A good deal for public

Private lease of Northwest Parkway ends debt fears

Published September 4, 2007 at midnight

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Not so long ago, the toll-financed Northwest Parkway was looking like a white elephant. Maybe it is, and always will be.

But if all goes according to plan, in a few weeks the parkway's fiscal uncertainty will fortunately be the headache of a private contractor rather than the parkway's public managers and debt holders.

In a recently approved deal that should close around Oct. 1, Brisa/CCR, a consortium of companies from Portugal and Brazil, respectively, agreed to pay $603 million for a 99-year lease to operate the parkway.

The consortium will be responsible for maintaining the highway, contracting with traffic enforcement and public-safety agencies and making improvements - which could include adding lanes if circumstances demand. The contractor will also collect all tolls the road generates during the lease.

In return, the Northwest Parkway Public Highway Authority will be off the hook, financially speaking. The folks who hold debt from the parkway are probably happy, or should be; the authority had to dip into reserves last year to make interest payments on its bonds.

And unless many more drivers had started using the toll road, the authority would have had trouble retiring the principal on its debt when those initial payments came due in 2009. Entering default could have led to bankruptcy. That would have likely halted maintenance and expansion along the corridor until creditors were paid off, leaving commuters in the lurch. It also would have damaged the state's credit rating.

In walked Brisa/CCR. The two companies altogether operate nearly 1,800 miles of toll roads in Europe and Latin America. Having private companies manage public highways is not unusual outside the United States. But to date, no domestic company has done that (though Goldman Sachs and Morgan Stanley were two of the 11 bidders for the lease, which tells you U.S. firms will soon be players). With Brisa/CCR, the authority selected a contractor with expertise in highway operations.

By most accounts, this is a generous offer. Steve Hogan, the authority's executive director, told us that Brisa/CCR will pay roughly 90 times the parkway's most recent annual revenues. That's about twice as much, relatively speaking, as a Spanish/Australian consortium paid in recent years to lease the Chicago Skyway and the Indiana Toll Way.

Why did the Northwest Parkway generate such a premium? It will be the first U.S. highway operated by Brisa/CCR, and private investors are eager to get a foothold in the U.S. market.

Under the terms of the lease, the contractor will also invest $60 million to help pay some of the construction costs if the parkway is extended to Colorado Highway 93, though officials in Golden continue to resist any expansion that would eventually link the 470 beltway around Denver.

We were skeptical that the parkway authority could land a favorable deal when it announced it was seeking outside investment. But it did, and if this arrangement works for the contractor and the public, perhaps there are other opportunities for officials in Colorado to court private investors to help build or maintain the ribbons of highways that are needed to keep traffic flowing smoothly throughout this state.

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