February 5, 2019

Mr. Keith DuRousseau, Chair

Southwest Louisiana Economic Development Alliance
Interstate 10 Calcasieu River Bridge Task Force
Lake Charles, LA 70601

Mr. George Swift, Executive Director

Southwest Louisiana Economic Development Alliance
Lake Charles, LA 70601

Dear Messrs. DuRousseau and Swift:

This is in response to our January 29, 2019 meeting in which a written response to the report and
recommendation of the Task Force was requested. While this letter will provide the basis for
future discussions on the project delivery, it also clearly states the intentions of the Department
with regards to delivering a new bridge.

As discussed in our meeting and on several occasions prior to the January 29, 2019 meeting, the
Department does support Public Private Partnerships (P3) encompassing of tolls and/or
availability payments. We have also declared that all funding and financing options should be on
the table for this bridge including, but not limited to federal and state funding, GARVEE Bonds,
tolls, and TIFIA loans. In 2016, this Administration successfully sponsored legislation granting
the authority to the DOTD to solicit P3 proposals as well as narrowing the list of projects that
could use this procurement method. Shortly after this legislative change was enacted, the
Department initiated a broadly scoped Request for Information to help inform our efforts to
pursue P3 projects in Louisiana.

The DOTD, for the first time, is nearing the end of its first P3 for transportation infrastructure
where tolling is a critical component of the projects success. This project was announced in
January of 2018 when the project did not have (1) environmental clearance, (2) a funding or
construction plan, or (3) any identified developers. I am proud to tell you that we have received
environmental clearance, have a financially feasible project with a funding plan, and are
expecting to open proposals from potential P3 developers at the end of Q1 or the first half of Q2
and then begin a negotiation on the project. It should be noted that the Department did not have
the internal expertise and tools in place prior to announcing this project, but we have been
diligent at developing this capacity that will benefit future P3 projects.
February 5, 2019
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While no two projects are exactly the same, this is verification that the Department can move at
an unprecedented pace provided the project is in the best possible position and other key factors
that contribute to success are present.

As a basis of the State’s response to your report, I will restate four issues that needed to be
corrected in the public record, provide an overview with specific responses to the
recommendations, as well as suggest a path forward that can further dialogue and action on this
bridge.

For purposes of clarification, the presentation and press release inaccurately stated that the
Governor’s Gas Tax Proposal was not sufficient to replace the bridge, when in fact the proposal
that is being discussed is not the Governor’s tax proposal. The Governor’s Transportation Task
Force Proposal in 2017 did in fact pay for the bridge with a $0.17 per gallon fuel tax increase and
maintained all funding and financing options available, including, but not limited to indexing.
We believe that the State should right-size its gas tax to address the priorities we have identified
beyond just maintaining the system. Unfortunately, decades of legislative inaction have caused
the needs of Louisiana to far exceed the available resources and it is impossible to overcome that
issue in 3 years.

It was also stated that 10 years of funding had been committed to other regions of the State
through the issuance of GARVEE Bonds. In fact, it is less than 10% of the State’s federal
obligations that we are proposing, which is under the current statutory cap. This
Administration’s policy for the use of GARVEE Bonds restricts them to interstate highways or
on non-interstate toll projects not to exceed 10% of the project cost.

It was also stated that the Department defaulted on a TIFIA loan. The Department has not
defaulted on the loan but rather refinanced and received a larger TIFIA loan with better terms.
While the Legislative Auditor correctly stated that the State could not meet the debt payments
with toll revenue, the loan was secured by the State and we have not missed any payments. For
the State’s only toll project, 100% of toll revenue is used to pay debt and the TTF covers 100%
of operations and maintenance. Louisiana has and continues to be eligible for full participation
in the TIFIA program.

The last correction we offer is that the projects to preserve interstate highways (including bridge
replacements) are eligible for federal funding at 90% with a 10% non-federal match as opposed
to the 80% federal/20% non-federal match stated in the report.
February 5, 2019
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The Executive Summary inaccurately suggests that the Calcasieu River Bridge is in pending
danger of falling because of similarities to the I-35 West Mississippi River Bridge in
Minneapolis. While the I-35 bridge had a fracture critical element that failed, the I-10 Bridge
has the necessary redundancies to ensure that it is safe based on the national engineering
standards of bridge safety and inspections. If the I-10 Bridge becomes unsafe, the Department
will close it, as we have done for similarly situated structures.

The Executive Summary accurately declares that an EIS is required and has been ongoing for a
significant number of years. As Secretary, I understand that previous administrations made
efforts that we cannot be accountable for, but are charged with advancing the project from the
point in which we found it in January 2016. Because of the unique circumstances of this project,
the type of environmental document requires was changed from an Environmental Assessment to
an EIS in 2007 when contamination was reported by Conoco in existing state right-of-way and
the footprint that would be needed to construct the project as scoped at that time.

The Executive Summary further suggests that there are alternatives to addressing the EDC
contamination, and that a 2010 statement from the LDEQ should drive engineering decisions. I
cannot dispute some facts with regards to this and the decisions that have to be made because of
the on-going litigation, but the Department is responsible to appropriately surmount the EDC
contamination as outlined in the EIS, and not legal proceedings. It is inappropriate for the
Department to make decisions in the absence of data. We firmly believe that issues of location,
scope, mitigation, construction methods, and tolling should and will be addressed in the EIS.

The Executive Summary accurately reflects the State’s inability to replace the Bridge because of
financial constraints. The Governor and Department made a proposal in 2017, which would
have funded this Bridge replacement. To our disappointment, the House of Representatives
failed to act on the bill, setting the State back further, not just in terms of new infrastructure, but
also putting us at risk of not meeting current levels of expenditures.

The Department agrees that a Public Private Partnership (P3 - DBFOM) to replace this Bridge is
a preferred approach, but strongly disagrees that this project should be done with 100% private
equity or with a very aggressive delivery timeline that is suggested. While 100% risk and
financing can be done, our responsibility to protect the public’s interest, earn financial close, and
deliver and maintain an interstate bridge consistent with federal requirements drives our decision
that it should not be pursued as such. Our professional experience and assessment of best
practices, as well as that of our knowledgeable consultants and independent P3 developers,
confirms that there is going to be have to be an element of public funding and exceptions not
available in a 100% risk and 100% private model. Not having public funding and financing
greatly increases the chances of higher tolls, an elevating private risk while putting additional
traffic on alternative routes that are free, convenient, and nearby. TIFIA and GARVEE are
public financing tools; deviating from federal practices and requirements will restrict the use of
these tools and potentially limits access to discretionary funding.
February 5, 2019
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Concerning Task Force Recommendations, we offer the following responses:

1. LADOTD should issue a Request for Proposal – The Department agrees that this is a
critical step in securing a P3 partner, but it is premature to do so at this time for a number
of reasons. We have yet to determine the full scope of the project that will be built and
where, and what is a reasonable and factually based model to finance and properly pay
for the Bridge. Furthermore, it is an agreed industry best practice to begin with a Request
for Information, followed by issuing a call for Letters of Interest, followed by a Request
for Qualifications, and finally followed by the Request for Proposals, whereby the RFQ
and the RFP are competitive processes.

a. Subpart statements “c”, “d” and “f” are items that will be further defined in the EIS.
Any predeterminations of issues intended to be considered compromises federal funds
and establishes grounds for legal challenges that could stop the advancement of the
project.

b. Subpart statement “e” will also be addressed in the EIS as it must include a financing
plan, but also depends on what the industry responds to. We have first-hand
experience in advancing the current P3 in procurement that each proposer will be
different and have different financial circumstances that may require unique
responses from the State. We are confident that this project can be financed,
designed, constructed, maintained, and that it has exceptional toll feasibility, but
because risk is calculated and priced in P3 proposals, it is in the public’s best interest
to know what that cost will be in advance of spending millions on procurement.

2. 2019 legislative priorities necessary for advancing the project – The Department has
already identified legislative issues that will benefit P3 procurement in Louisiana and
welcomes your support for those changes. We would, however, caution against making
legislative changes of a P3 nature specific to this Bridge. The Department welcomes
stakeholders to the process. In fact, the Department is currently engaged in advancing
others projects using a Context Sensitive Solution process that had various levels of
working groups, specifically community based stakeholders, technical stakeholder
representatives of public works professionals from the areas impacted by the project, and
policy stakeholders representing government elected and appointed officials. With
specific regards to the EDC litigation, the Department fully intends to dedicate 100% of
proceeds that may be available to the state to the advancement of the construction of this
project. In fact, the Department intends to include provisions in the Instruction to
Proposers on this issue. That being said, the Department has not formed a position on the
need for legislation directing such expenditures, as it would set a legal precedent that may
not be in the best interest of the State and DOTD.
February 5, 2019
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3. The existing bridge remaining open during construction – Past and current practices
are evidence that the Department would not allow the existing Bridge to be closed while
a new Bridge is being constructed. In the P3 currently being procured, the Department
has been intentional at maximizing utility of existing infrastructure, a factor that will be
part of each proposer’s calculation of risk and factored into their respective submittal.
This is a clear example of the importance of best practices and providing appropriate
parameters in a P3 RFP process.

4. Local users having access to reduced tolls – The Department is consistent with its
implementation of best practices. It is not advisable to mandate reduced rates and
discounts for toll payers or local citizens; the Department prefers to allow competition in
the marketplace to determine toll schedules and operational policies that are to be
adopted by a private entity. The DOTD does not interfere with means and methods of the
construction community; we should do the same for tolling. Louisiana has a history with
negative impacts, of engaging too much in the business practices of tolling, specifically
legislatively setting tolls, tolls reductions or toll eliminations. However, current policy
creates competition for proposers to offer the lowest toll for the shortest time, with other
benefits afforded to locals, thereby prioritizing these benefits to citizens. We also have
provisions that will ensure that I-210 would remain free for those users who prefer not to
take the toll bridge. The Department welcomes your support on this policy, as it is
necessary to provide the best possible project and to attract the broadest competition in
this very small, but competitive market for P3 developers.

At the January 29th meeting, the Department agreed to continue to work collaboratively, as we
have since 2016, on moving critical projects forward. All of the high priority projects that we
have successfully accelerated are projects that have similar histories to the I-10 Calcasieu River
Bridge project because of decades of indecision, lack of funding, project complications, or
disagreements regarding priorities.

As stated, the Department is completing the current P3 procurement, will soon enter into the
negotiation phase, and will move to construction on two design-build projects in the next 4 to 6
months. The innovative procurement staff at the DOTD managed all of these projects, as they
would do for this project.

The alignment of timing, resources, and project elements are critical to a successful Public
Private Partnership process. As stated in our meeting, the Department has identified the selection
of a preferred alternative as the critical path to advance this procurement. That will allow us to
better refine our needs and expectations, as well as benefit potential proposers while managing
cost and expectations.
February 5, 2019
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In closing, DOTD welcomes an opportunity to discuss these and other issues in more detail. We
have requested participation from the BATIC Institute at AASHTO and the FHWA Center for
Innovative Financing Support. It is our hope that this and future meetings will help you
understand the Department’s position and help us better understand the drivers of decisions that
led to the Task Force conclusions, specifically the major cost difference in the project envisioned
by the Task Force as compared to the project that is moving forward in the environmental
process.

Respectfully,

Shawn D. Wilson, Ph.D.

Secretary

SDW:rmv

c: Governor John Bel Edwards

Congressman Clay Higgins
I-10 Task Force Members via Chairman
Southwest House & Senate Legislative Delegation
Robert "Bob" Hardey, Mayor of Westlake
Nic Hunter, Mayor of Lake Charles
Eric Kalivoda, DOTD Deputy Secretary
Dan Magri, DOTD Assistant Secretary for Planning
Peggy Paine, DOTD Innovative Procurement Director