Tennessee toll lane contractor promises to pay state nearly $148 billion

The road construction group building Tennessee’s toll lanes along the I-24 southeast corridor is upping the ante, promising to pay the state nearly $148 billion over 50 years to lock in the deal, six times more than initially guaranteed.

The Tennessee Department of Transportation and DriveTN, a consortium led by Spain-based Ferrovial, announced Tuesday they reached an agreement on the amount the six-company group will pay the state over a half-century to secure the project, dramatically more than nearly $25 billion offered in August when the state approved the bid. The group will take on the $9.2 billion construction job, building toll lanes roughly 30 miles from downtown Nashville to Murfreesboro and along I-440 and I-40 East in Nashville.

The state’s Transportation Modernization Board awarded the project to DriveTN based largely on its promise to concede $24.8 billion in payments to the state over the eight-year construction phase. The consortium would try to recoup its expenses by charging motorists to use the toll lanes in the congested sector of highways over the next half-century.

Under the new financial structure, Tennessee is expected to receive $7.7 billion in payments between a financial closing date slated for the third quarter of 2027 and the completion of construction in 2035, followed by payments totaling more than $140 billion over the 50-year operating period, according to a Department of Transportation release.

The new financial structure comes two weeks after a road-building group that lost out on the project challenged the award. The group called 24 Choice Lanes Partners says in its filing in Davidson County Chancery Court that the Department of Transportation gave its competitor an edge by allowing it to change the terms of a record-setting payout after the bidding took place. 

The group says in its filing that DriveTN was able to make adjustments after the bidding because it could see the proposals of three other consortiums, two of which promised to pay the state about $7 billion in “concessions” to land the deal.

An international bank downgraded Ferrovial’s stock shortly after the bid, citing “higher risks” associated with a promised payment to the state that dwarfed competitors’ efforts to win the job.

Switzerland-based UBS lowered the company’s stock to “neutral” from “buy” in a new analysis, mainly because the company guaranteed the state nearly $25 billion in payments or “concessions” over the eight-year construction timeline. That figure is much lower than the new total announced Tuesday over the life of the 50-year contract.

A Department of Transportation spokesperson did not answer Lookout questions by Wednesday deadline.