Cline Bridge turnover deadline looms

2012-08-19T00:00:00Z 2014-01-20T16:47:18Z Cline Bridge turnover deadline loomsKeith Benman keith.benman@nwi.com, (219) 933-3326 nwitimes.com
August 19, 2012 12:00 am  • 

Despite a May announcement of a deal to build a new Cline Avenue Bridge, documents obtained by The Times show the state has yet to conclude a critical land-swap agreement with the bridge's private developer.

Under that agreement, still in draft form, the Indiana Department of Transportation will cede the right of way for the bridge to private developer United Bridge Partners in exchange for land the bridge company owns.

State officials have until Sept. 4 to conclude that agreement, according to a letter of intent obtained by The Times from the city of East Chicago under a public access records request. Without the land swap, no bridge can be built.

INDOT plans to finalize its land-exchange agreement with the bridge developer by September, according to INDOT spokesman Will Wingfield. The actual exchange of property will not take place until demolition of the current bridge is complete later this year.

"At this point, we are hoping to meet that time frame," Wingfield said.

The Cline Avenue Bridge was condemned in December 2009 after bridge inspectors found interior cables had rusted out, gravely weakening the 1.2-mile structure. State officials at various times have pledged to replace the bridge or construct a permanent detour. But those plans have been supplanted by the private toll bridge deal now nearing completion.

The letter of intent with INDOT and a separate agreement between the city of East Chicago and United Bridge Partners reveal other previously unknown provisions of the deal.

The East Chicago agreement gives the bridge developer four years to complete the project after it has obtained all necessary permits and governmental improvements. That means if all environmental permits were obtained by the end of this year, the developer would have to open the bridge by the end of 2016.

It also contains provisions that should help solidify the bridge's long-term financial viability but may limit the city's options when it comes to future transportation projects.

The most prominent of those is establishing a permanent "no-build zone" for new bridges, public or private, along the Indiana Harbor and Ship Canal, including its two branches. Anyone who wants to build a bridge over the waterway would need the express permission of United Bridge Partners or successor companies.

The only exceptions to the ban will be for railroad bridges and the Indiana Toll Road. INDOT would be allowed to maintain and improve its existing bridges.

Mayor Anthony Copeland said the no-build zone was included in the agreement so "late comers" cannot "saturate the market" by building other bridges. He compared it to the situation with casino boats, where additional boats steal market share from others.

"I think that's just to make sure they can recoup their investment over time," Copeland said.

 

The tolls

The bridge developer will recoup its investment by collecting tolls. Unlike the lease agreement that privatized the Indiana Toll Road for 75 years, the East Chicago agreement does not give the city or state any control over tolls.

Toll rates for the new bridge have not yet been developed. But tolls have been published for the soon-to-open South Norfolk Jordan Bridge in Virginia, which also is being built by United Bridge Partners. That bridge will charge tolls ranging from $2 to $9 per crossing.

The $2 toll is for cars with E-ZPass transponders. The highest toll of $9 will be charged to semitrailers at rush hours that do not have transponders and have not registered their license plates with the bridge operator.

Neither United Bridge Partners, nor its construction partner, the Figg Group, of Tallahassee, Fla., returned calls seeking information on financing, tolls or other topics.

 

'People will vote with their cars'

Leaving tolls at the discretion of the developer is just one way the East Chicago agreement differs from the Toll Road lease, according to Robert Poole, founder of the Reason Foundation and a longtime proponent of infrastructure privatization.

Right now, the Cline Avenue Bridge and the Norfolk South Jordan Bridge are the only two highway projects in the nation proceeding under a model known as build-own-operate, Poole said. Under such an arrangement, the bridge developer owns the bridge outright in perpetuity.

"It's kind of pioneering," Poole said.

There is no doubt the open-ended nature of build-operate-own deals can make some members of the public feel uncomfortable, Poole said. However, in the case of both the Cline Avenue Bridge and Norfolk South Jordan Bridge, the public has nearby options it can use to get across the same body of water.

"People will vote with their cars," he said.

 

Financing

As with any private business deal, raising the financing needed to build the bridge will be one of the most arduous tasks to complete before work can start.

"The critical path item will be getting their financing arranged," said Ed Crooks, a vice president at Booz Allen Hamilton, an international consulting firm.

"You have to get the money lined up."

City officials in the past have broached a cost estimate of $150 million to $250 million for the new bridge. When INDOT was contemplating building the bridge itself it estimated a new bridge would cost more than $150 million.

That money could be raised in a number of ways, most likely with United Bridge Partners putting some of its own money into the deal and the rest being raised either by bank borrowing or issuing bonds, according to Poole and Crooks.

Provisions like the "no build zone" created by the East Chicago and INDOT agreements often are referred to as a "noncompete" clauses, Crooks said. Those clauses ensure investors the revenue stream would be predictable and long-term.

Even once the land swap agreement is concluded in September, there will be other immediate obstacles to overcome, according to the agreement and letter of intent obtained by The Times.

The bridge developer must obtain numerous permits from a long list of agencies as well as the approval of the U.S. secretary of transportation.

The bridge developer will be responsible for complying with all regulations under the National Environmental Policy Act, Wingfield said. It is that act that sets out the environmental review process for large public infrastructure projects.

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