Public-Private Partnership Policy Casebook/Goethals Bridge

History
The original Goethals Bridge opened on July 29, 1928 to accommodate an increase in traffic post-WWI. The bridge is owned and operated by the Port Authority and is named after the Port Authority’s first consulting engineer, Major General George W. Goethals who was instrumental in the building of the Panama Canal. The bridge spans the Arthur Kill channel connecting Staten Island, New York and Elizabeth, New Jersey and carries approximately 80,000 vehicles per day across its four ten-foot travel lanes. Regardless of its narrow lanes and absence of roadway shoulders, the bridge has sustained the passage of an annual average of more than $33 billion dollars of regional goods, making it a vital piece of the region’s economy.

Goethals Bridge Replacement
In order to replace the functionally obsolete bridge, The Port Authority of New York and New Jersey entered into a design-build-finance-maintain (DBFM) P3 arrangement with NYNJ Link Partnership; a joint venture between Macquarie Infrastructure & Real Assets and Kiewit Development. Over the 40-year concession period, the Port Authority will make annual availability payments of $56.5 million to the concessionaire while retaining the operating rights and the ability to set and collect tolls. The new bridge will include three 12-foot-wide lanes, one 12-foot-wide outer shoulder, and a 5-foot-wide inner shoulder in each direction. The replacement will also provide pedestrian access by way of a 10-foot-wide sidewalk on the northern edge of the New Jersey bound roadway.

Annotated List of Actors
The Port Authority of New York and New Jersey (PANYNJ)- The PANYNJ is the public entity in the Goethals Bridge Replacement project. The PANYNJ was established by the New York and New Jersey state governments in 1921 as an interstate agency with a focus on enhancing the port district around New York Harbor, and in effect, improving trade and commerce for the region. The PANYNJ is authorized to plan, develop, and maintain many of the essential pieces to the Port District’s infrastructure, including JFK International Airport, the Lincoln Tunnel, the Port Authority Bus Terminal, and various other terminals, facilities, and real estate.

Patrick J. Foye- Executive Director of the PANYNJ since November 1, 2011. Mr. Foye is responsible for the management and operation of the Port Authority in compliance with the agency’s policies. He announced his resignation from the position in November 2015, but has continued to serve the Port Authority as no replacement chief executive has been found. He is also known for blowing the whistle on the infamous “Bridgegate” scandal, in which PANYNJ officials on the New Jersey side purposefully induced traffic jams on the George Washington Bridge as an act of retribution against a local mayor.

Macquarie Infrastructure & Real Assets (MIRA)- An Australian based infrastructure asset manager, MIRA has a 90 percent interest in the NYNJ Link Partnership.

Kiewit Infrastructure Company (KIC) - A construction, mining, and engineering company headquartered in Omaha, Nebraska, KIC has a 10 percent interest in the NYNJ Link Partnership. KIC is also part of Kiewit-Weeks-Massman (KWM), which is a partnership for the design-build portion of the project.

NYNJ Link Partnership (Joint venture between MIRA and KIC)- The NYNJ Link Partnership is the Special Purpose Vehicle (SPV) for the Goethals Bridge replacement project. They are responsible for the design, build, finance, and maintenance of the project for the 40-year concession. The SPV financed the project with $106.8 million in equity, as well as debt, through a $473.7 million TIFIA direct loan and $453.3 million in private activity bonds.

Weeks Marine, Inc. - Part of KWM, which is a partnership for the design-build portion of the project. Headquartered in Cranford, New Jersey, their offices support construction projects throughout the Atlantic and Gulf Coast regions, as well as internationally.

Massman Construction Co. – Part of KWM, which is a partnership for the design-build portion of the project. Specializing in heavy, civil, and marine construction projects, they have completed several cable-stayed bridges throughout the US.

Parsons Transportation Group of New York, Inc. – Lead design firm on the project and one of the world’s largest engineering and construction firms.

The Manhattan MBDA Business Center – The New York based business-development firm is working with KWM to identify qualified Disadvantaged Business Enterprises (DBEs) to work on the project.

KS Engineers (KSE) - One of the DBEs contracted to work on the project, KSE is a mid-sized, minority-owned engineering firm that specializes in civil engineering, structural engineering, geotechnical engineering, construction management and inspection, landscape architecture, and survey and mapping services.

Governor Chris Christie- New Jersey State governor since January 2010. The New Jersey State governor has the ability to appoint six members to the PANYNJ Board of Commissioners, as well as the agency’s deputy executive director and chairman of the board.

Governor Andrew M. Cuomo- New York State governor since January 2011. The New York State governor has the ability to appoint six members to the PANYNJ Board of Commissioners, as well as the agency’s executive director and vice chairman of the board.

Timeline of Events

 * 1923, the bridge was initially planned to carry only vehicular traffic.
 * September 1, 1925: Goethals Bridge Construction began.
 * June 29, 1928: the bridge and the Outer bridge Crossing opened and the $7.2 million Goethals Bridge and the Outer bridge Crossing, which opened the same day, became the first facilities constructed by the Port Authority.
 * 1959, the Arthur Kill railroad swing bridge was replaced, placing the Goethals next to the then-longest vertical lift bridge in the world.
 * 1964, a new toll plaza and administration building were constructed in Staten Island, also $3.9 million project was announced to improve the New Jersey   approaches to the bridge, which included construction of a 1,200-foot long approach south of and parallel to the original viaduct.
 * 1972, Concrete medians were installed.
 * 1997, An initial study concluded that the optimal solution would be a parallel span. However, a more recent study suggested that the existing span had only 10 years of life left, even with the recent deck rehabilitation, and that the optimal solution was an entirely new span.
 * Summer 2006, The initial alternatives included the option of twin three-lane replacement bridges north and south of the current alignment, which was completely eliminated; and twin three-lane replacement bridges (one south, and one along the current alignment), with the latter being built after the demolition of the current bridge, which was refined to be a single-span bridge instead of twin bridges.
 * Fall 2007, The reason for the dropping of twin-bridge alternatives was a request by the FAA to decrease the height of the bridge's towers to prevent interference with flights into and out of Newark Liberty International Airport.
 * July 2009, The Draft Environmental Impact Statement (DEIS) was issued and the formal public hearings on the DEIS were held.
 * August 2010, The environmental review process for The Port Authority of New York and New Jersey’s Goethals Bridge Replacement Project was concluded with the US Coast Guard’s issuance of the Final Environmental Impact Statement.
 * January 2011, the ROD (Record of Decision) for Goethals Bridge Replacement executed.
 * 2011, Goethals carried around 28,357,000 vehicles, while the Outerbridge accommodated around 29,237,000. Over $33 billion worth of goods pass across the bridge on an annual basis.
 * April 24, 2013, the Port Authority authorized the $1.5 billion Goethals Bridge Replacement Public Private Partnership (P3).
 * November 2013, The TIFIA credit agreement was executed Financial close for the senior debt occurred.
 * May 2014, the Port Authority began construction of the Goethals Replacement Bridge.
 * 2014, Plans for a new bridge began with environmental impact statements (EISs), followed by alternative analyses and public hearings before the Port Authority settled on a $1.5 billion public-private partnership with the NYNJ Link Partnership.
 * June of 2015, the Goethals Bridge celebrated its 87th year of serving the public.
 * 2016 to early 2017, The Port Authority aims to complete the Staten Island-bound roadway. At that point, both directions of traffic will be moved from the current Goethals Bridge to the Island-bound road.
 * End of 2017, the plan is to complete the Jersey-bound roadway. Because of the close proximity of the bridges, the traffic will be able to be moved from one bridge to another in one day's time, with minimal traffic impact.
 * End of 2018, the Port Authority will complete the project with the demolition of the current Goethals Bridge.

Maps of Location
https://www.google.com/maps/place/Goethals+Bridge/@40.6358899,-74.1969448,15z/data=!4m5!3m4!1s0x0:0x347f5333d7ed015d!8m2!3d40.6358899!4d-74.1969448

Narrative
The Goethals Bridge connects Elizabeth, New Jersey to Staten Island, New York. The bridge is owned by the Port Authority of New York and New Jersey (Port Authority) and was opened in 1928. The original structure was build to serve growing traffic in the mid-1920’s and was part of an overall project to address the arising regional transportation needs.

The Port Authority has operated the Goethals Bridge since it was completed in 1928. Given that the original design was done to meet early 20th century needs, the structure is now obsolete and will be replaced in 2018. In order to expedite the project and more efficiently allocate risk, the Port Authority entered a P3 agreement to procure the new bridge. The new bridge will have three lanes on each direction, a pedestrian/bike lane, and will have the capacity to add a future transit lane. Project was awarded in 2013 for a total of $1.5 billion as a design, build, finance, and maintain contract. The private partner is a team formed by a conglomerate of Kiewit Infrastructure Co., Weeks Marine Inc., Massman Construction Co., Parsons Transportation Group of New York, Inc., NYNJ Link, and the Manhattan MBDA Business Center.

Initial environmental and transportation planning studies were performed from 1994 to 1997. However, this effort was stalled and the Port Authority was not able to reinitiate the environmental process until 2004. The project did gain momentum in 2010 and the Authority issued a Request for Information (RFI) in May of 2010. Subsequently, in October 2010, the Port Authority issued a request for qualifications (RFQ) for the Goethals Bridge Replacement. In the RFQ, the Authority re-emphasized its intention for the P3 to be a DBFM with availability payments and requested developers to deliver proposals that integrated design, construction and operational aspects to minimize life cycle costs, maximize service life; optimize risk allocation between the parties and generate savings through private sector innovation. In 2011, the Coast Guard issued a Record of Decision approving the environmental study.

In October 2013, the Port Authority issued a Request for Proposals (RFP) to establish the consulting services team to perform monitoring services for the project. The consultant would create, implement and monitor policies and procedures for all the partners of the project from 2014 through 2019. The Port Authority selected a team of technical advisors made up by Ernst & Young, Halcrow, HNTB, and Arup. Legal advisor is Allen Overy.

In November 2013, the U.S. Secretary of Transportation announced a $474 million Transportation Infrastructure Finance Innovation Act (TIFIA) loan for the Goethals Bridge replacement project. The loan completed the nearly $1.5 billion funding of the project. Following the TIFIA loan, the financial structure of the project is as follows. The total cost for the bridge will be $1.436 billion being funded by the $473.7 million TIFIA loan, $453.3 million in Private Activity Bonds, $106.8 million in private equity, $125.0 million in Port Authority Milestone Payments, and $300.2 million directly funded by the Port Authority (Pre-development costs). The credit agreement was executed on November 5, 2013 and the financial close for the senior debt occurred on November 8, 2013.

The P3 team started construction on May 2014 after financial agreements were finalized. The Port Authority has a website that provides periodic updates about the project schedule and the overall project. In the website the Authority explains the impact of the construction project on the transportation system and the community. Project is requiring a detour of traffic to access the existing bridge. However, this is only temporary because the project is expected to be completed by late 2018.

As mentioned above, the new bridge was designed, is being build and financed, and will be maintained by a private, long-term development contract with NYNJ Link. The Port Authority will operate the bridge by setting and collecting tolls. This is an almost unique feature of the project as normally operations and maintenance are pooled together. This entails there will be a continued need for coordination between the public entity and its partners. This is due to the fact that operations and maintenance affect each other. Therefore, partners must ensure they perform at an acceptable to level to ensure the success of the project.

Lack of Transparency in the PANYNJ and the Depleted Transportation Fund of NJ
This P3 is unique in that the public entity is the Port Authority of New York and New Jersey (PANYNJ), not a state or municipality. A public authority often acts independently from the State in regards to legal and administrative matters. In the case of PANYNJ, some of the board members may be selected by the governors of New York and New Jersey and the members operate the authority as a financially self-supporting entity with no rights to tax revenues from either state. The PANYNJ generates most of its revenue from the user fees it charges, such as bridge and tunnel tolls, rail system fares, and airport and bus terminal fees. The Goethals bridge replacement, for example, will still generate user fee revenues to fund the PANYNJ since they operate and maintain authority over the tolling system. One item regarding the PANYNJ that has come into question over the last several years is the diversion of those funds to projects that are not directly tied to the Port District, as well as a handful of other corruption allegations. Audits performed on public authorities in the state of New York revealed that they are “exempt from many of the oversight and transparency requirements that apply to other government agencies.”

The infamous “Bridgegate” scandal brought to light issues of corruption and conflict of interests surrounding the PANYNJ. Aside from the scandal, the PANYNJ has come under scrutiny for some of the more costly local projects it supports that are highly favored by the New York and New Jersey State governors, including the multibillion-dollar reconstruction of the World Trade Center and the Port Authority Trans-Hudson commuter rail line (PATH), respectively. PATH, which is the PANYNJ’s worst performing facility in terms of operating income and is completely paid for by the PANYNJ. These two expensive projects have left little room for improvements to the Port District infrastructure facilities that need it most, such as the JFK and La Guardia Airports, and the Port Authority Bus Terminal. Some of the fees collected from these facilities are able to be used elsewhere because the New York airports were grandfathered into a 1982 federal law that prohibits the use of airport revenue for non-airport uses.

U.S. Senator Charles Schumer referred to the PANYNJ as, “the proverbial honey pot, a cookie jar, a rainy day fund –whatever metaphor you prefer- for state projects outside the Port’s core mission.” The Goethals Bridge Replacement is certainly a project that falls within the core mission of the PANYNJ. The original bridge has undergone many costly repairs that have required temporary closures on already tightly confined lanes, so a replacement seems to be justified. The PANYNJ decided to pursue an availability payment mechanism to finance the project. The PANYNJ will make an annual availability payment of $56.5 million to the concessionaire for the entirety of the concession period, so long as the bridge is made available to the public and meets certain standards stipulated in the P3 contract. According to Steve Coleman, a spokesman for the PANYNJ, “the advantage is you get a new bridge built now.” For a public authority that has neither the funds nor the public debt capacity to finance a $1.4 billion project, that is exactly the advantage they are looking for. The PANYNJ collects $131.8 million in user fees per year on the Goethals Bridge, so they should have no issues in making the availability payments on the project. However, this could present problems down the road if both State governments continue to allocate PANYNJ funds to other, more locally favorable projects. New Jersey, in particular, may find this honey pot ever more enticing as the state’s transportation fund has been depleted. While the availability payment model may be successful for the Goethals Bridge project, there are risks in trying to apply that model to other projects (such as highways without tolling capacity), especially if the public entity has a poor credit rating.

The Proposed Twin Replacement Bridge alternative's EIS-related issues:
There are four bridge replacement alternatives for detailed evaluation in the Goethals Bridge Replacement (GBR) Environmental Impact Statement (EIS). One of these alternatives was a single span bridge replacement in alignment within and extending south of the existing Goethals Bridge alignment (Twin Replacement Bridges in south). In this report, this alternative will be evaluated in the main body of the Environmental Impact Statement (DEIS) Draft. We also examine the potential environmental impacts of this alternative for replacement of the bridge and the reason for dropping this idea.

The Goethals Bridge is located approximately 3 miles from the southern boundary of Newark Liberty International Airport. As a result of the Port Authorities aeronautical studies and consultation process with the FAA and airport stakeholders, a maximum tower height of 272 feet above mean sea level (MSL) was established for the proposed Goethals Bridge replacement to avoid conflict with flight departure from the airport.

The twin replacement bridge south in current Right of Way was a new 3-lane bridge, south of and roughly parallel to the existing Goethals Bridge, would be designed and constructed to carry eastbound traffic. This twin structure would provide 12-foot-wide lanes, 12- and 5-foot-wide right and left shoulders. The construction duration for the twin replacement bridge is approximately 72 months including demolition of an existing bridge. The construction of the second bridge was started before the first bridge was complete. The goals of this project are as follows:

•	Address the functional obsolescence of the existing Goethals Bridge;

•	Address structural integrity issues associated with the aging bridge;

•	Improve the flow of goods to and from Staten Island and New Jersey/New York region;

•	Correct the inability of the existing bridge to physically accommodate transit services and other vehicles commuting alternatives.

•	Minimize environmental consequences of the improvement.

Alternatives should minimize the potential adverse environmental effects. There are nine evaluations measures were used to characterize the potential adverse of an alternative's construction and operation, in terms of key environmental considerations:

•	Wetland resources: •	Alternatives should seek to avoid permanent taking wetlands. •	Protected habitat/species: •	Harm to protected species or critical habitat is considered as an adverse effect. •	Essential fish habitat: The number of potentially affected species in the vicinity of an alternative is considered as an adverse effect. •	Cultural resources: •	Potential effects of alternatives on cultural resources were expressed in terms of the number of designated or identified eligible historic resources within one-half mile of an alternative's alignment.

•	Parklands and recreation areas: •	The permanent taking of public parkland or recreation is considered as an adverse effect, these are typically highly valued community      resources. •	Noise-sensitive land uses: •	New or expanded transportation infrastructure and increased vehicular adversely affect noise-sensitive land uses. •	Known hazardous substance sites: •	Disturbance of known or suspected hazardous wastes sites is considered as an adverse effect. •	Air quality: •	The potential effect of an alternative on regional emission on ozone and nitrogen oxides. •	Property acquisition: •	Adverse effects on occupied properties may be due to actual property taking or to proximity effects related to an alternative.

The twin replacement bridge alternative has the highest score regarding adverse environmental effects. Design studies that were undertaken to address the effect of the tower height decreased on the previously prepared conceptual bridge replacement designs confirmed that the twin replacement bridge alternatives south of the Goethals Bridge are no longer under considerations. In addition to, the changes in tower design and the potential interference with the Newark Liberty Airport caused the twin bridge alternative not to be the most efficient design.

The studies show that there are no alternatives that could be judged to fully satisfy all the project's goals. The twin replacement bridge alternative ability to improve goods flow within the NY/NJ region- separate from their assumed ability to improve goods flow between Staten Island and NJ was uncertain, as was their ability to minimize adverse environmental effects. After analyzing the environmental differentiators, twin bridge replacement cannot meet the environmental standards and needs. This alternative also has high impact to wetlands and affect the total cost of the project regarding mitigation for these impacts.

Environmental Issue :
Environmental Issues There are several environmental issues that face the Goethals Bridge. One of this is concerned with emissions of toxic gases that lead to Global warming. The construction-phase emissions during the construction of the bridge are likely to cause an environmental hazard. That is an incident of air pollution by the Bridge that needs to be addressed to avoid the negative effects of the same. Some of the construction equipment is likely to emit the toxic wastes in form of exhaust fumes and fugitive dust. Control measures for the same have to be implemented.

The other issue is the fact that the upgrade of the Goethals Bridge and even its usage has a direct effect on the marine and aquatic life right below it. The bridge is constructed along the coast and the use of construction equipment leads to spills that are harmful to the aquatic life. Because of that, the effect of the bridge on water pollution has to be taken into great account.

Third, noise pollution resulting from the construction equipment and other machinery is another environmental issue from the bridge. This should also be mitigated. From the discussions before, there are three major concerns of the bridge as far as environmental pollution is concerned. It leads to noise pollution, water pollution, and air pollution. Apart from the three major impacts, there are some other negative impacts on the environment not discussed in the paper. A proper environmental Impact Assessment should be done on the bridge so that all the associated risks and negative environmental impacts are identified and prevented before they become adverse. That is one of the ways to ensure the bridge serves its purpose without exposing much danger to the environment.

Risks Implications for not Including Operation of the Bridge in the P3
The Goethals Bridge replacement project is a DFBM P3 arrangement. This means that the operation of the bridge tolling facilities will be maintained by the Port Authority. The private partner will receive an availability payment for the maintenance of the bridge (as well as the other components of the P3) and use the resources to keep the bridge in good state of repair. This is different from a design-finance-build-operate-maintain (DFBOM) arrangement in which all these activities are bundled together under the private entity’s responsibility. The Goethals Bridge project is similar to a DFBOM arrangement in that it is being financed by mix of debt and public grants. The revenue source for servicing the debt is an availability payment.

The Port Authority decided to keep the operations segment of the project because it is the actual source of revenue. However, the Authority will have to cover the availability payment that is related to the level of traffic and the overall project. The advantage of this arrangement is that the Authority will maintain control over the revenue source and make sure that toll changes and service reflects the policy goals. The externalized advantage of this approach is that private partners can innovate to lower costs and improve service. There are risks in that the separation of the operation and the maintenance may lead the two parties to an adversary relationship and not a cooperating relationship. At the end, the project is designed under the assumption that all parties have stake and it will make economic sense to perform well.

Discussion Questions

 * Do you think that PANYNJ made the right decision in retaining the revenue risk of this project? Why, or why not?
 * Is this an example of a successful P3? Which stakeholders have the most to gain from this arrangement?