All we wanted to do was get to Indiana, right?

But the price for crossing the Ohio River – largely unbeknownst to the public –  is that we’ve ended up in the middle of a multi-billion dollar experiment.

Bridges Authority officials have not exactly gone out of their way to embrace public scrutiny of the East End public/private financing scheme. After all, it would take more than a 30-second TV soundbite, which could scare the hell out of the citizenry.

It was only when former IL contributor Curtis Morrison sent out massive numbers of Freedom of Information requests back in February did we start to understand how the Indiana Bridge will be funded under a completely different methodology than the downtown bridge, which is Kentucky’s project.

That’s because lawmakers in Indiana, unlike in Kentucky, have approved public-private partnership financing for infrastructure projects. In the case of the East End Bridge, Indiana is using an “availability payment concession.”

Now, national and international media are setting up a scenario in which – a mere 35 years from now – we’ll know which is the superior financing model (and better deal for taxpayers), Kentucky’s conventional debt financing or the private-public partnership, or PPP, model in Indiana.

PPPs transfer the risk of building and maintaining bridges or roads, with the private consortia betting they can structure a payoff through efficient construction and maintenance costs coming in under projected revenue paid by the state in tolls or in guaranteed payments.

Indiana essentially is buying the bridge over time from a group of contractors. The consortium – Delaware-based WVB East End Partners – won’t merely build the Indiana bridge, but will also finance it (through the bonding capacity of the state), then sell it back to the state – not unlike a buy-here, pay-here car lot.

WVB East End Partners is composed of Chicago-based Walsh Investors LLC, VINCI Concessions S.A.S., an Italian firm and Europe’s largest private infrastructure builder, Bilfinger Berger PI International Holding GmbH, based in Germany, and other firms.

Kentucky, by comparison, will finance the downtown  bridge and reworked Spaghetti Junction interchange through conventional public financing – issuing bonds backed by tolling revenue along with funds from a big federal infrastructure loan program, the Transportation Infrastructure Finance and Innovation Act, or TIFIA.

Indiana is obligated in the deal to pay about $33 million per year over about 35 years, which works out to $1.16 billion for the East End Bridge.

While this is not exactly a sexy story at home, it’s a rather big deal for the national and even the international media representing the opposing private/public philosophies. The Economist magazine weighed in on the private side.

In a post last month, the British magazine notes that it was easier to get Neil Armstrong to the moon than it was for Kentucky and Indiana to bridge the mile of Ohio River separating the two states.

Now that the initial construction is beginning for both, the Economist calls it “one of the world’s best natural experiments for testing two methods of procuring infrastructure.”

Clearly, the non-bylined author is rah-rahing Indiana’s public-partnership model:

The most interesting comparison between the bridges is over the longer term. For the PPP bridge, responsibility for the initial capital investment has been bundled in with the 35-year maintenance and operating costs. A special-purpose entity called WVB East End partners will finance and maintain the crossing. Walsh is also a partner in this entity and Greg Ciambrone, vice-president of strategic investments, says that WVB looked at many design alternatives such as the use of LED lighting, more robust pavement and “weathering steel”, that will not need to be repainted, during the bid phase, in an effort to optimise its bid and reduce costs during the 35-year concession term.

Perhaps more interesting than the Economist post is the long, detailed comment that follows. In that comment, the clearly agitated reader, identified only as “PPPFinancier,” (which we’re guessing is not his/her real name) points out that not all public-private partnerships are the same. He/she cites a notorious case of one gone horribly wrong … in Indiana.

Indiana sold the rights to build, then toll, a 157-mile stretch in northern Indiana, the Interstate-90 Toll Road.

The road was supposed to carry 11 million toll-paying trucks per year, but more than half took a detour.

The private consortium that owns it thought they’d make millions each year, but lost millions, having to borrow money to stay liquid. And they may default.

The difference between the I-90 deal and the East End Bridge is that Indiana had no obligation to reimburse the I-90 consortium. Under the deal with WVB East End partners, Indiana is required to make an annual payment.

At least that’s how we think it works.

Moreover, for every I-90 that blows up on the private consortium, there are three PPPs that end up costing the taxpayer, such as the infamous Brisbane Tunnel in Australia. That project is likely to cost taxpayers $1 billion because of way optimistic toll revenue projections.

We’ve tried without succes to interview Indiana officials about a nuanced financing structure worthy of a Wall Street investment banking firm, hedge fund or leverage buyout firm.

Our biggest question is, “Is there an escape clause that would allow – after a fixed period of losses – WVB East End Partners to renegotiate the deal? Which could lead to higher tolls?”

They’re not talking to us.

Their standard reply is, “You ask too many questions.”

Our standard reply is, “No, the conventional media doesn’t ask enough …..”

Terry Boyd

Terry Boyd

Terry Boyd has seven years experience as a business/finance journalist, and eight years a military reporter with European Stars and Stripes. As a banking and finance reporter at Business First, Boyd dealt directly with the most influential executives and financiers in Louisville.