While conducting the Tier 2 studies, INDOT explored various options to finance and construct I-69. In 2006, the state enacted legislation creating a statewide program of highway improvements called Major Moves. The state funded the program with revenue received from leasing the Indiana Toll Road (I-90) to a private entity. One of the priorities of the Major Moves program was the extension of I-69 from Indianapolis to Evansville. For a short time, Indiana's governor proposed that I-69 between Evansville and Martinsville (Sections 1-5) be developed as a (potentially private) toll road, as authorized in the Major Moves legislation. This idea was dropped by the end of 2006 due to significant local opposition along the route. The Governor also advocated for a privately constructed toll road called the Indiana Commerce Connector to allow trucks to bypass downtown Indianapolis. His proposal for that project suggested toll revenues could help pay for I-69 between Indianapolis and Martinsville (Section 6), but this plan also attracted substantial opposition and was abandoned in 2007.
Ultimately, Sections 1 through 3 were constructed between 2008 and 2012 using a combination of funds from the Major Moves program and traditional funding (primarily taxes on motor vehicle fuels). Section 4, which began construction in early 2012, also relied upon these funding sources. INDOT initially assumed the same funding approach would be used to pay for Section 5-estimated at the time to cost between $350 and $500 million-using a traditional design-bid-build procurement. However, with the state under budgetary stress from the economic downturn and I-69 Sections 1-4 consuming a significant portion of INDOT's available funding, it became clear by 2011 that the anticipated funding sources would be insufficient to build Section 5.
At the same time, legislation enacted in 2011 strengthened INDOT's ability to enter into private agreements to finance and build highway projects. The change in the law removed a requirement for the state legislature to approve P3 projects on an individual basis. Instead, they would only require the Governor's approval, while maintaining a role for legislative review. The impetus behind this change was to reduce the amount of time and uncertainty involved in gaining governmental approvals for P3 projects, which would in turn attract greater interest in projects in the state from would-be private investment partners. However, the legislation did not apply to I-69 until further changes were enacted in 2013. This was due to significant opposition to I-69 in the Bloomington region, which peaked during 2010-2012. As a result, P3 authorization requirements for I-69 were unchanged initially, but by 2012 the state legislature approved INDOT's active pursuit of a P3 strategy for Section 5.
Two months after the release of the draft Tier 2 environmental study for Section 5, INDOT issued a Request for Information (RFI) in December 2012 to gain industry feedback on the potential for developing this segment on a P3 basis. With access to private sector financing essential, INDOT contemplated two alternative models to build the project.
The first model called design-build-finance allows a private entity to design and construct a facility using its own funds (equity) and/or its own financing (at least for a portion of the project's cost) and receive reimbursement from the public agency sponsor at a later date, which is often tied to successful delivery of the project. The other model, a full design-build-finance-operate-maintain concession, also includes responsibility for the long-term operation and maintenance of the facility once completed. If using the full concession option for Section 5, INDOT would compensate the private partner with annual availability payments for a set number of years based on the satisfactory performance and upkeep of the roadway.
Using the RFI, INDOT sought comments from responding firms on the technical and financial feasibility of the two procurement options. Following the responses received, IFA and INDOT made the decision in early 2013 to use the design-build-finance-operate-maintain P3 model to procure I-69 Section 5. The rationale for INDOT and IFA selecting this method included the ability to share project risks with the private partner (such as on-time completion), the ability to encourage innovative design approaches to meet operational performance standards, and the budget certainty of making fixed availability payments for guaranteed facility upkeep.
As determined previously, the project would not involve tolling but instead leverage INDOT's annual funding appropriations to attract low-cost private sector finance. The successful completion of a similar availability payment concession agreement to construct the East End Crossing in Southern Indiana near Louisville, Kentucky provided further impetus for selecting this P3 model.