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Massachusetts Department of Transportation
(MassDOT)
Route 3 South Managed Lanes Project
High Level P3 Project Suitability
Assessment Report
September 11, 2013
Contents
Proposed Project Description
Project Background and Status
Commonwealth Considerations
Transportation Need and Benefit Statement
Assessment Criteria
Potential Delivery Structures
Key Findings Summary
Considerations and Challenges
Potential Next Steps
Appendix: Market Precedents
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Proposed Project Description

The Project includes the construction of HOT (High
Occupancy Toll) lanes, also known as “managed
lanes”, between:
–
I-93 / Route 3 interchange at Braintree at the north
end; and
–
Exit 14 (Route 228) in Rockland at the south end

The Project would add one lane in each direction,
creating 4 lanes of traffic from the I-93/Route 3
interchange to Exit 16, and 3 lanes of traffic from Exit
16 to Exit 14

The Project could also include expansion of 3 lanes
continuing down to Exit 11, as MassDOT examined
the widening of Route 3 South from Exit 16 to Exit 11
in 2005

Different tolling policies may be used in order to
manage congestion (e.g. dynamic pricing, time of the
day pricing)

In 2012, MassDOT received an unsolicited proposal
for the addition of managed lanes from the I-93/Route
3 intersection to Exit 14 under a P3 model
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Project Background and Status
This report is part of the high-level screening process used to assess the suitability of delivering a project under
a Public-Private Partnership:
Project Background
Project Name:
Route 3 South Managed Lanes
Sponsoring Agency:
Massachusetts DOT
Preliminary Schedule
 High level & detailed level P3 assessment – Fall 2013 (anticipated)
 NEPA process initiation – Late 2013 (anticipated)
 Project development – Early 2014 (anticipated)
 Project procurement – Mid 2014 (anticipated)
 NEPA clearance – Late 2015 (anticipated)
 Construction commencement – 2016 (construction period estimated at 2 years) (anticipated)
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Commonwealth Considerations
Project-specific Considerations:

Reduce Congestion – Reduce congestion on Route 3 South in both the north and south bound directions
and improve travel times for daily commuters living in the area

Environmental – Allow vehicles with a certain number of riders and above to use the HOT lane free of
charge to encourage carpooling and a reduction in vehicle emissions
Indicative drivers for P3 delivery:

Generate revenue that will be used to fund project costs

Accelerate development of the project

Transfer risk
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Transportation Need and Benefit Statement
Transportation Need and Benefit Statement
To reduce
congestion on
Route 3,
particularly during
peak rush hour
periods, and
reduce vehicle
emissions by
encouraging HOV
use.
Description of surrounding area:
 The section of Route 3 South that is under consideration for managed lanes is a freeway, connecting Cambridge to
Cape Cod
 The road is currently the only limited access highway serving the South Shore
 The highway was designed in the 1950s and portions were opened to traffic throughout the 1950s and completed
entirely by 1962
 The highway extends from the Southeast Expressway/Route 128 “Braintree split” in Braintree to the Rotary at the
Sagamore bridge in Bourne (approximately 40 miles)
 The northern 4 miles of Route 3 South between Braintree and Exit 16 in Weymouth consist of three travel lanes in
each direction; from Exit 16 in Weymouth to the Rotary in Bourne, the highway consists of two travel lanes in each
direction (except for a ½ mile section at Exit 4 near Plymouth where there are three lanes)
 There are few alternate routes available for direct/long distance travel (only a few that provide local/less direct travel
alternatives, such as Route 53 and Route 3A)
How will the project address the existing transportation need?
 The Project could help alleviate congestion by adding one HOT lane in each direction along Route 3 South from the
Braintree Split to Exit 14 (or Exit 11)
 Based on 2008 data, depending upon the segment of the project examined, the average daily traffic ranges between
70,000 and 80,000 vehicles per day in each direction
 These sections of Route 3 South experience extreme traffic volume and congestion, particular during the peak rush
hour periods (6-9am and 4-7pm, seven days a week), that can exceed 2,000 vehicles per lane per hour. Since 1985, the
shoulder of certain high volume sections are used as another lane for general traffic, due to high volume and
congestion.
 Different tolling policies may be used to help manage congestion. For example, tolls could be set at a higher level
during peak traffic hours (time of the day pricing) or could change in frequent, real-time intervals to maintain a
minimum speed (dynamic pricing)
 MassDOT is considering High Occupancy Vehicles policies to encourage environmental friendly commuting options
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Assessment Criteria
High-Level Screening Criteria –Commonwealth Considerations
Yes
Addresses Commonwealth’s
Considerations
No
TBD
The Project addresses considerations by:
 Adding lane capacity to reduce traffic congestion along the Route 3 South
corridor (particularly during rush hour, 6-9am and 4-7pm)
 Allowing for the introduction of environmentally friendly policies by allowing
car poolers (i.e., high occupancy vehicles) to use the HOT lanes at no or lower
cost, in certain circumstances
X
Yes
Satisfies Public Transportation
Need
No
TBD
Addresses Priorities Identified in
State, Regional and / or Local
Transportation Plan
Supporting Info
 The addition of one lane per direction will reduce congestion level and improve
travel times along Route 3
 HOV policies can be used to incentivize car pooling and use of public transit to
reduce congestion
X
Yes
Supporting Info
No
TBD
X
Supporting Info
 The project is not yet included in the state/local/regional transportation plan
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Assessment Criteria (Continued)
High-Level Screening Criteria - Opportunity for Acceleration, Innovation and Efficiencies
Yes
Opportunity for Private Sector
Innovation
X
Supporting Info
 The Project could offer an opportunity for the private sector in terms of enabling
cost efficiencies in construction, operations and maintenance, and whole life
costing if the private sector were to construct operate and maintain the project
 The level of technical complexity is similar to other P3 HOT lanes projects
 There are no capital expenditure estimates for the whole project scope, but
typically more efficiencies can be generated for projects with a cost in excess
of $200-300 million
No
TBD
Supporting Info
 There is an opportunity to transfer revenue risk (of the toll revenue on the HOT
lanes), finance risk, construction risk, operations and maintenance risk, as well
as lifecycle risk to the private sector
 Revenue risk transfer depends on policy objectives such as maximizing
throughput versus maximizing revenue, toll and HOV policy, and minimum speed
requirements
X
Yes
Accelerated Project
Development
TBD
X
Yes
Ability to Transfer Risk
No
No
TBD
Supporting Info
 Private sector incentives, such as liquidated damages and commencement of
payments after completion may be introduced to expedite project delivery
 In addition, currently there is no public funding budgeted for the project; hence,
leveraging future tolls may allow acceleration of the project
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Assessment Criteria (Continued)
High-Level Screening Criteria – Funding/Financing
Yes
Ability to Raise Capital
No
Supporting Info
 Based on market precedent, the market can finance managed lanes projects
either under an availability payments or toll revenue mechanism
 Due to the limited track record on the operating performance of managed lanes
projects, lenders and credit rating agencies are more conservative in the
assessment of projects where debt is raised against a revenue pledge
 Ability of to fund project is subject to market conditions, financing of any
funding gap and risk allocation
X
Yes
No
Potential to Generate Revenue
and Funding Requirement
Yes
Market Precedent
TBD
X
No
TBD
Supporting Info
X
 The Project will generate revenue through the collection of tolls from the users
managed lanes
 How much revenue that could be generated is yet to be determined, given that
no traffic studies or tolling analyses have been completed at this time
 Currently, there is no anticipated funding for the project
TBD
Supporting Info
There is extensive market precedent for projects similar to this project being
pursued as a P3. Examples of such projects include:
 DBFOM/Toll Concession: Capital Beltway (Virginia), NTE (Texas), LBJ (Texas),
I95 (Virginia), US 36 (Colorado), SR-91 (California)
 DBFOM/APs: I595 (Florida)
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Assessment Criteria (Continued)
High-Level Screening Criteria - Readiness
Yes
No
Readiness
Yes
No
Consistent with Federal
Requirements
Yes
Can Be Structured as a P3 ?
X
No
TBD
Supporting Info
X
 There has been one draft environmental study completed of a section of Route
3 South (from Exit 16 to Exit 11), however no official environmental studies
have been completed.
 Additionally, there is no funding currently identified for the project
TBD
Supporting Info
X
 Draft EIS documentation has been developed but hasn’t yet been reviewed by
FHWA
 Environmental impact of road widening will need to be further assessed. For
example a potential increase in traffic counts due decreased congestion and
its relationship to the level of tolls
 Project not yet included in the State Transportation Improvement Program (TIP)
 Environmental clearance could take up to 18-24 months
TBD
Supporting Info
 Market precedent indicates that the project can be structured as a P3.
 Different payment mechanism can be used for the financing of the project,
including availability payments or toll revenue
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Potential Delivery Structures
Potential Delivery Model
Features
Risk transfer: A developer will be responsible for the delivery of the project under a fixed-price, datecertain design-build contract and will be responsible for O&M during the life of the contract (typically a
50-75 year contract term). Toll setting control as well as traffic and revenue risk are transferred to the
developer. Tolling operations are the responsibility of the developer.
Option 1: DBFOM – Toll Concession
Payment mechanism: The developer will pay for O&M, life-cycle costs as well the initial capital
investment through the collection of tolls. Any funding gap will need to be covered by a Commonwealth
contribution.
Private investment: Typically, under this delivery model, projects are funded with a combination of
debt and equity at a ratio between 65/35% to 80/20%.
Option 2: DBFOM – Availability
Payments
Risk transfer: A developer will be responsible for the delivery of the project under a fixed price date
certain design build contract and will be responsible for O&M during the life of the contract (up to about
a 35-year contract term). Traffic and revenue risk and tolling policy are retained by the Commonwealth.
Specific activities may be retained by the Commonwealth (e.g. snow & ice removal), if it is deemed
more cost effective. Tolling operations may be outsourced to the developer, if it is deemed more cost
effective.
Payment mechanism: The developer may be repaid by the Commonwealth with milestone payments
during construction, construction completion payments, and/or a stream of availability payments post
construction completion. Payments are additionally subject to performance deductions. The
Commonwealth may fund payments though state funds and /or toll revenue.
Private investment: Typically, under this delivery model, projects are funded with a combination of
debt and equity at a ratio between 85 /15% to 90/10%.
*Please note that these are illustrative examples. Other options or variations on these themes may exist.
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Key Findings Summary
High Level P3 Suitability Assessment
Addresses Considerations:
Yes. The project the Commonwealth’s considerations by aiming to reduce congestion on highly traveled
roads and reduce vehicle emissions by encouraging HOV use. .
Opportunity for Acceleration,
Innovation and Efficiencies
Yes. This project has the potential for private sector acceleration by transferring construction risk to the
private sector. This project can also allow for innovation and efficiencies by transferring operations and
maintenance and long term capital maintenance to the private sector. If tolling operations were also to
be transferred to the private sector, this could allow for additional potential efficiencies.
Funding/Financing:
TBD. Revenue levels are not know yet and there is no dedicated funding for this project from the
Commonwealth.
Readiness:
TBD. No environmental work has been done on the project site to date. Traffic and revenue as well as
tolling analyses will need to be completed on the project in order to determine necessary project funding
and if the public sector can provide the funding needed.
Can the project be structure das a P3?
Yes
Move to the next phase for further analysis?
[TBD by the Commission]
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Considerations and Challenges

Identifying the optimal north and south limits of the project

Interface issues for any improvements along the corridor beyond the managed lanes

Policy consideration of maximizing throughput versus maximizing revenue

Operational and commercial issues in relation to a single managed lane per direction

Buffer versus barrier separation of HOT lanes from general purpose lanes

Tolling policy (dynamic tolling to maintain minimum speeds, pre-determined time-of-day rates, etc.)

Need for public funding will be subject to level of publicly acceptable tolls

Updating environmental documents based on preferred project length

HOV policy and park & ride facilities

Traffic management during construction
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Potential Next Steps

Commission a traffic & revenue study on a segment by segment basis

Consider policy objectives for tolling

Conduct an operational assessment of managed lanes project (e.g., implications of a single HOT lane per
direction and its limitation on throughput and revenue generation)

Refine preliminary capital and O&M expenditures on a segment by segment basis

Estimate cost of video/electronic tolling equipment on a segment by segment basis

Perform financial analysis of implementing tolls on the Route 3 managed lanes project

Identify potential Commonwealth contribution to project

Assess options for various business models (delivery and payment mechanisms) and the impact to MassDOT

Commence local stakeholder discussions to ensure project support and coordination
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List of References
Specific information in this report came from the following sources:
Interview with Frank DePaola, Administrator – Highway Division, on August 1, 2013
Draft Environmental Impact Study, 1/1/2005
Route 3 Traffic Volume Diagrams, 2008
Three-page unsolicited proposal presentation form unsolicited proposer regarding HOT lanes proposal on Route 3
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Appendix: Market precedents
Market Precedent/Case Study
I-95 HOV/HOT Lanes Project
Characteristic
Project Detail
Project Type
Brownfield
Sector
Transportation – Roads
Description
The Project involves the conversion, expansion and extension of 29
miles of HOV/HOT lanes on I-95 from Garrisonville Road to Stafford
County to Edsall Road in Fairfax County
Funding Details: $925 million
Public sponsor
Virginia Department of Transportation
Advisor
KPMG
Private sector partner
95 Express Lanes, LLC (Fluor / Transurban – led consortium)
Status
Financial Close – July 2012
Term
76 years
Project size
$924.7 million
Delivery model
DBFOM – Dynamic Toll concession
Payment mechanism
Revenue / demand risk





$308.4 million TIFIA
$292 million Equity
$252.7 million PABs
$71.1 million Public Grants
$0.5 million Interest Earnings
Public
Grants
8%
TIFIA
33%
PABs
27%
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Equity
32%
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Market Precedent/Case Study
I-95 HOV/HOT Lanes Project
I-95 HOT Lanes Map
Procurement Schedule
June – 2005
Proposals Received
November – 2005
Preferred Bidder Selected
July – 2012
Financial Close
Lessons Learned
Delivery Strategy
 Understand the balance
between innovation and
competition
 Be clear on the pros and cons
of TIFIA, particularly under a
split commercial and financial
close
Delivery Implementation
 Where it makes sense use a
‘hard bid’ procurement
structure to drive competition
 The rating agencies are taking
a hard look at revenue risk
transactions
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Market Precedent/Case Study
I-495 Capital Beltway HOT Lanes Project
Characteristic
Project Detail
Project Type
Greenfield
Sector
Transportation – Roads
Description
The 14 mile Project includes construction of four new lanes and the
conversion of four existing lanes to HOT lanes, refurbishment of 12
interchanges, and adds new capacity to the DC region’s most
congested route
Public sponsor
Virginia Department of Transportation
Advisor
KPMG
Private sector partner
Fluor Enterprises and Transurban Group
Status
Financial Close – December 2007
Term
80 years
Project size
$1.6 billion
Delivery model
DBFO
Payment mechanism
Revenue/demand risk
Funding Details: $1.6 billion



$590 million PABs
$590 million TIFIA
$409 million Public Grants
Public
Grants
26%
PABs
37%
TIFIA
37%
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Market Precedent/Case Study
I-495 Capital Beltway HOT Lanes Project
I-495 HOT Lanes Map
Procurement Schedule
April – 2005
Comprehensive agreement
signed with Flour and
Transurban
September – 2007
In-principal agreement signed
between Flour/Transurban
and VDOT
December – 2007
Financial Close
Lessons Learned
Delivery Strategy
 Competition of ideas is as important as price
competition
 Agency has a major due diligence process
prior to financial close
 Build in-house staff capabilities
 Track financial trends
Delivery Implementation
 Lead time to financial close is lengthy
 Design period upon financial close is short
Other
 Concessionaire wants the road open as soon
as possible
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