In a study released Wednesday morning to the legislative Transportation Interim Committee, UDOT examined four scenarios for the proposed highway on the west side of the Salt Lake Valley. It found that if the toll road were allowed to operate as a private concession as officials have discussed, toll rates would rise twice as much each year, and it would take twice as long to pay for.
Another finding: If private investors built the $1.8 billion project in exchange for toll-collection rights, the state would have to close a funding gap of $332 million to $502 million. Conversely, if the state kept control of the highway tolls, that gap would range from $552 million to $641 million.
That means the state has to spend at least $332 million to make the deal attractive to investors, or allocate $220 million more to keep the highway construction and operations in public hands, said UDOT Executive Director John Njord.
"What we found is there isn't a market out there for this facility or a private-public partner out there to fill in the gap," he said. "We still have to come up with [at least] $332 million."
Key to understanding the differences is the profit motive: While private investment would mean the road could be open in six years instead of decades, private investors expect a return on their investment. Mountain View Corridor project manager Teri Newell said the UDOT study assumed a 12 percent rate of return on private investment, or $140 million in 2006 dollars.
Under the public toll road scenario, initial tolls would range from 7 cents to 15 cents per mile, and the toll rate would grow 3 percent per year. The public-private partnership scenario would see the toll rate grow 6 percent per year, Newell said.
If the state kept the tollway, construction bonds would be paid off in 40 years, after which the toll roads would be a revenue source, the study found. Under a public-private partnership, the investors would hold the toll collection contract for 99 years, collecting its profit after about 40 years of recouping its investment.
Part of the reason for the difference is Utah, with its AAA bond rating, could borrow money at a lower rate than a private investor could secure.
Another hitch: Mountain View would be a brand-new road, which makes it different from examples in Chicago and Indiana the state Transportation Task Force considered while studying toll roads. Those deals consisted of leasing existing sections of already existing roads to a Spanish-Australian private investment consortium which essentially paid billions of dollars in rent money up front.
But Mountain View would have costs and risks associated with environmental studies and new construction that investors wouldn't want to take on; that reluctance accounts for the $332 funding gap under the study's scenarios.
The Transportation Interim Committee took no action on the report.
But Rep. John Dougall suggested that much of the funding gap could be erased if the state could buy the corridor land, which Njord said would cost about $450 million.
The route
The Mountain View Corridor is planned to run from I-80 in Salt Lake County to the Pleasant Grove Interchange in Utah County (approximately 6400 North). The project's east-west area is from Bangerter Highway to State Road 111 (approximately 6900 West) in Salt Lake County and from about 11800 West in Saratoga Springs to I-15 in Utah County.
