P3 Profiles: Dallas-Fort Worth I-635 Managed Lanes (LBJ Expressway)

P3 Profiles: Dallas-Fort Worth I-635 Managed Lanes (LBJ Expressway)

By Chrissy Mancini Nichols

Apr 26, 2011

This post first appeared at metroplanning.org

PPP Profiles is an ongoing series of case studies on national and international public-private partnerships. 

Location: Dallas/Fort Worth, Texas (TxDOT)

Project Sponsor: Texas Dept. of Transportation

Private Partner: LBJ Infrastructure Group, LLC – a joint venture of Cintra, Meridiam Infrastructure, and Dallas Police and Fire Pension System

Project Delivery: Design/Build/Finance/Operate/Maintain

Cost: $2.626 billion

Funding Sources:

   Cintra, Meridiam & Dallas Police and Fire Pension Funds - $665 million in equity

   Private activity bonds - $615 million

   Transportation Infrastructure Finance and Innovation Act  loan - $850 million (that investors will service and pay)

   TxDOT funds - $496 million

The LBJ Express, Interstate 635 in Dallas/Fort Worth, Texas, is a major headache for drivers and transportation officials. Originally built in 1969, it was designed to carry 180,000 vehicles; by 2009 that number reached 270,000. Projections show that without action, by 2020, traffic demand is estimated to exceed 450,000 vehicles per day. Currently, the highway is congested at all times, whether it is rush hour or not.

In 1987, the Texas Dept. of Transportation (TxDOT) started thinking about reconstructing the expressway to alleviate congestion and harmful emissions from idling cars; however, it was determined that without outside help, TxDOT could only finance about $1 billion, less than half of the cost of reconstruction. The agency decided that without a private partner to help with financing, given the size and scope of the project, reconstruction would be delayed for years or possibly forever. So TxDOT partnered with the LBJ Infrastructure Group, LLC, (LBJIG), a public-private partnership composed of Cintra, Meridiam Infrastructure, Dallas Police and Fire Pension System, and contractor Trinity Infrastructure, to design and build the 17-mile expressway, after which LBJIG will operate and maintain the system. Described as the most comprehensive and complex project of its type in the country, the LBJ Express will be reconstructed, turning the LBJ/I-635 Corridor from an eight-lane free expressway, to a multi-level 18 to20- lane complex of free and priced travel. It is anticipated that road capacity will double. Construction will run from 2011 through 2016.


Reconstruction includes:

   Construction of six new managed lanes (mostly subsurface) along I-635 from I-35E to US 75

   Construction of six new elevated managed lanes along I-35E from Loop 12 to the I-35E/I-635 interchange

   Reconstruction of the eight existing lanes and four parallel access road lanesalong I-635

Once construction is completed, drivers will have the choice to remain on the free, main lanes or to opt for new express, variably priced, managed toll lanes. The tolls will vary depending on traffic conditions, type of vehicle, and number of passengers in the vehicle. The dynamic pricing system will allow the tolls to be adjusted as frequently as every five minutes based on traffic levels to maintain a steady 50 mile-per-hour (mph) flow of traffic. Tolls will range from 15 cents per mile during low traffic volumes to 55 cents per mile during rush hour. Vehicles with two or more people will pay half. 

TxDOT transfers risk, shares profits

The concession agreement, or lease, formally began on Sept. 4, 2009, and will last 52 years, during which time LBJIG will construct, operate and maintain the roadway. At the end of the lease term, the operation and maintenance responsibility for the roadway will be returned to TxDOT. The Dallas Police and Fire Pension System, one of the investors, is the first U.S. pension fund to invest directly in the construction and maintenance of a major road project. 

LBJIG has contracted with the North Texas Tollway Authority (NTTA) to collect tolls on the LBJ Express.  After subtracting NTTA administrative costs, remaining toll revenues will be used to pay debt service, maintenance, and operations. Any revenue left will be LBJIG's profit from the project.  To the extent that toll revenues exceed specified levels, LBJIG will share profitswith TxDOT based upon an agreed internal rate of return for equity. 

In partnering with LBJIG, TxDOT has shifted the construction and revenue risk from the taxpayer to the private sector. For example, if ridership demand for the toll lanes doesn’t materialize, it is LBJIG that must deal with the revenue loss, not TxDOT.  In fact, LBJIG is liable for payment (ranging from 25 to 100 percent of tolls collected) to TxDOT if average speeds in the managed lanes fall below 50 mph.   

During the five-year overhaul, the construction philosophy is to “keep traffic moving,” with a minimum of four lanes open in each direction during peak traffic times, and at least one frontage road lane open for access to existing businesses.

Lessons Learned

Cost savings

LBJIG used just $445 million of the $700 million in public funds made available by the State of Texas to help bidders finance the project. The group benefited from favorable terms it was able to negotiate on its repayment for the $850 million federal Transportation Infrastructure Finance and Innovation Act (TIFIA) loan. LBJIG may defer 75 to 100 percent of required debt payments for up to 25 years, if toll revenues are insufficient to cover operations and maintenance, senior debt service, and potential revenue sharing with Texas. 

Air quality

Vehicle emissions created by heavy congestion make Dallas’ air quality below national standards.  Steady traffic flow in the corridor will mean fewer idling vehicles, reduced vehicle emissions, and improved air quality.


LBJIG estimates that direct construction and operation will result in 1,500 jobs.  In addition, TxDOT cite FHWA estimates that for every $1 billion in highway investment, 27,800 jobs are supported, meaning the investment ripple effects could create almost 70,000 jobs across the economy.

Need for mass transit?

The Texas Transportation Institute ranks the Dallas/Fort Worth area as the fourth most congested among large urban areas in the U.S., causing local drivers to burn 106 billion gallons of extra fuel per year and waste countless hours delayed in traffic. According to the LBJ Express web site there is no way to re-build the expressway to handle the eventual demand for the LBJ, which will be  450,000 vehicles per day by 2020. Even upon completion, the roadway would be outdated.  TxDOT officials believe the managed lanes will keep traffic moving through the corridor, making for an easier commute, but investing public transit could be more economical, efficient, and green. Dallas Area Rapid Transit (DART) operates rail and bus service that connects a 700-square-mile service area around Dallas. The rail system has expanded twice in the past five years and should double in size by the end of 2014. Currently DART’s network of rail and bus services moves more than 220,000 passengers per day, but still a small percentage of the 2.7 million daily commuters. Investing in reliable and accessible rail and bus would be the answer to end the horrific congestion in the Dallas area.



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