Anatomy of a deal: Calcasieu Bridge’s public-private partnership winner

One way to tell that the public-private partnership to replace Louisiana’s Calcasieu Bridge has gained national attention in P3 and transportation infrastructure circles?

“People can actually pronounce it now the correct way,” joked Shawn Wilson, Louisiana’s former transportation secretary, who ushered the years-long project through early planning, procurement and nearly to completion. (It’s pronounced KAL-kuh·shoo.)

The winner in the Public-Private Partnership Financing category of The Bond Buyer’s Deal of the Year awards, the Louisiana Public Facilities Authority’s $1.33 billion private activity bond financing for the new I-10 Calcasieu River Bridge marks the state’s second P3 and its largest and most complex to date.

The road to financial close was littered with obstacles, illustrating how P3s structured with tolls face political opposition that require high-level administrative and political support. But throughout the process, stakeholders continued to negotiate and ended up crafting a final contract with an uncommon provision that gives the state a piece of future toll revenue.

In addition to replacing the bridge, the project calls for widening the interstate to six lanes, new bridge approaches, interstate roadways and ramps, I-10 service roads, and interchanges.

“This project is the most convoluted project I think I’ve ever seen in my 18-plus years history,” Wilson said, describing a site dense with utilities, high-pressure pipelines, rail lines and heavy commercial and residential traffic that crosses the nearly 70-year-old span every day.

Then there was the cost. Louisiana, which funds most of its transportation infrastructure with a gas tax, could not pencil out the project on its own, Wilson said.

“We were struggling in terms of the overall state’s revenue,” he said. “We knew the only way to deliver this was using a public private partnership, using innovation, whether it was discretionary grants, whether it was a [Transportation Infrastructure Finance and Innovation Act] loan, whether it was tolls — this was an all-of-the-above project.”

And then there was the political opposition.

Last October, state lawmakers voted down the project. The vote came after a three-year procurement period and two months after the state brought in Calcasieu Bridge Partners, a syndicate consisting of Plenary, Acciona, and Sacyr, as the private partner.

Skeptical lawmakers didn’t like the proposed toll rates, which commercial truckers were lobbying hard against. Outgoing Gov. John Bel Edwards, a Democrat who was one of the project’s biggest cheerleaders, was term-limited out of office in January. The level of support from incoming Gov. Jeff Landry, a Republican, remained unclear.

In February, however, two months after taking office, Landry revived the P3 by announcing a renegotiated contract. The new concession had the state kick in more money on the front end to lower the large truck toll rates, and receive 15% of future toll revenue. Landry called it “a hell of a deal,” and lawmakers went along with their new governor to approve the project.

“Time ran out on our administration because of politics, quite frankly,” said Wilson, who had resigned earlier in 2023 to mount a gubernatorial run. He’s now at WSP, as national agency coordination leader for transportation and infrastructure.

The same GOP lawmakers who voided the deal came back under Landry and approved it, he said. “And we’re grateful that they did, because at the end of the day, the citizens win. This was not about credit. This was about delivering infrastructure in a way that was going to produce the most value with the least amount of risk exposing the citizens of the state.”

The new contract calls for the state to kick in an additional $409 million to buy down the toll rates.

The remaining funding patchwork remains largely the same: a $150 million federal Mega grant; $100 million in American Rescue Plan Act funds; $240 million from six years of vehicle sales taxes; $85 million of general obligation bonds; $75 million from the Transportation Trust Fund; and $150 million from the general fund.

Tolls will not be charged until the new bridge is open to traffic. Construction works are expected to begin in 2026 with the bridge opening to traffic in 2031, according to Sacyr.

The agreement giving the state a roughly 15% piece of annual toll profits after operations and maintenance, which will go to further buy down toll rates, shorten the 50-year lease, or toward infrastructure projects in the area, marked a unique feature of the deal, said Taylar Hart, executive director and head of infrastructure credit strategy at JPMorgan, which ran the books on the deal with Wells Fargo Securities.

“It’s not necessarily the norm but it is becoming more popular,” Hart said. “It’s a very smart way for a governmental entity to be engaged with these projects over the long term.”

After the revised contract was hammered out, the pricing date was again delayed by a change order related to the alignment of the roadway to the rail lines, Hart recalled.

“We had to be very nimble with our timing because of the different dates we had as commercial close was pushed out over time,” she said.

The underwriters ended up bringing the bonds to market in August, amid a summer of heavy private-activity bond supply that offered plenty of choices to the relatively narrow pool of PAB buyers.

The team took its time to shop the deal.

Moody’s Investors Service, which rated the bonds Baa3 with a stable outlook, released a report that helped explain the inaugural credit to potential buyers.

The bankers held a “very active” two-week marketing period, meeting with investors, digging into offering documents and consultant reports, Hart said. Despite the heavy PAB supply, “our offering stood out for the nature of the project and the ratings category, so we were able to command a lot of attention.”

Throughout the turbulent process, from the politics to the market, the key words were patience and perseverance.

“There were a lot of moments of saying, ‘Is this going to happen and is the will there?'” Hart said. “But at every inflection point all the stakeholders stayed at the table and in the end it got done.”