revenue study

A traffic and revenue study by WSA in 2005 concluded that optimum per mile car toll rates in 2012 would range between 5c and 55c depending on time of day and direction of travel. It said that initially the same toll rates could apply in all segments, but that by 2020 it would be necessary to introduce differential rates by segment to properly manage traffic.

WSA modeling suggested that the toll lanes would carry about 11% of traffic in the morning peak and 10% in the afternoon peak under an all-pay scenario in 2015. By 2020 this share would increase about one percentage point.  With HOV3+ free, the usage was rather similar.

Average weekday traffic of about 40k to start

In the opening year 2012 the toll lanes produce around 39k/day trips under an all-pay scenario and 41k with HOV3+ free, and about $17m/yr ($68k x 250 days) to $16m/yr. By 2025 transactions are up to 58k/day and 53k and tolls of $35m/yr and $33m.

Allowing more holidays WSA calculates annual toll collection of $87m and $80m in 2040.

WSA assumed the 10-county Dallas Ft Worth metro area will grow in population from 3.15m in 2000 to 5.42m in 2030, annual growth of 1.8% compared with 3.9% in the 1990s.

The modeling found that relatively high toll rates will be required immediately westbound mornings to limit traffic to the density needed to allow free flow.

At low toll rates on opening in 2012 they'd get 50k VMT/hr or 17k VMT/lane/hr well above free flow. At 45c/mile however the traffic would be halved and speed would be 60mph.

Eastbound in the mornings generates almost no revenue because the general purpose lanes are flowing well and the speed advantage as modelled is only 5mph. The post peak hour is actually better for the toll lanes with a 15mph at 10c/mile.

Middle of day toll lanes do well

In the middle hours the toll lanes do surprisingly well both directions, offering 65mph travel vs less than 40mph WB and 50mph EB on the tax supported lanes.

3pm to 7pm eastbound the speed differential is 30 to 40mph at tolls of 30c to 50c/mile the modeling suggests providing decent utilization of the toll lanes. Westbound there are differentials too but only at toll rates of 10c or less.

By 2025 WB in the AM peak there is a huge speed differential 22mph in the tax lanes and 60mph in the toll lanes and high usage of the toll lanes at 60c/mile. In the following shoulder hour there is a 30mph/65mph speed differential at 35c/mile. Midddle of the day operations show speed differences of 20 to 25mph at tolls of around 15c/mile.

2025 speed differentials are 30 to 35mph EB at 60c/mile. WB in the evenings there are similar 30mph/60mph and 65mph at tolls of 25c to 30c/mile.

http://www.newlbj.com/

http://www.txdot.gov/business/partnerships/i_635.htm

http://www.txdot.gov/project_information/projects/dallas/635_lbj_cda/developer_proposals.htm

The LBJ or 635 as it is known locally is one of the urban freeways built in the immediate interstate construction boom set off by the federal aid highway program and the beginning of the federal gas tax. It is mostly 2x4 lanes at present and runs about 200k veh/day.

TOLLROADSnews 2009-03-02

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