I77 Tolls: The Undone “Done Deal”

“Tolls are a done deal.”  It’s a phrase being tossed around frequently this election season.  We’re told the contract will be awarded in January of 2014, so it’s only a matter of time.

But is that really the case?

I’ve been hearing “done deal” talk since April 2010, when the Lake Norman Transportation Commission (LNTC) voted unanimously in support of tolling.  I didn’t believe it then, and I don’t believe it now.  Here’s why:

First, the current plan defies fiscal history.  As we’ve mentioned elsewhere, the I-77 toll lanes would have to collect more revenue than every toll lane in the country except one.  Toll revenues would have to repay one of the largest capital costs while serving one of the smallest metropolitan areas.

The fiscal disconnect is put in sharp perspective when comparing the current plan to the “done deal” of April 2010.  Back then a modest, publicly-operated project hoped to collect $22M in tolls over a period of twenty years.  The current project will require that kind of revenue every year.

Of course, fiscal gravity has never been a concern of HOT lane proponents.  They point out that the private companies will never underwrite the project if they feel there is little chance of making a return on their investment.  Unfortunately, under the current proposed contract, the taxpayer may be the one ensuring that return. As we’ve written about elsewhere, the taxpayer stands to bail out a significant portion of the project if (when?) it fails financially.

Second, the official HOT lane justification is driving on thin ice.  Projects of this scope must undergo some form of an impact assessment.  For this project, NCDOT conducted an environmental assessment (vs a full-blown review).  In August the Southern Environmental Law Center issued a blistering memo about the inadequacy of the NCDOT’s environmental assessment.  (The SELC are the same folks who sued to stop the Monroe Bypass.)  Most notably, the SELC took issue with the study time frame ending the same year the project is supposed to open.

Before a project may go out for bid it must be granted a Finding Of No Significant Impact (FONSI) or have a plan developed to remedy the impacts noted.  The HOT lane plan was supposed to have FONSI status last month.  No word from the NCDOT on when this may happen.  Further, the NCDOT has failed to post responses to the public comments from their meeting back in July.  No word on when those will be posted, either.  Until the FONSI happens, the project cannot legally proceed.

But there’s another wrench: North Carolina has a 150-day statute of limitations on the FONSI, after which the state cannot be sued.  Thus, it would be prudent for the NCDOT to wait 5 months after they issue the FONSI (assuming they do).  This puts us past January, which is important for a reason we’ll discuss in a moment.

Again, prudence may be ignored.  When it comes to tolls, the NCDOT has a history of playing fast and loose with taxpayer dollars.  They issued hundreds of millions in bonds immediately after the FONSI for the Monroe Bypass.  The SELC filed suit and won, and now the NC taxpayer is paying millions in interest every year for bonds that have built nothing.  Similarly the Triangle Expressway, North Carolina’s only toll road, has revenues so far below plan that the General Assembly has pledged $25M per year for the next 30 years to cover potential shortfalls.

Third, even if the NCDOT decides to summarily issue the FONSI they may have trouble with the Feds.  The SELC memo takes issue with the NCDOT’s disregard for a federal statute called the National Environmental Policy Act (NEPA).  (Sorry for all the acronyms.)  According to our source, the Feds may very well step in and insist the environmental assessment be re-done to NEPA standards, including a time frame of 20-25 years in the future.  The Feds apparently have a history of doing this, at one time delaying a project for a couple years until the state complied.

A reworked EA would add another 6-8 month delay. That plus the 5 month statute of limitations pushes the project approval to late 2014 at best.

Why is this important?

Because between now and then there are local elections.  If we support candidates who oppose tolls, a lot that can happen within a year.  That’s the subject of another blog post, but for a good idea of the kind of candidates we need, you might want to check out TollFreeNC.org.

As one NCDOT official put it, “it’s not a done deal until the contract is signed.”

Vote this November.  It’s important.

— Kurt Naas
Sept, 2014

Norfolk Southern Derails Red Line

In a June 14^th memo, Norfolk Southern outlined their guidelines for evaluating shared freight/passenger rail proposals.  While the requirements are general in nature, they apply to the Red Line, a proposed commuter rail link from uptown Charlotte to southern Iredell using Norfolk Southern’s existing freight line.

In order for NS to consider a passenger rail project, proposals must satisfy three primary conditions:

• Public and employee safety be maintained or improved.

• The effects of passenger rail on existing operations must be understood not only for the proposed line, but throughout NS’s system.  NS will not support any plan that has not been fully studied and modeled, and they expect such a study to take a year or longer.  Costs of the study would be borne by the passenger rail sponsor, i.e. the Red Line.

• NS shall be compensated for use of their right-of-way, including indemnification for the risk associated with passenger service.  NS warns that in their experience, the “cost to the passenger carrier for insurance and indemnification is substantial.”

In addition, the company has taken the position that light rail involves the use of equipment that is “not appropriate for use on NS tracks” and therefore requires physical separation.

Compliance with these requirements, especially physical separation and indemnification, will render the Red Line (as it is currently proposed) impossibly expensive.  The memo is a polite way to kill it.

While these requirements seem tough and restrictive, consider the railroad’s perspective: a third party is asking to use their existing asset for an indefinite period of time and for a purpose it was never intended.  In light of this, these requirements are reasonable.

Previously, we have commented on the Red Line only to the extent it affects I-77 tolling. We have not taken a position regarding commuter rail.  So why are we commenting now?

For four reasons.  First, let’s contrast Norfolk Southern’s diligence requirements with NCDOT’s approach to the I-77 toll lanes.  The I-77 HOT lane plan involves a third party (the toll operator, or P3 company) utilizing an existing asset (27.5 miles of public right-of-way on I-77) for a long time (50 years).  However, whereas NS requires compensation and thorough reviews, NCDOT does not.

The department is not only giving away the right-of-way for free, they are sweetening the pot with $170M taxpayer dollars. Rather than a thorough operational review, the NCDOT produced an environmental assessment with a timeframe that ends the same year the project opens!  Further, the threadbare assessment only looks at traffic on I-77, not the effect toll lanes will have on ancillary roads.  And the taxpayer, not the P3, foot the bill for this study. As far as risk, even if the P3 company defaults, they will be compensated by the taxpayer.  Granted, the P3 is required to obtain insurance, but the ultimate financial backstop is still the North Carolina taxpayer.

Second, the Red Line consumed an inordinate amount of our elected officials’ time. Beginning in 2011, the Lake Norman town boards made a big push for commuter rail.  Task forces were formed, websites built, “free” informational luncheons given.  For the first six months of 2012, town governments held a staggering 60+ meetings devoted to the issue. A local publication hailed Davidson Mayor John Woods as 2011 Citizen of the Year for “driving the region’s commuter rail effort.” Huntersville Mayor Jill Swain traveled to New York to meet with potential investors and extol the benefits of public-private partnerships.  (However, she never traveled to Cornelius Town Hall to learn what her constituents thought of tolls.) Consultants were paid a quarter of a million dollars to develop a plan.

Imagine if this energy was instead devoted to widening I-77 with general purpose lanes.

Third, the early rhetoric supporting the Red Line might sound familiar.  Then-Mayor Jeff Tarte characterized N-S’s concerns as a “negotiating tactic” and said the Red Line is not a matter of “if” but “when.”  During his re-election campaign, Commissioner Chuck Travis noted rail is coming and we need to get on board.  When Norfolk Southern wrote the Red Line plan was “fatally flawed,” Swain characterized the statement as “a little setback.”

This same “done deal” rhetoric permeates the HOT lane discussion.  Yet, the contract signing date continues to recede into the future.  Last fall the contract was to be signed by the end of 2012, then by August 2013.  Now the date is February 2014, although insiders say it will be May 2014 at the earliest.  If it is a “done deal”, then why hasn’t the deal been done?  Meanwhile, MUMPO added a generic general purpose lane project to their latest roll-up in case the toll option falls through.

Fourth, all of this energy was expended, the meetings held, the lunches eaten, the consultants paid, and the plans developed… before the railroad was in agreement.  Failure to perform proper diligence resulted in a massive wasted effort and diverted our leaders’ attention.

The HOT lane contract looks to suffer the same fate.  Despite the extremely complicated contractual language, despite being written primarily by the tolling industry, and despite some troubling terms and conditions, no town has held even a single meeting to review it.  As things currently stand, no town nor independent party will review a 50 year contract written by the tolling industry, for a governmental agency in favor of tolling (NCDOT), to be operated by a private tolling company.  Pleas for such a review by Gilroy (Cornelius) and Phillips (Huntersville) have fallen on deaf ears. Davidson decided to “listen to the experts.”

Unfortunately, unlike the Red Line, there is no voice of reason like Norfolk Southern.  And there will not be unless we elect them the November.

You can download a copy of the memo here:
Norfolk Southern Proposed Passenger Projects.061413

Town Boards Vote for Status Quo on Transportation Planning

As a result of the 2010 census, federal law requires an expansion of MUMPO’s planning region. MUMPO, you may recall, were the folks who ranked widening I-77 with general purpose lanes at #93. For the past several months, a MUMPO sub-committee has been developing a new governing structure for the expanded organization, now called Charlotte Regional Transportation Planning Organization, or CRTPO. The governing structure is codified into a Memorandum of Understanding (MOU) between the towns and the Governor of North Carolina, and must be ratified by 75% of the towns.

Under MUMPO, 18 entities had voting privileges and Charlotte’s vote counted for 41% of the total. Under CRTPO, 27 entities vote and Charlotte’s counts for 46% of the total.  That is not a typo: Charlotte’s percentage increased in spite of the organization’s expansion.

The new electoral math is dauntingly in Charlotte’s favor.  In fact, Charlotte plus any three voting entities will pass anything.  Conversely, to override Charlotte’s vote, 24 out of the remaining 26 entities, or 92%, must vote against.  The result is that it is virtually impossible to overcome Charlotte’s near-majority, and the bare political reality is no Charlotte vote in the history of MUMPO has ever been overturned.  Given Charlotte now casts an even greater percentage, this is unlikely to change.

Each voting entity is represented by a single individual, including Charlotte and their 46%.  Presently that individual is David Howard, the gentleman who called for security during the I-77 HOT lane vote.

In addition to determining how the towns will vote, the subcommittee determined how the towns will fund CRTPO’s budget. The proposed budget was sized “to maximize the (available) federal grant.”  Once the grant size was determined they calculated each town’s required contribution to maximize those federal dollars. The budget is therefore not based need, but rather the maximum the taxpayer will bear.

In order to have a “seat at the planning table,” towns must pay the specified amount.  Failure to pay will eliminate their voice from a federally-mandated planning organization.

Huntersville will pay ~$15,000/yr for 3% of the vote.

Cornelius will pay ~$8,000/yr for 3% of the vote.

Davidson will pay ~3,600/yr for 1.5% of the vote.

Charlotte will pay ~$240,000/yr for 46% of the vote.

At first glance, it appears Charlotteans are getting a raw deal.  They pay 60% of fees yet have “only” 46% of the vote.  However, this arithmetic ignores the relative value of having more than one vote.  As an illustration, suppose Charlotte had 51% of the vote.  Then all other votes would be meaningless.  Since the only vote that counts would be Charlotte’s, they should pay the entire amount.

We are not far from that scenario.  As stated previously, 92% of the remaining entities must vote against Charlotte or the measure passes.  In that light, it’s fair Charlotte pays around 90% of the total.

The towns were in the process of deciding whether or not to adopt the new MOU.  Once adopted it will not be revisited until the next census, i.e. for another decade.

HOT Lane advocates have repeatedly stated we are “stuck” with HOT lanes because MUMPO voted for them.  Revising the MOU provides a once-in-a-decade opportunity to change the current governing structure. Among the changes our MUMPO representatives could have (should have?) proposed:

> Dividing Charlotte’s votes amongst four individuals. This would help drive consensus-forming within Charlotte.

> Add “at-large” votes reflecting the regional nature of the planning body.

> Include a veto power based on a plurality of towns.

Each of these measures would drive coalition-forming and consensus-building, hallmarks of good governance.  The result would be better transportation planning for the entire region, including Charlotte. (As an example, when the embattled uptown streetcar project needed to be included in a transportation plan in order to qualify for federal funds, MUMPO quickly amended the plan and put it at #3.  One would be hard-pressed to make the case a 1.5-mile streetcar would have a regional benefit, let alone be ranked #3 out of nearly 300 projects.)

Rather than instructing their respective MUMPO reps to consider changes like these, here’s how your town board voted:

>The Huntersville town board voted to accept the MOU this week. Only Commissioner Danny Phillips voted against. Sarah McAulay represents Huntersville for CRTPO.

>The Cornelius town board voted to accept the MOU this week. Only Commissioner Dave Gilroy voted against. Chuck Travis represents Cornelius for CRTPO.

>The Davidson town board voted to accept the MOU weeks ago.  The vote was unanimous. Brian Jenest represents Davidson for CRTPO.