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September 20, 2014

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State dumps public-private financing for massive I-15 project

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COLAB Las Vegas

A rendering of the Project Neon Downtown Gateway.

The Nevada Department of Transportation today scrapped plans to use private financing to pay for major overhauls to Interstate 15 in Las Vegas over concerns about affordability.

The department instead opted to go with a more traditional financing plan using government-issued bonds to pay for the $700 million to $800 million Project Neon.

The decision is a change of course from a year ago, when the department’s board of directors, which includes Gov. Brian Sandoval, enthusiastically endorsed a public-private partnership to complete the project.

The partnership would have used private equity to design, build, operate and maintain a stretch of I-15 near the Spaghetti Bowl for 35 years. The state would have made payments to the private company, similar to a home mortgage.

But since the public-private partnership was approved in June 2013, changes to the project’s scope and uncertainty in the financial markets made it a less attractive option.

“The ground has shifted beneath our feet in terms of interest rates and the best delivery method,” Sandoval said.

Department of Transportation documents show the projected cost of Project Neon under the public-private partnership has increased from $602 million to $740 million over the last year. The biggest drivers of the price jump are higher interest rates, an expanded project scope and increased maintenance costs.

Bill Hoffman, the department’s deputy director, said today that switching back to financing through bonds would be more affordable and offer greater flexibility for completing the project.

The reversal is not expected to significantly delay the start of construction, which is targeted for late next year or early 2016. The project is expected to be finished by 2020.

Sandoval said the year spent exploring the viability of using private financing was a necessary part of the due diligence process to ensure the most cost-effective approach.

Project Neon is the largest roadway project in the state’s history. It’s focused on reducing congestion on a 3.7-mile stretch of I-15 near the Spaghetti Bowl, which sees more than 250,000 vehicles daily.

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