The St. Louis Regional Business Council (RBC) commissioned a study by Goldman, Sachs & Co. (Goldman Sachs) to ascertain the feasibility of a toll concession. Goldman Sachs is a leading Wall Street investment banking company with extensive experience in large infrastructure projects and toll concessions. It assisted the City of Chicago to realize $1.8 billion by auctioning the Chicago Skyway and turning it into a PPP concession. Most recently, Goldman Sachs advised the State of Indiana on a concession sale for the Indiana Toll Road, resulting in a bid of over $3.8 billion for a 75-year lease on the facility.
Goldman Sachs reports that a concession for the new I-70 Mississippi River Bridge "is a viable alternative" and reports that "a wide range of values is achievable." They believe a concession should potentially raise $700 million to $950 million based on an average $2.00 toll increasing at 2.5% a year over a 99 year concession with a 75% operating margin. This valuation is based upon a set of assumptions, particularly around traffic flows, and would need to be validated prior to moving forward. The model assumes all existing bridges remain toll free and the proposed bridge has an opening year average daily vehicle rate of 47,000, increasing annually at a rate of 2.5%. This valuation assumes that the concessionaire bears responsibility for payment of all operating and maintenance expenses associated with the bridge, as well as a set of capital expenditures.
Goldman Sachs reports that a concession sale garners more value for the taxpayers than a traditional public authority financing. Public authorities typically structure loans based on no more than 40 years payoff of debt, and assume no residual value. By contrast, with a toll concession, of typically 75 to 100 years, the investors see growth in value well beyond 40 years and do not require the same "coverage ratio" as would be necessary on a bond financing secured by toll revenues. Given these factors, investors will pay and invest far more up front than can be raised in a traditional public authority bond sale. Another benefit of the PPP model is the efficiency with which private operators are likely to be able to operate the facility, which is priced into the value paid for the concession. Additional value is derived from the tax treatment of depreciation and interest cost deductibility their cost of capital and increasing the amount they may pay for a lease on an asset.