A new managed toll-lane on a 25-mile stretch of I-55 could be finished in as little as three years if the Illinois Dept. of Transportation allows a private company to design, build and finance the construction in exchange for toll revenue.
The proposed private highway financing scheme — which has been adopted in other states — is called a “public-private partnership” or P3. The financing proposal was presented at a public hearing at the Holiday Inn, Countryside Dec. 7.
The Illinois General Assembly approved the Public-Private Partnerships for Transportation Act in 2011, but this is the first time an IDOT project has proposed using this financing method to build a highway, said Steve Schilke, IDOT project manager.
“If we don’t finance this with P3, and use the traditional approach of design-bid-build, we are looking at sometime in the 2020s,” Schilke said.
The project, predicted to cost $425 million, will create two optional toll lanes within the inner median of I-55 between Chicago and I-355.
“Managed lanes are really an expressway inside of an expressway,” said Randy Blankenhorn in an explanation video at http://www.i55managedlaneproject.org. “It’s a way to manage traffic so we keep things moving throughout an expressway system.”
IDOT predicts the managed lane, which will stretch southeast through Cook and DuPage counties into Will County, will reduce morning and evening rush-hour travel times by 10-15 minutes in the express toll lanes and 5-10 minutes in the existing lanes.
The Federal Highway Administration recommends adding managed lanes within the median as the best way to reduce congestion, add capacity and add an optional toll lane for express travel, according to materials presented at the hearing.
Privatizing the highway still has a lot of questions, such as how toll collection will integrate with the IDOT-owned I-Pass system, whether the private company will maintain the roadway, and who will plow the snow, Schilke said.
Privatizing big infrastructure construction has been boosted by President-elect Donald Trump as a way to replace airports and bridges and other big public works projects in the U.S. IDOT said the benefits of a P3 construction include delivery that’s on-time and on-budget, access to cutting-edge technical innovations, streamlined planning and a quick access to capital that could otherwise be bogged down waiting for federal and state transportation funds.
“You have to remember that these are private companies running the highways, who are in it to make money,” said Rick Kuner of Citizens for Appropriate Transportation, an advocacy group studying the proposed expansion of I-290.
At the federal level, the FHA encourages private companies to take on private highways by reducing risk. The feds have subsidized P3 transpiration projects by guaranteeing up to 49 percent of the project cost with a Transportation Infrastructure Financing and Innovation Act (TIFIA) credit subsidy. Some private companies also negotiate “concessions” from the state departments of transportation to guarantee a certain minimal income if toll revenue doesn’t meet a certain threshold.
That’s where risks to taxpayers can pop up, said transportation editor Angie Schmitt, of StreetsblogUSA.com. A number of privatized toll road companies have gone bankrupt over the past several years partially because of over-optimistic traffic prediction studies, she said.
The operator of the privately-run Indiana Toll Road, ITR Concession Co. LLC, declared bankruptcy in 2014, after a 22 percent predicted increase in traffic over seven years failed to materialize. Instead, traffic decreased by 11 percent, according to an article by Schmitt. Other privately owned toll roads also have gone bankrupt including the I-10 South Bay Expressway in San Diego, the Southern Connector in South Carolina and highways constructed by American Roads in Alabama and Detroit, Schmitt has reported.
Downers Grove Realtor Kris Jepsen, who attended the hearing, said he lived for many years near the I-10 in San Diego, which installed a managed toll-lane.
“[The optional toll lane] cut driving times for people. If you were in a hurry or had to travel for work you would take the toll road. It worked pretty well.”
Jepsen said the shortened commute times drove real estate values higher in outer rings of San Diego. He hoped the managed lanes on I-55 would have the same effect in Chicago suburbs.
But Australia-based Macquarie, Group, Ltd., the company running San Diego’s South Bay Expressway, declared bankruptcy in 2011 and defaulted on the Federal Highway Administration TIFIA subsidy, which lost $81 million. The TIFIA had to guarantee another credit subsidy for the subsequent owners, according to the San Diego Union Tribune. Again, traffic patterns did not live up to predictions, causing the tollway to be financially unsustainable.
“There’s a big question about the price of tolls, what is the market willing to bear, how receptive people are to paying tolls,” Schmitt said. This is especially true when a free option is also available, such as the existing lanes in the I-55 corridor.
IDOT says traffic on the I-55 is currently around 180,000 cars daily.
“The vehicles per day are based on projections by the Chicago Metropolitan Agency for Planning,” wrote IDOT Spokesman Guy Tridgell in an email. “Of the approximately 200,000-plus vehicles per day projected on the corridor by 2040, up to an estimated 18 percent would utilize the one toll lane in each direction,” Tridgell said.
In September, IDOT met and an “industry summit” with 18 private firms in Chicago to hear ideas on how to design, build, operate and maintain the highway under a P3 arrangement with the state. Among the companies participating was Macquarie Capital (USA), a subsidiary of the Australian company. Other companies from South America, Europe and US firms from outside Illinois participated, as well as some Illinois companies such as K-Five Construction Corp. and Walsh Construction.
The next step for the P3 finance model for the I-55 buildout is a joint resolution passed in the General Assembly, maybe this spring, Schilke said. After that, IDOT will present a “request for qualifications,” then compile a short-list and put the project out to bid.
— IDOT considers privatizing I-55 toll lane project —