Tennessee hits gas on developing P3 toll express lanes
4 min read
The debt Tennessee expects will help pay for new highway “Choice Lanes” will be the first municipal bonds to be used for state highway construction there in more than 45 years, though they won’t be traditional state-issued debt.
The state government in recent decades paid for highways on a pay-as-you-go basis, using already collected funds for projects. As of January 2023, the state hadn’t borrowed for roads since 1978, according to a report from the Sycamore Institute, a Tennessee non-profit that provides information about policy issues.
However, in April 2023, lawmakers
Private firms will
Tennessee expects private activity bonds will provide some of the financing for the private concessionaires, said Rebekah Hammonds, Tennessee Department of Transportation public private partnership communications officer.
The department is working with the Build America Bureau at the U.S. Department of Transportation to gain Transportation Infrastructure Finance and Innovation Act loans and structure private activity bonds for the first Choice Lane project, Hammonds said.
Tennessee’s population grew by 10.9% from 2010 to 2022.
“Tennessee is the fastest-growing state in the nation and it’s important we have a transportation strategy that keeps up with the pace to prepare for continued growth and economic opportunity across our rural and urban communities,” Gov. Bill Lee’s Press Secretary Jade Byers said in April 2023. “The governor’s plan will give TDOT the resources needed to solve the state’s current and future mobility challenges.”
Optional tolled lanes to bypass congested highways are already found in Texas, Florida, Georgia, California, Virginia, and other states.
The first project will be built from Nashville to Murfreesboro along the existing Interstate 24. Murfreesboro is a city of 162,000 34 miles southeast of Nashville.
The state’s Transportation Modernization Board approved the project in February. The Department of Transportation has commenced holding public information and comment meetings. Wednesday’s initial meeting was held virtually on the department’s website but the three following meetings will be held in person in the region through Aug. 29.
Meanwhile, the state is conducting environmental studies for the planned lane in accordance with Federal Highway Administration regulations and under the National Environmental Policy Act. These should be concluded by the second quarter of 2025.
The department expects to hold additional public hearings in the first quarter of next year and put out a request for proposals in the second quarter. It expects to sign an agreement with a private developer-operator in the third quarter of 2026 and that construction will start in 2027.
The department is looking at three other locations for Choice Lanes: part of Interstate 65 near Nashville, parts of I-24 and I- 75 near Chattanooga, and part of I- 40 near Knoxville. The Transportation Modernization Board, which has five people on it, considers what projects to approve.
Joseph Krist, publisher of Muni Credit News, said of the proposed P3 structure, “To the extent that the process of providing highways in particular is quite complex, having a clear structure for design, build, and operation offsets the pressure the traditional process produces.”
Beacon Impact, a conservative Tennessee advocacy organization, “endorsed the Transportation Modernization Act that allowed for the creation of Choice Lanes because it’s one of the few things that have been proven to reduce travel times,” said Mark Cunningham, vice president of communications and outreach at Beacon Impact’s sister organization Beacon Institute.
In 2018 the Beacon Center, in a traffic reduction proposal, suggested the creation of high occupancy toll lanes either through converting high occupancy vehicle lanes into them or expanding roadways through the use of public-private partnerships.
However, Tennessee State Sen. Heidi Campbell, whose district includes I-24, said she opposed the planned Choice Lanes on multiple levels.
Campbell, a Democrat in the GOP-dominated state legislature and a member of the Senate Transportation Committee, said she was opposed to privatizing part of the state’s transportation network. In other states privatizing transportation has sometimes led to firms backing out of contracts, she said. If the Choice Lanes will turn a profit, then the state should make the profit.
Campbell said she was skeptical of the Choice Lanes altogether. The state lacks meaningful public transit. It also doesn’t have multi-modal connectivity. State government should be focused on these things, she said.
Instead, Republican Gov. Lee’s Transportation Modernization Act was mostly a “paving plan,” she said.
Once the state privatizes things, as it has for prisons and is starting to do with schools, it cedes the opportunity to participate in conversations as to how to solve issues going forward, Campbell said.
Krist was more positive about the use of a private firm to build and operate the highway. He said standard contract provisions penalizing the party for late rollout of the highway would help in making sure the road is built on time. By comparison, government entities don’t have these inducements.
P3 arrangements “make lots of sense for tolled express lane projects,” Krist said.
“Outside of the road sector, the issue is less clear,” he said, citing what happened with the Denver International Airport terminal expansion and the Purple Line project in Maryland.
Denver in 2019
The still-unfinished Purple Line has seen a change in private contractors, cost overruns and is now expected to be delivered five years late.
Tennessee’s general obligation bonds are rated triple-A by Moody’s Ratings, S&P Global Ratings, and Fitch Ratings. However, any bonds issued for the toll lanes would be the responsibility of the private operator to pay back and would be rated separately.
