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Public-Private Partnerships Potential for Arizona-Mexico Border Infrastructure Projects

Final Report

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Chapter 13 - Project Specific Discussion

Section 8 lists fourteen potential public-private partnership projects located at Arizona's seven ports of entry and two projects in Pima County. Section 8 also indicated that the projects identified at three of these locations - Naco, Lukeville, and Sassabe - did not lend themselves to a consideration as potential public-private partnerships. Potential public-private partnership projects at each of the other ports of entry were identified in Section 8. The following sections will discuss the public-private partnership potential for each.

13.1 San Luis

The San Luis Port of Entry will soon consist of two border crossings, the original San Luis I and the newly built San Luis II.

San Luis I is currently slated for a major reconstruction and reconfiguration project. The current commercial and truck traffic using the existing port of entry will be routed to the new San Luis II Commercial Port of Entry located several miles to the east upon its completion. Currently, the port contains a commercial vehicle inspection station and related facilities. The reconfigured port will then process only pedestrians and passenger vehicles.

San Luis II is the first new port of entry built on the US-Mexico border in the past eight years and is scheduled to be completed in the latter half of 2009. This new commercial "super" port is an example of private involvement in a land port of entry project in Arizona. While it is not a "traditional" public-private partnership project, the Greater Yuma Port Authority committed local resources in the form of land purchase and donation to advance the port of entry project on an accelerated time frame. The new port of entry facilities will more than double the current throughput capacity of the San Luis I port for cargo, and included the potential to be expanded, if need be.

This new port is a catalyst for industrial development including prospects for a new rail line and industrial parks. The industrial development factor makes the San Luis II Port of Entry a prime candidate for potential public-private partnership integration.

The potential public-private partnership projects identified in connection with the San Luis Ports of Entry include:

  • Project #1: Improvements to US 95 connecting to San Luis I
  • Project #2: Improvements to US 95 Truck Route to San Luis I
  • Project #3: Improvements to South Avenue E and SR 195 at San Luis II
  • Project #4: Proposed Industrial Park at the San Luis II Port of Entry
  • Project #5: Extension of SR 195 from Interstate 8 north to US 95
  • Project #6: Improvements and Expansion of Juan Sanchez Boulevard

Most of the projects proposed for San Luis I and San Luis II have potential land use impacts. Improvements to US 95 (Project No.1) and US 95 Truck Route (Project #2) would occur in the urbanized area surrounding the San Luis I Port of Entry. Potential effects on businesses and other properties along these routes would include loss of land, parking, and potential for relocation depending on the nature of improvements. The projects proposed near San Luis II Port of Entry including improvements to South Avenue E and SR-195 (Project #3) and the extensions of SR-195 (Project #5), and Juan Sanchez Boulevard (Project #6) would also affect neighboring properties and land use.

Land has already been acquired for the industrial park (Project #4) but additional rights-of-way could potentially be needed for the other projects. If a public-private partnership is implemented for any of these projects, the public sponsor will need to acquire any necessary rights-of-way.

Several of the routes proposed for improvements serve substantial local traffic and local transportation needs in addition to border traffic. If improvements on these roads are focused primarily on the need to improve traffic flow to the border (whether part of a public-private partnership or not), local resistance may emerge. Improvement plans will need to balance border and local needs.

Concerns over potential security issues in implementing a border crossing public-private partnership with private sector involvement may arise among the public and several officials. The fact that private sector involvement on the proposed projects would have no impact on border security and inspections at the port of entry will need to be well communicated.

Projects #1, 2, 3, and 6 are surface streets that provide significant local access. The fact that these routes are currently free and that the ability to control access is limited, these projects are not candidates for toll funding. If the decision is made to move these projects forward as public-private partnerships then the use of a design/build/finance model may be appropriate. However, the annual funding for these improvements will need to be identified.

As Project #4 develops it should generate revenues from various leases and user fees. It should be anticipated that these revenues will pay for the development within the intermodal center. It should not be anticipated that any significant revenues will be generated to support other area projects.

Project #5 is too short, and with too many alternatives, to operate as toll road. If the decision is made to move this project forward as a public-private partnership then the use of a design/build/finance model may be appropriate. However, the annual funding to support Project #5 will need to be identified.

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13.2 Nogales - Mariposa

The Mariposa Port of Entry is located approximately one and one-third miles to the west of downtown Nogales. This port serves passenger vehicles, pedestrians, and commercial cargo. The road leading to the Mariposa Port of Entry on the Mexican side is the Corredor Fiscal which is an 8-mile toll road bypass around Nogales, Sonora. The road terminates to the south at Mexico Highway 15 and has no access along the route, only at the endpoints. The Mariposa Port of Entry is currently open from 8 am to 6 pm for commercial vehicles and from 6 am to 10 pm for passenger vehicles, Monday through Saturday. However, CBP is considering opening the port to passenger vehicles 24/7 upon opening of the reconfigured port of entry.

Mariposa is Arizona's principal gateway for international trade. It was originally intended to process 400 trucks per day and now has as many as 1,600 truck crossings in a single day. The Mariposa Port of Entry alone accounts for the import of 45% of the fresh produce consumed in the entire United States between October and May. A port reconfiguration project is currently funded for construction and will help alleviate the congestion problems that have begun to plague the port in recent years. This reconfiguration will allow the port to handle its increased traffic volumes for all modes.

Of the fourteen projects located at or adjacent to Arizona's ports of entry, Project #7: SR 189 (Mariposa Road) from the Mariposa Port of Entry to I-19, has the greatest potential as a public-private partnership project. Approximately 3 miles long, there are a number of factors which lead to this conclusion:

  • The majority of the trips on the project are through traffic with limited local trips.
  • The expected cost of this project is in excess of $100 million. Though small for most public-private partnerships, this project is large enough that it should be able to support the development costs of a public-private partnership project.
  • An 8-mile toll road, the Corredor Fiscal, already connects the Mariposa Port of Entry to Mexico Highway 15 south of Nogales, Sonora. Together these two roads would form a tolled bypass of both Nogales, Sonora and Nogales, Arizona.
  • Diversion of existing traffic should be minimal given that the closest alternative commercial port of entry is over eighty miles due east, has longer connecting routes, and has a port of entry that may not be able to handle significant increases in commercial traffic.
  • The existence of the Corredor Fiscal should lead to very reliable revenue projections since there is already a track record of tolled traffic patterns.
  • The current port of entry expansion project is already funded.

Despite these advantages, Project #7 has some issues that will need to be addressed. These include:

  • The Mariposa Port of Entry has not historically operated 24 hours a day for seven days a week. This limits the revenue potential for the project. It is unclear how the public-private partnership market will react to this limitation.
  • The conversion of previously "free" roadway to a tolled facility could result in resistance from public officials, trucking associations, and members of the public.
  • Concerns over potential security issues in implementing a public-private partnership with private sector involvement may arise among stakeholders.
  • The existence of tolls on the US side of the border could create an additional queue as vehicles stop to pay the toll for the project. This can be mitigated to an extent if electronic toll collection (ETC) can be implemented. However, successful implementation will require international enforcement.

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13.3 Nogales - DeConcini/Morley Gate

The DeConcini and Morley Gate Ports of Entry are located in the Central Business District of Nogales for both Nogales, Arizona and Nogales, Sonora. The DeConcini Port of Entry offers crossing for passenger vehicles, busses, recreational vehicles, pedestrians, and rail. This crossing is open 24 hours a day, seven days a week. This crossing is over 100 years old and is the most congested border crossing between Arizona and Mexico. The Morley Gate is a pedestrian only crossing located nearby at the end of Morley Avenue in Nogales. The crossing is located just to the east of the DeConcini Port of Entry and is generally considered part of the DeConcini Port of Entry.

The potential public-private partnership projects identified in connection with DeConcini/Morley Gate include:

  • Project #8: Intermodal Freight Facility in Rio Rico at DeConcini/Morley Gate
  • Project #9: Relocation of Rail to the East or West of Nogales

Both projects have potential environmental issues that the public sponsor will need to take the lead in addressing and obtaining needed environmental permits and clearances. Project #8 will need environmental clearances for whatever site is selected. Project No.9 has known environmental issues with both potential identified locations for the relocated rail. There is an open area to the east of Nogales, but it runs through a riparian area in the vicinity of the Santa Cruz River. A potential move to the west, near the Mariposa Port of Entry, has significant terrain challenges and associated environmental issues to contend with. Environmental documentation may be needed to evaluate alternatives and select a preferred alternative.

Site selection and land acquisition will be key implementation challenges for public-private partnership implementation of both Projects #8 and #9. For the intermodal facility in Rio Rico, a large site will need to be assembled and provided with utilities and other infrastructure. There may be an important public sector role in site assembly before private sector investment is attracted to the site. For the rail relocation in Project #9, both the rail company (Union Pacific) and public entity paying for part of the project will need to agree on an appropriate relocation site and acquire the needed land. Any public-private partnership arrangements would need to determine which entity will acquire the land for the project.

Project #8 is a development project, where the public benefits would come in the form of reduced truck congestion at the neighboring Mariposa Port of Entry and potential job and economic development benefits. The private sector sources of revenue would be related to leases associated with an intermodal facility and facility related service and freight charges levied by the rail company and/or intermodal facility operator. Public sector source of revenue to support the facility could come in the form of a land acquisition and donation, a special district with tax abatements, and grants dedicated to develop infrastructure including roads and utilities to support the facility.

Project #9 necessarily requires coordination with a private partner, the Union Pacific Railroad. Since the railroad would be the sole user of Project #9, its interests will need to be taken into account in addressing any relocation of the existing rail line. This single user would make it difficult for a third party to participate. Project #9 should be considered as a public-private partnership between the Union Pacific and a public sponsor or as a private sector partnership with a public sponsor providing support, but not entering into a partnership. Public sector contributions could come in the form of grant funds and in kind services or land.

The public benefit of the proposed projects is more indirect than other transportation improvements and a strong case for public participation will need to be made. These are projects that primarily involve indirect benefits in terms of reduced congestion, safety, and economic development for the public instead of delivering a new infrastructure facility.

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13.4 Douglas

The Douglas Port of Entry is the second largest commercial port of entry in the state with over $1 billion in trade conducted every year. The Douglas Port of Entry serves both commercial and passenger vehicles at the same station. Commercially, approximately 78 trucks go through the port every day, according to data for the first seven months of 2007 (Bureau of Transportation Statistics, 2007). Very little seasonal variation exists with an annual average of 27,000 trucks since 2002. Nearly 100 percent of the freight imported and exported through the Douglas Port of Entry is done by truck. Commercial vehicles, including buses, freight trucks, and commercial trucks, enter into the docking and inspection area to the east of the passenger entry into the United States. Currently, southbound truck traffic is forced to cut through the line of privately owned vehicles (POVs) in order to exit the US compound and enter the Mexican customs inspection, creating a serious safety situation and additional congestion in the port of entry area. The port lacks dedicated facilities for pedestrians and busses to access the primary inspection lanes as well.

The potential public-private partnership projects identified in connection with the Douglas Port of Entry include:

  • Project #11: US 191 Corridor
  • Project #12: Chino Road Improvements & Realignment
  • Project #13: Chino Road Extension
  • Project #14: Alignment and Safety Improvements to SR 80 and SR 92

Projects #11 and 14 are the main transportation facilities connecting the communities of southeastern Arizona. As such they do not lend themselves to development as toll roads. Potentially these corridors may be developed as a design/build/finance public-private partnership, but annual funding for these improvements will need to be identified.

Projects #13 is dependent upon the proposed port of entry expansion. Project #12, the road realignment and improvements would be beneficial with or without the new port development. However, Project #13 would not be appropriate without eventual completion of the new port facility. The viability and need for these two projects is predicated upon completion of an unfunded expansion and reconfiguration of the existing port of entry. At an estimated cost of $5 to $6 million it is questionable whether the project(s) can support the expense of developing a public-private partnership project. Should the decision be made to move these projects forward as public-private partnership projects then design/build/finance model may be appropriate. However, the annual funding for these improvements will need to be identified.

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13.5 Pima County Projects

In addition to the fourteen projects located in close proximity to Arizona's seven ports of entry, two additional projects were identified which have potential implications for cross border traffic. One of these, Project #15: I-10 Tucson Bypass/ Pima County, is subject to a separate study. Any conclusions regarding the potential for this project should be deferred until this study is completed.

Project #16: UP Nogales Branch Addition proposed as a bypass around the Tucson Rail Yard. As with Project #9, this project necessarily requires coordination with a private partner, the Union Pacific Railroad. The railroads interests will need to be taken into account in addressing the potential for this project. This single user would make it difficult for a third party to participate. Project #16 should be considered as a public-private partnership between the Union Pacific and a public sponsor or as a private sector partnership with a public sponsor providing support, but not entering into a partnership. Public sector contributions could come in the form of grant funds and in kind services or land.

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