In 2009 as the initial draft of the second environmental document was nearing completion, the Port Authority began exploring alternative financing and delivery options for the Goethals Bridge Replacement Project. The agency was required to adhere to bond covenants that place caps on the amount of funds it is able to borrow at any given time. Because of other spending needs in the wake of the 2001 terror attacks, the Port Authority did not have adequate funding in its Capital Plan to implement the replacement bridge. In order to add the project to the Capital Plan, construction would have to be deferred until the funding could be assembled, or an alternative approach to the agency's standard debt financing practices would need to be identified. Management was concerned with the ongoing operational issues if the bridge's replacement were deferred for too long. Moreover, a delay in the replacement project could trigger the need for repairs on the existing Goethals Bridge, including the costly possibility of re-decking.
Although neither New York nor New Jersey had P3 enabling legislation in place, the Port Authority's Financial Analysis Group explored the possibility of pursuing an availability payment P3 procurement approach for the replacement bridge. Rather than having a private partner collect the toll revenue from the new bridge, the Port Authority would make monthly availability payments to the private partner. The private developer would leverage the agency's payments to raise the necessary financing for the bridge, leaving the Port Authority with control over the sensitive issue of toll rates.
The Port Authority would be able to pursue a P3 approach for the bridge replacement because it is not bound by the procurement laws of New York State or New Jersey. While it generally follows state law in its normal business dealings, it is not obliged to do so. Financially and legally, the Port Authority's actions must comply with its own bond covenants and the original bi-state Port Compact establishing the mandates and functions of the agency. It had recently pursued alternative design-build-operate-maintain contracts that would not have been allowed under state law on two recent projects at John F. Kennedy International Airport: the AirTrain and the new International Arrivals Terminal. This experience encouraged the agency to consider a P3 approach for the Goethals replacement.
The Port Authority retained financial and legal advisors who confirmed that an availability payment P3 structure would be feasible and would not impact the agency's bond covenants. Given the need to ensure that toll levels on the new bridge would be consistent with the agency's toll policies on its other bi-state crossings, the Port Authority would continue to set toll rates on the replacement bridge and use agency staff to collect tolls. The private partner would receive milestone payments during the construction period, followed by monthly availability payments throughout the term of the P3 concession. Although the Port Authority's financial analysis indicated that the cost of the availability payment concession approach would be greater than if the agency financed the bridge using traditional debt sources, the P3 procurement would accelerate the implementation of the project and obviate the need for ongoing repairs to the original Goethals Bridge.