New PPP opportunity comes to market in Pennsylvania

New Jersey and Pennsylvania are joining forces to bring to market a $310 million bridge replacement project on the Delaware River that some see as a “bellweather” public private partnership for the Northeast region.

The governors of the two states will ask the Delaware River Joint Toll Bridge Commission to begin a search for legal and financial advisors for the commission’s Scudder Falls Bridge replacement, according to a statement from Pennsylvania Governor Ed Rendell.

Scudder Falls Bridge, located north of Philadelphia, handles nearly 60,000 vehicles per year and is in critical need of improvements due to safety and congestion issues. It is the site of some 105 crashes per year and travelers face an average delay of 27 minutes trying to cross it at peak times.

Officials hope to alleviate these problems by widening the bridge and improving its access roads. But the $310 million ticket price of the project raises issues for both the Bridge Commission and the two states. The commission would have to raise tolls on its seven tolled bridges to fund the Scudder replacement, raising equity issues for the other bridges' motorists who would be subsidising it.

Absent that, Pennsylvania and New Jersey would need to subsidise the project, which neither state is capable of doing at this time.

So they will look to the private sector to foot the bill and then get repaid via tolling of the replacement bridge. The tolling has already been approved by the Bridge Commission’s board.

“By creating a public-private partnership, we can complete construction more quickly and efficiently, while allowing the Bridge Commission to focus on ongoing construction and maintenance projects on its other 19 bridges,” Rendell said in a statement.

The project will be the largest bridge replacement in the 76-year history of the bridge commission, according to spokesperson Joe Donnelly. Rendell’s office also said in a statement it would be the nation’s first multi-state public-private partnership (PPP).

“This really is a bellweather for what we really think will be a very healthy and vibrant PPP market in the Northeast,” said Frank Rapoport, chair of the global infrastructure and PPP practice and Washington DC-based law firm McKenna Long & Aldridge.

Several other PPPs are also in development across Pennsylvania, New Jersey and New York. But the opportunities have so far been largely limited to government authorities, or independent entities that own and operate their own infrastructure assets. That’s because none of the three states have yet passed comprehensive legislation allowing their governments to enter into PPPs for state-owned assets. Authorities like the Delaware River Joint Toll Bridge Commission operate on their own pacts and can still choose to pursue PPPs.

In May, for example, the Port Authority of New York and New Jersey issued a request for information to gauge private investor interest in financing a replacement for its 82-year-old Goethals Bridge, which connects New Jersey with New York City’s Staten Island. If the $1 billion project reaches financial close before the Scudder Falls project, it would beat the Bridge Commission for the title of first multi-state PPP.

But the Bridge Commission seems intent on moving the project, already seven years in planning, to a speedy conclusion. The commission is expected to seek proposals for financial and legal advisors in a joint fashion, meaning that the legal and financial advisors would submit qualifications together as a team rather than separately. If the commissioners do proceed in this manner, it would indicate that they are intent on getting advisors on board quickly to proceed with the project.

The winning advisors would assess the best structure for the deal and work with the Bridge Commission for a request for proposals for the design, building, financing and operating the bridge once the improvements are done.

Rendell spokesperson Gary Tuma said the private investors would operate the bridge under long-term lease from the Bridge Commission. It would not be a sale, added.

A request for proposals for legal and financial services is expected to be issued at a special board meeting of the Bridge Commission later this month. No date for the meeting has yet been announced.