Complex legal efforts part of groundwork for 2 new bridges across Ohio River
Published by Indiana Lawyer by Marilyn Odendahl-December 16, 2015
On the first Saturday in December, nearly 45,000 people walked across a new Ohio River bridge connecting southern Indiana and downtown Louisville.
The walk commemorated not only the completion of the structure, named the Abraham Lincoln, but also marked a historic milestone in a large infrastructure project that has been talked about for decades. A few miles upriver is the other half of the project – a second new bridge spanning the Ohio River.
Spurred by a friendship between two former governors, Indiana’s Mitch Daniels and Kentucky’s Steve Beshear, the construction of the river crossings, which languished for years, was restarted. And as the two states developed the framework of cooperation, the effort has transformed into a unique interstate project that showcases two different methods of financing.
bridges-numbers.gifKentucky took responsibility for building the downtown bridge and elected to go with a traditional design-build model. Here the commonwealth determined the design, solicited bids, awarded a contract and sold bonds to provide funding.
Indiana agreed to construct the east end bridge, referred to as East End Crossing, which connects Utica, Indiana, with eastern Jefferson County, Kentucky. It decided to get funding through a public-private partnership. Indiana contracted with a private consortium to build, operate and maintain the bridge for 35 years. Over the life of the project, Indiana will make “availability payments†to the consortium for the upkeep and use of the roadway.
Before a shovel could break ground on construction, the project required a lot of lawyering. Teams of attorneys had to maneuver through federal highway laws as well as Indiana and Kentucky laws and regulations to hammer out agreements detailing how the states would work together during construction and once traffic begins flowing.
“It was an incredibly complex, complicated legal challenge to pull this all together in a very strict time frame,†said Kendra York, former director of the Indiana Finance Authority. “But we did it.â€
One Project, Two Bridges
Initially, the Ohio River Bridges project came with a price tag topping $4 billion. When plans were sketched in 2003, a sizable amount of the funding was to come from the federal government.
The project then stalled until a 2008 National Governors Association meeting when Daniels actively sought out his gubernatorial neighbor Beshear. They renewed the push for construction but soon realized federal funds were going to leave a significant gap that the states would have to cover.
Schultz Schultz
To shepherd the project through the early stages, the governors formed the Louisville and Southern Indiana Bridges Authority and tapped attorney and longtime Daniels associate Steve Schultz to be the executive director.
Work then began in Indiana and Kentucky to find ways to reduce the cost. When the price settled at $2.3 billion, the amount needed to build each bridge was about equal, which led the states to split the project. This opened the door for each state to choose its preferred method of financing.
Although the method is different, paying for both bridges will come from tolls. The project is expected to be completed by the end of 2016 and then motorists traveling over the river will be tolled when they cross either the new Lincoln bridge, the existing Kennedy bridge downtown, or the east end bridge. Tolls initially are projected to range from $1 to $4 for passenger vehicles and from $5 to $12 for medium and heavy trucks, according to the Louisville – Southern Indiana Ohio River Bridges Project.
A caveat to the tolling is that the downtown crossings are expected to carry the most traffic and, therefore, will collect about twice as much revenue as their east end counterpart. According to the 2014 Louisville-Southern Indiana Ohio River Bridges Project Financial Plan, the downtown bridges will gross about $6.4 billion in tolling revenue through 2058 while the east end will gross $3.2 billion.
Again at the direction of the governors, Indiana and Kentucky agreed to evenly split the tolls.
With the overall framework established and both states agreeing to let the other look over their respective shoulders, Indiana enlisted Ice Miller LLP in March 2012 to help fill in the details to make the whole project work.
Dankert Dankert
“Each had to commit to the other to get their job done because the project doesn’t work without both projects being done and collecting tolls,†said Gary Dankert, partner at Ice Miller.
Old Tools, New Uses
The team at Ice Miller, which drew attorneys from construction, real estate, and public finance practice areas, had to craft the bi-state and inter-local agreements along with the public-private partnership contract by the end of 2012.
The agreements were key in laying out the road map and mechanisms for how Indiana and Kentucky would cooperate during construction and after completion with the collection of tolls.
Hoosier attorneys and their Kentucky colleagues had to find ways to write these agreements to bring four state highway and financing agencies together to cooperate across state lines in a manner that complied with their own statutes.
The work was difficult, time-consuming and occasionally arduous. Brenda Horn, partner at Ice Miller, was on a trip to Rhode Island when she dialed into a conference call for the bridges project. She sat on the porch of the bed and breakfast, anticipating a two-hour discussion. The call bled into six hours.
Looking back, Horn said the bridges project provided an challenge for using existing statutes and regulations. The work so interested her that she believes without it, she would have retired.
“It’s sort of like you have all these tools and all of the sudden you’re going to twist them and see if we can make it work,†Horn said. “I feel blessed to have the opportunity to work on something like this that is new and different and challenging.â€
TOLL ROAD STATUTE
The Ice Miller team also had to assist with the public-private partnership. The Daniels administration wanted to engage the private sector and after reviewing the different types of partnerships, decided incorporating an “availability payment†would give Indiana the best deal.
The east end bridge contract was awarded to WVB East End Partners, a consortium of Walsh Investors LLC, VINCI Concessions and Bilfinger Project Investments. Along with designing and building the bridge, WVB also agreed to oversee its maintenance, such as fixing potholes, clearing snow and refurbishing the structure, for the next 35 years. As long as the consortium meets the operation standards spelled out in the agreement, the state will make the full payment.
State officials tout this plan as providing an incentive for the consortium to innovate and build the best bridge it can. In addition, the financial risk is shifted from the taxpayers to the private sector because any costs that exceed the availability payment amount will be borne by the consortium.
“We felt like this was how the state could get the most bang for its buck,†said York, now an attorney with American Structurepoint Inc.
For composing the agreement between the state and the consortium, Ice Miller turned to the statute passed by the General Assembly in 2006 for the lease of the Indiana Toll Road. Indiana Code 8-15.5 granted authority to the state to enter into public-private partnerships and set the groundwork for moving forward with the bridge construction.
Without that law on the books, the attorneys say the public-private partnership agreement with WVB could not have been done. Along with setting the legal grounds for the agreement, the lease of the toll road also provides some valuable lessons used in the bridge project, such as how to transfer thousands and thousands of parcels very quickly.
The East End Crossing is scheduled to open in October 2016. What the name will be and whether people will have the opportunity to walk it remains to be seen, but looking back over the work they did and the deadline they met, Dankert succinctly summed up the feeling of the team.
“We were thrilled,†he said.•
