I-70 EXPANSION TO COST $2.2 BILLION OVER 30 YEARS

The public-private expansion project will be paid over more than 30 years.

The controversial Interstate 70 expansion through northeast Denver shows the hefty price tag of the agreement with a private partner.

Financial terms released this week for the controversial Interstate 70 expansion through northeast Denver show that a partnership agreement will cost the Colorado Department of Transportation an estimated $2.2 billion over more than 30 years.

For the first time, state transportation officials have detailed the figures that resulted from recently wrapped negotiations with Kiewit Meridiam Partners for a complex public-private partnership contract on the Central 70 project.

CDOT in August selected the team from among four consortiums that bid to finance, design and build the $1.2 billion project. It then will operate and maintain the widened 10-mile stretch for three decades.

The freeway project’s construction tab hasn’t changed much ahead of a groundbreaking that’s expected in early to mid-2018, although financing costs will push the total to nearly $1.3 billion.

But in addition to shouldering just over half of that upfront project cost — $687 million — CDOT will be responsible over the long term for sizable annual payments to Kiewit Meridiam Partners. Those annual checks mostly will repay KMP for its significant equity and borrowing, but they also will compensate KMP for operation and upkeep of the highway — costs that CDOT notes it would pay for normally, through its annual budget, after a more traditional project was built.

An arm of CDOT will oversee tolling on new express lanes in each direction and pocket the money, although those tolls will help fund the annual payments to KMP.

KMP is contributing $610 million to the project upfront, including $65 million of its own equity.

CDOT officials say projections show KMP will earn a 9.5 percent return on that $65 million investment over the deal’s life.

In most cases, KMP agreed to shoulder the cost of overruns or delays.

“This (partnership) maximizes the value for the public in part because we’re putting up a smaller upfront capital cost,” said David Spector, director of CDOT’s High Performance Transportation Enterprise.

“Had we borrowed, we’d be obligated to repay the debt service no matter what — if construction’s late or something happens,” he said. “Here, we only pay them if they’re doing a good job.”

Spector, accompanied by project director Tony DeVito and other CDOT officials, detailed the terms to The Denver Post on Tuesday.

The High Performance Trans-

portation Enterprise and Colorado Bridge Enterprise boards unanimously approved the contract terms Wednesday.

The Post analyzed figures released by CDOT to come up with the total cost to the state, since CDOT says it typically does not include financing or operating costs in its project estimates.

But The Post’s calculation is comparable to another recent large publicprivate partnership deal: Denver International Airport’s 34-year terminal contract. That deal, which combines a terminal renovation with 30 years of management of new concession spaces, is projected to cost DIA $1.8 billion.

KMP, in its winning bid, projected that it could deliver the project for $71 million less in construction costs than CDOT’s original estimate. It also estimates it will build the project in four years — at least six months faster than CDOT had expected, given CDOT’s edict that no lanes will be closed during peak traffic hours.

Construction could begin by late spring, officials say. The project calls for rebuilding a portion of the six-lane freeway and widening it between Brighton Boulevard in Denver and Chambers Road in Aurora to add a managed toll lane in each direction; a future phase could add a second toll lane. Between Brighton and Colorado boulevards, an aging 1.8-mile viaduct will be replaced by a lowered highway.

In the largest of several community concessions being provided by CDOT, KMP will build a 4acre parkland cap over part of that section next to Swansea Elementary.

How the I-70 costs break down for CDOT

CDOT’s costs are staggered:

•Construction: CDOT is putting up $687 million, or just over half of the $1.3 bil-

lion project cost, although KMP will pay $25 million to offset some of the preliminary work CDOT already has performed. But $319 million of CDOT’s contribution will be split into milestone payments that KMP receives upon finishing four segments and then substantially completing the project.

•Equity payments: Once the project is done — expected in 2022 — CDOT will pay KMP $28.4 million a year in today’s dollars as capital performance payments, to repay KMP’s borrowing and investment. In 2022, the estimated value will be $31.4 million, and it’s set to increase 2 percent each year — totaling $1.26 billion over 30 years. •Operating payments: Similarly, CDOT will pay KMP $7.1 million a year in today’s dollars as operations, maintenance and rehabilitation payments. When this payment begins in 2022, it’s estimated at $7.9 million, and it will be adjusted with inflation — totaling $317 million over 30 years.

For its upfront costs, CDOT will tap $457 million from the Colorado Bridge Enterprise, funded by annual vehicle registration fees; $180 million from a CDOT capital fund; and $50 million in federal dollars provided through the Denver Regional Council of Governments.

CDOT’s annual payments later in the contract will come from a mix of toll revenue, CDOT money, the bridge enterprise — consuming about a quarter of its annual revenue — and the city of Denver’s $37 million project contribution, officials said.

KMP’s $610 million upfront contribution will come from $404 million in borrowing through the federal Transportation Infrastructure Finance and Innovation Act program, which provides low-interest financing for certain public projects; $141 million in bonds; and its $65 million equity investment.