Transcription:
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.
Mike Scarchilli (00:05):
Hi everyone and welcome to the Bond Buyer Podcast, your essential resource for insights into the world of public finance and infrastructure development. I’m Mike Scarchilli, editor-in-chief of the Bond Buyer, and today we’re diving into a fascinating discussion about one of the year’s most significant infrastructure achievements. Our senior infrastructure reporter, Caitlin Devitt, sits down with Dr. Shawn Wilson, former Louisiana Transportation Secretary and now National Agency Coordination Leader for Transportation and Infrastructure at WSP to discuss the groundbreaking Calcasieu Bridge Project, the project which recently reached financial close and earned the Bond buyers P3 Deal of the Year award is a transformative public-private partnership to replace an aging bridge over Interstate 10. It’s one of the most complex and impactful infrastructure endeavors in Louisiana history. Dr. Wilson shares an insider’s look at the challenges from securing funding and overcoming opposition to tolls, to managing environmental risks and stakeholder expectations. He also offers a forward-looking perspective on when states should consider public private partnerships, the evolving landscape of infrastructure funding and the opportunities presented by the infrastructure investment and Jobs Act. So without further ado, let’s jump right into this week’s conversation.
Caitlin Devitt (01:28):
Welcome Dr. Shawn Wilson.
Dr. Shawn Wilson (01:30):
Thank you for having me. Looking forward to the conversation.
Caitlin Devitt (01:33):
Me too. So there’s a lot to cover, but let’s start with Calcasieu Bridge. This is a project you ushered through and it recently reached financial close after years of planning and the deal also won the Bomb Buyers P3 Deal of the Year award. It’s going to replace an aging bridge over Interstate 10, and like I said, it’s been a long planned project. It’s super important to the state and also to the nation. It’s the state’s biggest, I think it’s the second P3, is that right? It’s your second P3.
Dr. Shawn Wilson (02:02):
It is the second P3 that is correct.
Caitlin Devitt (02:04):
And the biggest and the most complicated. So when you were transportation secretary, you, as I said, ushered it in and kind of brought it and structured it as a P3. So talk to us a little bit about, give us a behind the scenes look at the project and the challenges and the successes of it.
Dr. Shawn Wilson (02:23):
Sure. Well, first let me tell you, I’m excited to hear you say Calcasieu because that’s indication that this project has evolved because people can actually pronounce it the correct way, but you’re correct. This was a huge project with so many twists and turns in it, and we identified this because it’s a project that had been around for decades in terms of a desire or a need to replace it, and Governor Edwards and I looked around the state and we were committed during our tenure leading the state and the leading transportation to deliver projects that the citizens had always talked about. We weren’t necessarily focused on creating a legacy of things that we wanted to do. We wanted to give the citizens what they wanted. And Calcasieu was the top of that list, not because it was just an old project, but it was a project that really speaks to I think the future of that community.
(03:16):
It speaks to the future of the multimodal industry of freight, and it was just an amazing project to work through. This project was complex because we opted recognizing that time was not necessarily our freight and we opted to run parallel tracks. We had done this on the Bell Chase project as well, and that was moving through NEPA, simultaneously working through procurement. That allowed us to leverage time, but it introduced some uncertainty in the process. And so as we worked with all of the potential bidders on it, they were very, very open and understanding and respectful of our process and what we’re doing. And as secretary, I stayed intimately engaged in what we were dealing with. This is a project that was experiencing the ballooning cost of infrastructure. As we said, it was 30 years outdated in terms of the time to replace it. It had a tremendous sense of urgency from the community.
(04:14):
And so when you have these urgent projects, everyone tends to act on their own. And so corralling the kittens, if you will, to put everybody in the wheelbarrow to move in one uniform direction was also a challenge. Overcoming misinformation and key stakeholders, whether it was elected officials or advocates or just citizens, their unfamiliarity with public private partnerships and what’s at stake and what’s at risk. This project is the most convoluted project I think I’ve ever seen in my 18 plus years history. Within the DOT, it had multiple utilities that were conflicting active pipelines, high pressure pipelines that predated the interstate system that crossed and traversed the right of way. We had two class one railroads. We have a globally operated industrial facility that poses all kinds of risks. There was like a chlorine explosion adjacent to this corridor. It had been in an environmental conflict for a long time because of an EDC spill that occurred, not to mention the traffic and the volume of people that were moving back and forth across this bridge between Texas and Lafayette, Louisiana, all the way to New Orleans for that matter.
(05:30):
And then last but not least, it’s a project that we didn’t have enough money to build. We were struggling in terms of the overall state’s revenue. We had not increased revenue when we started this project. And we knew the only way to deliver this was using a public private partnership using innovation, whether it was discretionary grants, whether it was tia, whether it was tolls, this was an all of the above project, and we were fortunate enough to integrate all of that and it well such that at the end of our administration, the current administration was able to come in and close the deal based on all of the work that we had done because we had been in procurement for two and a half to three years. So this was not an easy task. That time ran out on our administration because of politics, quite frankly, where the legislature rejected the idea of tolling a bridge. And then the same legislators came back in and approved it and we’re grateful that they did because at the end of the day, the citizens win. This was not about credit. This was about delivering infrastructure in a way that was going to produce the most value with the least amount of risk exposing the citizens of the state.
Caitlin Devitt (06:39):
Yeah, it was interesting that opposition to tolls. And I remember when the legislature killed it. I think that was the end of the year last year.
Dr. Shawn Wilson (06:48):
Yeah, I think it was September, October, I believe.
Caitlin Devitt (06:52):
And those of us from the outside, we didn’t know the new governor’s commitment to it. It was hard to tell whether or not he was going to come in, but then he did and all that, like you said, all that groundwork had been laid and they did some tweaks including interesting stuff where they kind of kicked in some money to bring down the rates and they’re going to get a piece of the toll revenue on the back end, which is pretty unique, I think also. But very quickly they got it back on track. And like I said, it reached financial close I think in August or September.
Dr. Shawn Wilson (07:20):
Yes, it was much later. And of course there’s inflation and escalation as a result of the timeframe difference. But the governor and I were, meaning Governor Edwards and I were very committed to this project, and I think he had one request in the handoff, if you will, of the transition to the state was that there was no other way to move this project. And I know the governor elect personally, we don’t always agree, but he understands the importance of Louisiana and the importance of infrastructure. And I’m thankful that he saw fit to demonstrate and validate the things that we were saying to folks is that the state can’t afford it by itself. We need the private sector. We need the private sector for innovation. We need the private sector for their financial capacity and the more affordable dollars that we could get, the most affordable dollars we could get, were involving a P3.
(08:13):
When you look at the ability to refinance with tia, when you look at the discretionary grant, we got $150 million out of the bipartisan infrastructure, law Secretary Buttigieg, and of course President Biden actually came to the bridge. We were very committed to investing every dollar we could, even the legislature dedicated revenue out of a recurring revenue package to this bridge. We dedicated excess surplus to this bridge. And so we were always in the mindset of, listen, we know this is going to cost a little bit more, but we’re going to put as much skin in the game as we can to reduce the burden on our citizens without cannibalizing the project’s integrity or its value. And I think we’ve actually done that. The fact that the city of Lake Charles is going through a master planning process to redefine the riverfront or the lakefront area to rehabilitate downtown post hurricane disaster, the bridge is going to be the centerpiece for it. It’s going to be an amazing infrastructure. And I’m excited that plenary and the team of folks that they have were the successful bidder. One because they were the winners of our first B three two. They understand our state, and I’ve seen their work, not just here, but across the world, and I think we are in a really good place for Calcasieu.
Caitlin Devitt (09:35):
Cool. Well, congratulations on that. Thank you. So taking lessons from that, looking nationally, when do you think states should consider P3s and when do you think they should go the more traditional financing route?
Dr. Shawn Wilson (09:51):
Yeah, it’s a tough, tough question because it’s going to be different for every state. The size and scale of projects are ever increasing and the opportunities for innovation or ever increasing from low carbon materials to innovative delivery and design, the whole idea of progressive design bill within the scope of a P3, there’s so many ways that can offer more value to citizens. If we were to exercise that first, we got to understand that only half the states, if I’m not mistaken, have P3 authority. And even less than that from a transportation perspective, that actually engaged in it so happy that Louisiana is on the front end with other amazing states that are doing it. States have to be thoughtful of managing risk. They’ve got to be thoughtful of controlling cost. We’ve got to harness innovation, and we got to expedite delivery. And government, when I studied in my PhD program, studied the processes of government and what it looks like.
(10:51):
Government isn’t always built to be the most efficient. It’s not always built to be the most innovative. It’s built to be sustaining and to be cautious as they move. The cost of infrastructure is ever increasing. And so we have to pull back some of that bureaucracy and accelerate that and unleash, I think, the private sector in ways that we hadn’t done before. And so for states that are willing to engage and be thoughtful about that, the better off they’re going to be. When I look at things like the first principles produced by ai, ai, it’s an association advancing infrastructure. Here in America, we’re teaching public entities, not just state governments, but local governments as well about risk and about how contractors think and about making a good deal. No different than when you issue bonds. I’ve seen bond packages be issued for 30 years on an asset that’s only going to be of value to the citizens in its best condition for half that time.
(11:53):
That’s not necessarily a good investment. I’d much rather make short-term investments on longer term life assets as opposed to not. And so being thoughtful about that and teaching states how to use that, I think is going to help determine when to move it. So states that are facing mega projects are going to have to look at fee threes. I believe, in order to one, be competitive for the contracting industry to come in, but two, to be able to attract additional dollars. TIA financing from the bureau cannot be beat. Traditional bonding is always going to be an asset using private activity bonds of which we did on the Calcasieu Project, absolutely smart thing to do. Those are things that people are going to have to say, I can get this done in my state, not for every project. Remember this was in Louisiana, one of four projects that had the potential to be a successful P3 out of thousands of projects.
(12:51):
And so it’s one of the projects, by the way, that was going to cost probably more than 30% of those other thousand projects all combined. So you have to think about it, and I would encourage states to gather all they can, establish some capacity, identify the assets you need in terms of advisory services, engineering services, procurement services. Be thoughtful about what your legislation actually allows you to do. When you think about this, a P3 is really an amazing contract because it’s a contract that’s not only looking at the evolution of a project with the delivery of the project, and it contemplates the lifespan of the project for the duration of the concession. And that is not something states are accustomed to. States typically do with projects on the here and now and add it to the list, we’ll get to it when we get to it.
(13:43):
That’s not the case with a P3. You’re actually protecting value over the long haul. And a P3 is only going to be as effective and successful as the document that it’s based on. And that I think is going to be a fundamental opportunity for states to improve and find a way to deliver. And that’s what we did in Louisiana when I was secretary. We created an office of Innovative Procurement to specifically deal with these projects and to build the pipeline of the right kinds of projects to pursue the right procurement model and the right delivery model because the vast majority is going to be designed bid build. But the really grizzly projects, the ones that are really going to move the needle from a public appreciation and public utility perspective are going to be projects that absolutely need this kind of innovation. And we need to be better at doing it as a state. We need to be better doing it as an industry. And of course, we need to be more thoughtful about it as citizens because infrastructure is expensive and we’ve got to find a way to pay for this, and taxes isn’t going to do it all the time. We’re going to have to be innovative and let the value of that asset reduce more infrastructure.
Caitlin Devitt (14:53):
Yeah, I mean, as gas taxes become less and less effective federally and on the state front, I mean, I think Louisiana, correct me if I’m wrong, but finances, most of its transportation to its gas tax.
Dr. Shawn Wilson (15:06):
That’s correct.
Caitlin Devitt (15:08):
And as electric vehicles become more popular and more efficient and more energy efficient cars and the feds are going to have to deal with this too, with the Highway trust fund, I mean, they’re going to have to try to figure out a way for either tolls or private some way that the equation’s going to have to shift a little bit.
Dr. Shawn Wilson (15:25):
It absolutely does. And look at WSP, we are keenly focused on supporting road usage charge initiatives because it’s going to have to be something sustainable, something that’s measurable, something that can be easily calculated with some levels of integrity that the public will buy. And once we work through some of those glitches, it’s going to take some time to convert that. But in the interim, we’re going to need to find a way to still deliver and protect and preserve the systems we have because we’ve built a robust system that I don’t think we could ever put a price tag on it. And my friend Roger Malar would always say, infrastructure is based on the economy we have, not necessarily the economy we want. And if we get our eye off the ball and don’t take care of what we have, we’re going to be in a really tough spot. And so I clearly see this fitting into that conversation of how do we fund infrastructure period, not just a project, but infrastructure across the board.
Caitlin Devitt (16:26):
Yeah, and I know IJA has a pilot program in there for road user charge for National Road User Charge system. So it’ll be interesting to see what happens with that if anything does end up happening with that. But speaking of the IGA, the Infrastructure Investment Jobs Act, Friday was the third anniversary. It’s hard to believe,
Dr. Shawn Wilson (16:48):
Yeah.
Caitlin Devitt (16:48):
It’s been three years since President Joe Biden passed that it’s a five year bill. The Biden administration said people would’ve just said Friday or Thursday that they’re working to get the money out the door as fast as possible in the administration’s final months. A lot so far has funded 66,000 projects. So tell me from your perspective, what kind of impact has the IJA had so far on states in particular like state dots in particular, and what do you think the remaining two years are going to look like in terms of spending and projects?
Dr. Shawn Wilson (17:18):
Yeah. That old exciting day on the lawn in the White House when that bill was signed, I don’t think anyone envisioned. I think the opportunities that lay ahead as well as the challenges, and because of the number of programs, the Protect Act, nevy, all of the different elements of the IJA were being stood up using a model that the department, meaning U-S-D-O-T, they had some familiarity with, but they hadn’t really scaled up to the capacity. And the secretary and the leaders at DOT have done a yeoman’s job at getting to the point to move grants and move these programs forward. Let’s not take for granted what it means to stand up a project. And in spite of having to stand up multiple new programs, 66,000 projects have been funded out the door. And what makes IIJA special I think is it was focusing on shovel worthy projects and not just shovel ready projects.
(18:17):
It was focusing on a broad array of transportation assets from sidewalks to transit systems to highways and bridges to electric to climate and sustainability. All of those buttons have been pushed. And so three years into it, we are at effectively halftime where we have awarded hundreds of millions and billions of dollars to projects that would not have normally gotten done. When you think of something like the Brent SPS bridge, when you think about something like Calcasieu, when you think about the I 10 mobile bridge, when you think about these mega projects out there that could not on their own or within their own state resources, given the federal investments have been funded, I’m excited about what the future holds because these investments are going to take six to eight years to actually build out. And it’s my hope and prayer that we can double down on these efforts with reauthorization and not find ourselves sucking air because the profit sector, they’ve gone out and made strategic investments in terms of equipment and claims and hiring people and training people.
(19:26):
And if we pull back the pipeline, if we eliminate the resources that have been set forth at our IJA as a minimum to fund infrastructure at a new aggressive level, we will be doing our economy and our communities and our citizens and this industry a disservice. And so I’m excited about what the future holds because that means we’re going to see projects over the next few years that we talked about and allocated funding. I mean, Calcasieu received $150 million two years ago. If it was easy, it would’ve been done already. And so the fact that we got to this point, it takes time and the citizens have to be patient. Our legislators have to be thoughtful and smart about what that looks like, and let’s not pull the rug from under the economy. Let’s double down on this and focus on these improvements as we go into reauthorization. Another private sector at WSP is excited about all of those efforts from energy to sustainability to asset management, the technology components of what’s happening in transportation, safe streets for all. When you think about how we’ve moved the needle on saving lives in communities, large and small, urban and rural, it’s phenomenal. And so it’s an exciting time. It’s unfortunate that it has to end with the IIJA, but it’s an opportunity to do even more going forward.
Caitlin Devitt (20:51):
We’re going to take a quick break, and we’re back with Dr. Shawn Wilson. So you mentioned you just talked a little bit about the next surface transportation bill, which the upcoming Congress, the hundred 19th, which is going to come in in January, is going to tackle those IIJA funds. Those are advanced appropriations for a couple of years. So I think even if the Republicans aren’t particularly happy with them, if they have a tough time unwinding it, but in any case, they are going to be crafting the new bill, which is going to be starting, which the funds will run out for the IJA and end of fiscal year, September, 2026. So they’re going to be crafting the new surface transportation bill ahead of that. One area that I expect to see some debate over is whether or not the new bill will should have the same focus on discretionary grant funds as the IIJA, because we’ve seen that that’s been a little bit of controversy or is it going to swing back to more formula funds? And what do you think and what do you think states should prefer?
Dr. Shawn Wilson (21:59):
Yeah, when you’ve been in this business, not that I’m a lifer by any means, but for two decades I paid attention to the policies and implementation here, dating back to the FAST Act. We put this in and there was a debate around the need for discretionary, and then we had another administration and they kept it in and it grew. And then we got this IJ and we kept it and it grew. States are all unique in that not everybody’s going to win a discretionary grant, and we were building capacity standing up the ability to compete for discretionary grants. And I think there will always be a role for discretionary grants in lieu of earmarks that we once had, but it’s adding a little bit more discipline to the process states for the most part, all love formula because everybody gets their fair share, but you may not be able to get those big projects done.
(22:49):
And so for me, the most perfect world is a both and situation. We need both discretionary and formula, and the way we can make that happen is, one, you can move national policies in national agendas for infrastructure while empowering states to one, deliver their regular programs, but two, choose what they can compete with. States have done exceptionally well. Red states, blue states, rural states, urban states, all have done well with discretionary grants. And so I suspect that there will be a yearning to cut back on some of that. I think the tipping point was the number of new programs that were all created in the IJA. And so I think what’s going to happen is you will continue to see discretionary, but maybe not as many programmatic spins that you saw in IJA deliver that. And that’s going to be unfortunate for those programs that for the first time got funding.
(23:46):
I mean, something like safety and the money that we spend on safety in formula as well as in discretionary right now is phenomenal because small communities and large states both get a piece of the pie and you can compete projects from a quality standpoint. It would be a very unfortunate situation if that was a project or a program, safe Streets for All to disappear because of this desire to not like discretionary and to double those dollars in the Formula Fund I think might not produce some of the innovation, some of the best practices that we’re seeing and accelerate some new innovations out there. So I think it’s going to be a combination of both states would like to see more formula money. I understand that. I respect that. And quite honestly, if you want to really move the National Needle formula is the way to go, but you cannot deny that some of the great work that’s happened with discretionary funds would only have happened if they were discretionary funds. And so my recommendation, if anyone’s listening, not that I get to make the say so, is do a little bit of both. Let’s find a way to strike a balance to be able to help these big projects be innovative, but also support state abilities to do the projects that are important to them.
Caitlin Devitt (25:04):
Wise words. So you talked a little bit about from your current WSP, some of the exciting things that you guys are looking at and thinking about, but tell me a little bit more about what you think are some of the most exciting things happening right now and the national infrastructure scene.
Dr. Shawn Wilson (25:18):
Well, outside of rear authorization from a policy standpoint, that’s something that we can be a part of the discussion, but it’s not going to be what drives us every day. What’s going to get us up every morning and move us forward is the ability to be competitive around the world with infrastructure here in America that’s going to drive the economy, it’s going to increase the quality of life here and it’s going to keep people working. I’m excited about what this investment in Jobs Act. Remember it was infrastructure investment and Jobs Act because it’s changed the conversation to help make infrastructure a cool career again. And so we’re talking about elementary kids and high school kids gaining trades and learning the skills necessary to sustain this industry. And so we get to be engaged in that at WSP from a training standpoint, from a hiring and recruiting standpoint to deliver projects that are just top line for citizens.
(26:15):
We’re excited about the NEVY program and what that might mean, not just for the climate or the sustainable efforts of energy in this country, but think about it in terms of the conversation of how do we fund infrastructure with a robust electrified system with technology. As our friend, we are going to be in a much better place to transition to a new system of collecting IE road usage charges, I think going forward in a way that respects individual’s privacy, but also produces the data to help make the kinds of allocations to infrastructure based on its usage. So I’m excited about nevy and what that means. I I’m excited about the variety of types of projects. So when you look at Bridges, mega Bridges and the Bridge Investment program that allowed us to fix a small rural bridge that’s going to move sugarcane from a field to a port or to a refinery or a mega project like the Calcasieu Bridge project connecting Texas to Lake Charles, those are projects that I think are really exciting for us because it allows WSP to maximize its bridge expertise, but also to put engineers across the board to work the area of safety and technology.
(27:38):
Safe Streets for All is another amazing tool that’s giving us some real low hanging fruit that has tremendous value to save a life. The ability to use technology to allow someone to get home safely, the information and the knowledge that you have in a vehicle today is eons away from what it was when I learned how to drive a stick shift truck in Algiers, Louisiana. So I’m excited about what technology is doing for our industry, not just in terms of what the citizens feel like, but from a digital twin perspective. From designing and developing these tools and developing projects. It’s an amazing opportunity for us to really be prepared for the future, not just the future that we want, but the future that we haven’t even imagined yet. It’s going to be possible as a result of some of these investments. Transit is going off the chain, aviation is doing great things. We’d love to see that system continue to expand. And so IJA was really an undergirding component of what the future is and why it’s exciting to be here today, and this is WSPs perspective, but every firm, all of our competitors, I hope they’re thinking the same thing because that is what it’s going to take to move it. There’s so much work, so much need and so much opportunity. It’s just an exciting time. The convergence of what this bill has created and where we find ourselves now.
Caitlin Devitt (29:06):
Very cool. Lots to look forward to. Some sort of jets since future. I was kind of imagining as you were talking, and also if we could somehow harness little kids with all their excitement for seeing the construction projects out there, we need to pull that forward with a generation.
Dr. Shawn Wilson (29:23):
Just think of the workforce. When you look at the disaster response of what we’ve seen in South Carolina and North Carolina and Georgia and Florida and all of the Southeast for that matter. Think about how people use drones today. Think about how we inspect bridges and think about the game equipment that young people use today, grow up doing this stuff. Why not apply that to the value of citizens and put them to work to do that, to say, I can go and assess damage with this drone. I can control this forest. I can deliver this package for you. It’s going to be cheaper, it’s going to be cleaner, it’s going to be safer. Those are cool opportunities, man. I’m just excited about where we find ourselves now and look forward to leaving my grand babies a much better place than it was when I found it.
Caitlin Devitt (30:10):
All right. Well, you’ve got me excited too. Thank you so much for your time, Dr. Shawn Wilson, and for your vision.
Dr. Shawn Wilson (30:15):
Well, thank you.
Caitlin Devitt (30:15):
And we look forward to hearing more from you in the future.
Dr. Shawn Wilson (30:18):
Awesome. Hey, thank you Bon Buyer for recognizing the effectiveness of Calcasieu. Congratulations to everybody who worked on it. From the communities, to the department, folks to the legislators, our Congress folks, everybody who had a hand in it, they all share in the success. And thank you for recognizing that.
Mike Scarchilli (30:35):
We hope you enjoyed this episode of the Bond Buyer Podcast. A big thank you to Dr. Shawn Wilson for sharing his insights on the complexities and opportunities of modern infrastructure projects. And to our senior reporter, Caitlin Devitt, for leading such an engaging discussion. Here are three key takeaways from today’s episode. One, the Calcasieu Bridge project showcases the power of public-private partnerships to deliver large scale high stakes infrastructure projects that states alone may not have the resources to fund or manage effectively two discretionary grants and innovating funding mechanisms such as private activity bonds and TIFIA loans are vital for advancing critical projects that exceed the scope of traditional financing models. And three, the infrastructure investment and Jobs Act has reshaped the infrastructural landscape, creating opportunities for states to address longstanding needs while pushing for innovation in project delivery and funding. Thanks again for listening to the Bond Buyer podcast. This episode was produced by the Bond Buyer. If you liked what you heard, please hit subscribe on your favorite podcast platform. Leave us a review and check out our latest coverage at www.bondbuyer.com. Until next time, I’m Mike Scarchilli signing off.