Jacksonville Beltway concession procurement put on hold until tax liability resolved, T&R strong

April 30, 2008

Florida DOT have put the Jacksonville outer beltway concession procurement on hold, they've announced. FDOT District 2 secretary Charles Baldwin says state lawyers told him yesterday morning they were no longer sure that he could tell bidders on the First Coast Outer Beltway concession that they would be exempt from property tax.

"It is an unknown risk. At worst (the tax liability) could be hundreds of millions of dollars over the life of the concession. I just didn't want this hanging over (the procurement) so we're deferring the selection process until we get this resolved. Otherwise the project is moving ahead strongly," said Baldwin.

Requests for qualifications were due this week.

State lawyers are worried, Baldwin says, about a case in the 1990s when the city of Sebring in central Florida entered into a longterm concession on the Sebring Raceway - used for major car races. Although the property remained in city ownership the tax people demanded property taxes from the concessionaire and prevailed in an appeals court.

Concessionaires on the Jacksonville beltway project might lower their bids, provide prices with and without tax liability, or even stay away if the tax liability isn't clarified.

Baldwin says he isn't sure what the fix will be. That is being examined by FDOT lawyers.

Options might include getting a court ruling, or legislation. The Florida legislature adjourns for the year in only a few days time so that fix would probably not be available until they assemble again in the spring of 2009.

Another possible fix, it occurs to us, might be to have the concession contract declare the concession exempt from property tax, giving it the constitutional protection of contract law. The concession would make the property of the project state property.

Most jurisdictions assess property tax on the owner of the land. Toll concessions usually operate on state or city owned land and all fixed assets are usually deemed state property when the concession term begins.

Dulles Greenway VA an exception

An exception is the Dulles Greenway tollroad in northern Virginia which pays propoerty taxes. The concession company in that case bought the land on which the tollroad is built in hundreds of privately negotiated purchases. The tax bill is about $2m/yr out of annual tolls of $55m in their last financial report.

We don't know of any other tollroads that pay property taxes.

Final traffic and revenue study "very strong"

Baldwin says there is no backing away from a concession. On the contrary, he says, the prospects for a concession look stronger now, based on the results of a final traffic and revenue study received in recent days. This study, he says, suggests the project is considerably stronger than the preliminary studies had showed.

The final T&R study will be posted on the project website early next week.

see project website


General information only on Sebring Raceway


A press release reads:

"The request for qualifications of companies to fund the design, construction and operation of the First Coast Outer Beltway around Jacksonville has been postponed pending resolution of a number of issues, announced the Florida Department of Transportation (FDOT) today.

"The postponement of the concession agreement will allow the FDOT time to resolve the issue associated with potential property taxes on the First Coast Outer Beltway Public Private Partnership project. The environmental studies associated with the proposed $1.8 billion project will also be substantially completed.

"This beltway project is very important to Florida and to the region as it will ensure the mobility of people and goods and enhance economic prosperity while at the same time preserving the quality of our environment and communities along this important corridor," said Charles Baldwin, FDOT District Two Secretary.

"The FDOT is still committed to serving the needs of the region and providing a transportation system that is safe and efficient."

"The FDOT is committed to pursue this innovative project by continuing the preliminary design, environmental studies, property acquisition and other project development activities.

"The First Coast Outer Beltway is proposed as a four-lane limited access toll road that would connect Interstate 10 on the west side of Jacksonville and Interstate 95 in northern St. Johns County. The 46.5 mile long roadway would include a new bridge over the St. Johns River in the vicinity of the Shands Bridge and 13 interchanges. It is proposed as a public private partnership in which private concessionaires are solicited to build, operate and maintain, thus saving the state money and allowing it
to be built sooner than if using just state funds."

TOLLROADSnews 2008-04-30

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