Disincentivising overbidding for toll road concessions

3 │ TOLL ROAD CASE STUDIES
Box 3.7 The LBJ Express (IH 635)
The IH 635 Managed Lanes Project is designed to relieve congestion north of Dallas on 13 miles of IH 635
(the LBJ Freeway). The project involves:
••
reconstruction of the main lanes and frontage roads along IH 635;
••
the addition of six managed lanes (mostly subsurface) along IH 635 and four managed lanes stretching
west and east;
••
the addition of six elevated managed lanes along I-35E to the I-35E/IH 635 interchange.
The project is set to relieve congestion in one of the most congested corridors in Texas (and the USA), and is
being built under a PPP (CDA) between TxDOT and LBJ Infrastructure Group, which will operate and maintain the
facility for 52 years. Construction is expected to take five years.
When completed, this project will have one of the most comprehensively managed HOT lane systems in the world,
employing state-of-the-art electronic toll collection technologies and pricing mechanisms to dynamically manage
congestion on the managed lanes (and guarantee managed-lane users speeds of at least 50 miles per hour).
HOV2+ users will receive a 50% discount during peak operating periods.
Project highlights
Capital value:
US$2.2 billion
Investment value: US$2.7 billion
Stage of development: Currently under construction; completion is expected for 2015/16
Concessionaire: A consortium of Cintra Infraestructuras, S.A., Meridiam Infrastructure Finance,
and the Dallas Police and Fire Pension System.
Funding details
Private activity bonds:
TIFIA loan:
Equity contribution:
Public funds:
US$615m
US$850m
US$665m
US$496m
The North Tarrant Express and LBJ concessions both pass full traffic risk to the private sector concessionaire.
Contract award was based on the maximum scope of works. If two (or more) bidders offered the maximum scope,
the winner would be the one requiring the minimum subsidy. The subsidies were capped at US$600m for the North
Tarrant Express and US$750m for the LBJ.
Discussion
Not without basis, the USA has some strong advocates of managed-lane concessions and the approach that has
been adopted in Texas. Proponents point to the following.
••
Improved road design and economic performance. On the LBJ Express, an earlier plan to put several miles
of the new IH-635 toll lanes in a pair of bored tunnels was abandoned in favour of the present entrenched/
cantilever design—a solution less costly to build and operate (and without which the project would have not been
economically feasible).
••
Optimised investment strategy and corridor development programme (project life-cycle approach). Managedlane
policies and a progressive approach to project delivery also helped to address feasibility issues, delivering
optimised revenues (from a state perspective) under a framework that balanced capacity requirements
with economic viability (through the provision of managed toll lanes today and additional free capacity when
traffic requires it). The concessionaire is contractually obliged to construct additional lanes and other future
enlargements and expansions of the project—including the construction of additional general-purpose lanes and
additional managed lanes—and (at TxDOT’s discretion), capacity improvements on connectors to the project road
(or earlier if certain traffic levels are reached).
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