Is the GOP Embarrassed by Toll Lanes?

This past Saturday the Mecklenburg Republican Party held their annual convention at Myers Park Presbyterian Church. While most of us were mowing the lawn or hitting the grocery store or doing those Saturday things, the Party Faithful gathered to affirm, energize and debate the issues of the day.

Or at least that’s how it was supposed to work. Instead what happened was a stunning slap-down by the state party. After three hours of speeches essentially saying the same thing, the convention began the business session. Rules Committee Chairman Warren Cooksey proposed the following change:

Resolutions considered by the Convention shall be in one of the following categories:

i) Resolutions in memory of Republican activists in Mecklenburg County or honoring a particular achievement or achievements of Republicans in Mecklenburg County; or
ii) Resolutions recommending that the State Convention adopt specific resolutions, platform planks, or amendments to the State Plan of Organization.

In other words, the Mecklenburg Republican Party will no longer pass resolutions taking a stand on an issue… any issue… like, ummm, toll lanes. Instead they must go hat-in-hand to Raleigh in the hopes that the NC GOP will deem their issue worthy.

Last year, you may recall, the Meck GOP unanimously adopted an anti-toll resolution. Later in the year the NC GOP Convention debated a similar resolution, but House Speaker Thom Tillis scuttled a vote by walking out. This year, in the words of one party apparatchik, “the GOP didn’t want to have any embarrassing issues back in Raleigh.” Apparently, opposing a plan that costs the taxpayer millions, gives away our public right-of-way, and allows a private company to profit from 50 years of congestion misery constitutes an embarrassment for the state Republican Party.

The official spin was that a representative with a district covering more than one county might get conflicting directives. Of course, this would necessitate the representative getting out and talking to constituents. The GOP leadership solved that “problem” by essentially telling representatives they now take orders from Raleigh.

Not surprisingly the party establishment- led by Thom Tillis- voted in favor of the resolution. We do not have an official count, but we’re told the vote was “close.”

Eighty nine delegates registered this year, down significantly from 164 last year. We’re told this is typical for an off-cycle election with no local elections. But one has to wonder… with North Carolina’s Senate race garnering national attention and Tillis’ seat in the NC House up for grabs, shouldn’t there a be a little more enthusiasm?

Perhaps giving up a Saturday just to be told what to think is a waste of time… even for party die-hards.

The East Coast P3 Conference: the View From the Little Guy

Today the East Coast P3 Conference wrapped up in downtown Charlotte.  Sponsored by the Charlotte Chamber of Commerce, the event focused on how to build public projects via public-private partnerships (P3). About two hundred movers and shakers attended, including Gov McCrory, Transportation Secretary Tata, Mayors John Woods and Jill Swain, Commissioners Sarah McAulay and Brian Jenest, a host of consultants, bank vice presidents, lawyers and….uhhh….me.  I attended because of the generosity- and behest- of some folks up in Lake Norman who insisted I needed to be there for the little guy and they put their money where their mouth was.

Our MC’s for the event were Swain and Charlotte Councilman David Howard, co-chairs of the Transit Funding Working Group.

McCrory and Tata kicked off as keynote speakers.  Interestingly, they said very little about public-private partnerships (P3s) but quite a lot about the new Mobility Formula. Tata talked about I-77 HOT lanes, saying the bids close by March 31, the best value proposal will be determined two weeks after that followed by a 60 day cooling off period and then “shovels in the dirt.”  Seventeen months later we can expect HOT lanes. Then they threw it open to questions and my hand involuntarily went up.  My question, pretty much verbatim, was:

The taxpayer contribution for the I-77 HOT lanes project is $170M. Yet, estimates show a general purpose lane project widening the road just where we need it would cost around $100M. Secretary, before we sign a 50 year contract that takes $20-30M a year out of the Lake Norman economy and costs the taxpayer tens of millions more, shouldn’t we evaluate a general purpose lane alternative?

The response (in so many words): We don’t know the time slip impact. We don’t know if the fiscal part is true. We’re also looking at it as a general purpose contract.

I have no idea what that last statement means, but I get the impression Tata really really really wants to do a P3.  I guess to him we’re a feather in a cap. Seeing as how he’s the guy who will sign the contract, that’s not a good thing unless you’re looking forward to fifty years of tolls.

The pervasive theme through the conference was how to get money to build stuff.  And boy are they getting creative.  Among the things for sale:

  • Green cards. A foreign national can contribute $500K – $1M in an EB-5 bond and get a green card for his spouse or children.
  • Air.  Some municipalities are looking at leasing the air rights above public rights-of-way.
  • Names. Kind of like football stadiums, some folks want to sell naming rights to our interstates. Soon we might be taking Interstate “Duke Energy” instead of I-85.
  • Safety. TXDOT now gets “concession payments” for allowing tolling companies to set a speed limit higher than normal.  The higher the speed limit, the higher the payment. They raked in $100M in return for an 85mph speed limit on one Texas toll road.

For me, one presentation stood out, although not for positive reasons.  It was given by the Director of P3 programs in Virginia.  Last year VDOT was subject to a lawsuit from citizens over a proposed toll increase for a tunnel under the Elizabeth River. The toll increase was to pay for a second tunnel. The plaintiffs argued that putting toll revenues to a different use constituted a tax, not a user fee. The Virginia Constitution grants the General Assembly sole powers of taxation; a government agency cannot set tax rates.  A circuit court judge agreed, but last fall the Virginia Supreme Court overruled. In a decision that would make John Roberts proud, they ruled the second tunnel- and therefore the increased tolls- were part of an “integrated transportation network providing benefits not available to the general public”, and therefore were not a tax.  As the presenter said, “we’ve got some smart lawyers.”

He also lauded the success of the recently opened Capital Expressway toll lanes. He neglected to mention they lost $51M in their first year of operation.  After his presentation the CEO of Charlotte Area Transportation Systems (CATS) started her closing remarks by thanking him and saying “this is a great model we hope to replicate here.”

Several presenters talked about the savings going the P3 route.  The folks at my table seemed to agree that financing costs would have to be higher- an equity partner is going to demand a whole lot higher return than a municipal bond holder. Also, toll lanes incur significant operating costs that general purpose lanes do not.  The much-loved Capital Expressway incurred $19M in operating costs last year for a 13 mile stretch of road. Since it’s brand new, I assume that does not include maintenance. I wanted to ask about those costs, but wore out my welcome with the first question.

The other theme was transparency. “The process needs to be open to all parties so there are no surprises,” trumpeted elected officials from the dais.  Except for I-77.  We still don’t know where we’re going to get on and off, we don’t know how we’d get on or off, and we still don’t know how much the damn tolls are expected to be. I learned yesterday that parts of the agreement will remain secret even after it is signed. And North Carolina’s P3 legislation allows P3 agreements to be conducted in secret.

In the interesting tidbits department:

  • I sat next to a lawyer who was part of an American Bar Association committee tasked with “removing legal obstacles so we can drive these agreements through.” I asked if the committee represented the public or the private sector.  She seemed surprised by the question, but after a bit managed to answer “both.”
  • Gen Jim Trogdon, formerly the #2 at NCDOT, was there plying his consultant’s trade. He was lauded for having come up with the idea of naming rights.
  • The NCDOT is considering everything to raise revenues: mileage fees, registration fees, and tolls tolls and tolls.
  • Virtually all of the slides, with the exception of one investment banker’s bond rates, were conceptual in nature.  In other words, they did not cite references, hard numbers or facts.
  • A few times presenters made reference to failed P3 projects, most notably the Chicago parking meter debacle.  But there was no focus on lessons learned from these.
  • The COO of Parsons Brinkerhoff said we should not “fall in love with a P3 project” and “P3s may not be the solution for everything.” Perhaps he should talk to Mr Howard.

Sarah McAulay, to her credit, came over and said ‘hi.’ As you know, I’ve had issues with Sarah in the past. She was joined a few seconds later by David Howard.  Howard represents Charlotte on MUMPO (now CRTMPO) and his vote counts for 46% of everything.  Sarah introduced me as the “anti-toll guru.” Fair enough. I explained to Howard that the I-77 toll financials make no sense- $20M would be required yet a similar project in Salt Lake City (same metro area) only grosses $900K.  He said I can always find negative reasons; we don’t have the money otherwise; and P3’s are the future of how we’re going to get things done.  I noted that if we don’t have money, a general purpose alternative would save the taxpayer vs what they’d pony up for HOT lanes, to which he replied widening with GP lanes is a “short term solution- you’d have the same problem in 2 years.”

I wanted to ask why that logic doesn’t apply to I-85 in Cabarrus, or why NCDOT is considering a huge project to widen I-77 through south Charlotte with general purpose lanes, but the next session started. It was not a productive discussion.

The biggest zinger of the event, at least for me, was the “question” Swain asked a panel near the end of the second day.  It was lengthy, but an accurate paraphrase (as quickly as I could write):

Inevitably in projects of this type there are citizens who do their own research on the internet or papers or whatever and they find projects that fail, and they focus on those projects. But since we’ve learned so much, aren’t they focusing on the wrong things? How do you answer those people?

The panelists’ response essentially was ignore them and let the facts speak for themselves.

It was a long couple of days.

Kurt

Senate Candidates Talk Tolls

Last night in Huntersville the newly-formed Lake Norman Conservatives (LNC) kicked off their first meeting by hosting three Republican candidates for U.S. Senate.  The wide-ranging 90 minute forum touched on a number of topics, but our ears really perked up when the subject of P3’s (public-private partnerships) came up.

This type of financing model is being proposed for toll lanes on I-77 through Lake Norman.  In exchange for building toll lanes on the remaining public right-of-way, the current plan grants a private company (commonly referred to as the P3) the exclusive right to operate the toll lanes under a 50 year contract.  Taxpayers will kick up to $170M of the anticipated $550M construction costs.

The P3 is free to set toll rates, and tolls would vary based on the congestion in the general purpose lanes.  Right now the P3’s bidding for the contract anticipate the tolls would range from a few pennies to as much as $9 one way.

Before an overflow capacity of over 150 people, the candidates- Greg Brannon, Heather Grant and Mark Harris- stood shoulder-to-shoulder in their opposition to this type of funding.  Brannon noted that P3’s are the “worst of both worlds”: they grant a private company powers that should be reserved for the government. Harris, the pastor at First Baptist Charlotte, “wondered why would we want to pay tolls from now until Jesus comes?” And Grant noted that, while private companies are more efficient in general, this is not the case when they get to act like a government.

Their position is at odds with the other major candidate, Thom Tillis. Citing a prior conflict, Tillis was not present. He lives in nearby Cornelius. To date he has not attended any candidate forums.

Tillis has been the primary mover behind the I-77 toll project despite widespread opposition from his constituents. He cites budget constraints as the reason, at one point accusing a constituent of “living in a parallel universe” for thinking the state has enough money for roads.

I-77 toll lane opponents point out that the road can be widened where it is needed for less than the proposed taxpayer contribution to the private toll lanes.

While we’re heartened at the candidate’s grasp of the issue, we couldn’t help but noticing an interesting cross-current.  One the one hand, the room buzzed with energy. In a little over a month, the LNC have over 550 members on Facebook. The story about the forum was picked up from one end of the state to the other, and even out-of-state publications like the Washington Times. Clearly they have touched a nerve.

By contrast, the North Mecklenburg Republican Women (NMRW), the “establishment” organization in the region, has around 850 members in the five years it has been in existence. Of the three Lake Norman towns- Huntersville, Cornelius and Davidson- only two elected officials from Huntersville attended last night’s forum. (Commissioners- and Tillis- are regular attendees at NMRW meetings.) Neither of the Republican candidates for Tillis’ seat attended last night.

Which leads to an interesting question: is the Republican Party about to commit fratricide? It seems the Establishment has turned its back on a sizeable chunk of their constituents.

The genesis of this, at least in Lake Norman, is the toll issue. GOP apparatchiks point out that “you never agree with someone 100% of the time”, so if you agree 80%, you should vote for that person.  A single issue- like tolls- should not be splitting the party apart.

Unless, of course, that issue is symbolic of a larger one.

This is absolutely the case. Opposition to I-77 tolls is widespread. Even in Davidson, a predominantly liberal enclave whose town board “unanimously and enthusiastically” endorsed tolls last year, 56% of residents opposed tolling I-77 ever, according to a survey by Davidson College. An unprecedented grass roots organization has sprung up in opposition, and the topic was the subject of much discussion during last November’s election.

Yet, Tillis has remained steadfastly in favor of private tolling, maintaining without tolls I-77 would not be widened for at least 15 years. Perhaps, but the fact is no one- neither Tillis nor anyone else- really knows for certain.  That’s because the NCDOT has never evaluated a general purpose lane project under the new funding criteria passed last summer. That criteria, called the Strategic Mobility Formula, gives a high priority to cost-effective projects that reduce congestion, and the general purpose lane project fits this criteria exactly. Unfortunately, Tillis wants to sign a 50 year tolling contract without evaluating a general purpose lane project first.

One way to ensure nothing happens is to never try.

So the issue is more than tolling- it’s about a representative failing to listen to his constituents. And it begs the larger question: if Tillis won’t listen to the folks in his own backyard as their representative, will he listen to people across the state as their Senator?

Judging by the enthusiasm last night, it’s a question many are asking.

NCDOT Looking for Input on Roads

The NCDOT is holding a public comment period prior to submitting their long range transportation plan under the new, data-driven formula.  Please stop and and tell them you want a general purpose lane alternative to I-77 HOT lanes:

Date: Thurs. Jan. 30

Time: 4-7 pm

Location:
Metrolina Regional Transportation Management Center
2327 Tipton Dr.,
Charlotte, NC 28213

Contact: Tim Boland
Division 10 Comment Form (PDF)

 

New Political Group Formed- Has Its Genesis in I-77 Tolls

Last month saw the formation of a new political organization, the Lake Norman Conservatives. The LNC was created by former high-ranking board members of the North Mecklenburg Republican Women.  Previously under their leadership the NMRW quickly grew to be the establishment organization for area Republicans.

The genesis of the Lake Norman Conservatives was the founders’ disaffection for the way the establishment handled the toll issue.  Despite an anti-toll plank in the official NCGOP platform, some prominent Republicans remain staunch toll advocates.  Faced with the choice of supporting personalities or their principles, apparently the LNC have chosen the latter.

This split mirrors a disconnect between the elected and the electorate.  For instance, before the November election the Davidson Town Board “unanimously and enthusiastically” supported toll lanes. Yet, a concurrent survey by Davidson College showed 56% percent of residents opposed toll lanes on I-77, the only negative response in the survey.  A year earlier a town-funded study concluded 53% of residents felt I-77 tolls were “not at all important,” again the most negative response in the survey. So, despite a year of advocating tolls, the Davidson Board failed to move their constituents a single iota toward their position.  Not coincidentally, some charter members of the LNC live in Davidson.

The Lake Norman Conservatives have planned an ambitious first meeting: a forum for all U.S. Senate candidates, scheduled for Jan 30th.  The event is free but an RSVP is recommended.

They must have some pull, because they have attendance confirmation from four of the five candidates. All four of those candidates- Greg Brannon, Bill Flynn, Heather Grant, and Mark Harris– have publicly stated their opposition to tolling. (We wonder if that’s more than coincidence.) Thom Tillis remains the sole candidate still advocating tolling. An invitation has been sent but as of this writing Tillis has not confirmed his attendance.

If you’re a conservative, you might be hoping the LNC will bring Republicans back to their purported roots of limited government and fiscal responsibility.  If you’re a Republican, you’re probably hoping the party can heal fissures like these. And if you’re a Democrat, you’re probably enjoying the show.

But if you’re like us, you hope our government, regardless of party, will do more listening and less advocating. Perhaps the Lake Norman Conservatives are a step in that direction.

Cracks

As recently as this past October state officials were saying the I-77 toll financials made absolute sense, proposals were due at the end of this year, and construction could start as early as Spring 2014.  The I-77 toll lanes had a tectonic inevitability, at least in the minds of advocates.  “Tolls are a done deal” was a common refrain on the campaign stump.

But lately new fault lines have opened up. Though slight tremors right now, we’re wondering if the toll plan will suffer at a Richter-scale shakeup next year.

First, the proposal submittal date has been delayed. Again. Now proposals are due in March, with the contract award in May. You may recall when we first started this blog that proposals were due back in June. That was pushed to October, then December, then January.  In fact the I-77 toll plan has been one of continual delays.  Originally proposed in 2010, construction was supposed to have been completed by 2013.

In addition to raising serious questions about how well the contract negotiations are proceeding, these delays undermine one of the main justifications for tolls, namely that we can get them now.  We have been listening to the “tolls now” rationale for nearly four years.  Construction completion remains three years away, a mirage that continually recedes into the future.

Second, we’ve noticed a repositioning among some state officials.  In November Senator Jeff Tarte mentioned he was looking to form a commission to review the P3 contract.  Most noteworthy, he talked about including staunch toll opponents Dave Gilroy and Danny Phillips as part of the team. Including those two sends a clear message Tarte is looking for a critical review, not a rubber stamp.  Also, in a departure from past conversations, in recent Facebook posts Tarte has proposed alternative transportation funding in lieu of tolls.  At recent meeting he publicly questioned if tolls are the right way to fund our roads in the future.

This raises serious speculation. Are the financials not panning out after all? Are the private companies demanding even more taxpayer dollars to “buy down” the toll revenues they must generate year after year?  Do the private companies want the taxpayer shouldering even more risk?  A “yes” answer to any of these obliterates the remaining justifications for tolling, i.e. the private company assuming risk, and leveraging public money with private capital.

We’ve said from the jump the financials make no sense. According to one commissioner’s estimates, toll revenues would have to exceed $30M/yr.  That works out to over $200 annually for every man, woman and child in the Lake Norman region.  Perhaps the private companies are just now figuring this out.

As the reality of the gravity-defying financials begins to sink in, we hope our elected officials will take a second look at this plan and engage state and NCDOT officials to develop a general purpose alternative. (There is a path forward without CRTMPO (formerly MUMPO), but that’s a subject for another blog post.) The revamped transportation funding process rewards cost-effective projects that relieve congestion with a high priority.  We can think of none more deserving.

Why I oppose I-77 toll lanes: Nuclear safety

Today TollFreeNC and WidenI77 features Robert Ageenko, Commissioner Candidate for Cornelius.

AGEENKORobertIn the 1970s, I-77 was built as an evacuation route for the two nuclear stations in our region just as much as it was intended for a faster ride to and from Charlotte. For this reason, I have grave concerns about our safety when it comes to I-77 as a nuclear evacuation route.

You see, I am from Russia and knew people who worked in Chernobyl and died after the nuclear disaster. I personally knew the workers who helped to build the massive cover over the Chernobyl nuclear station in order to contain the radiation in case of a leak. Sadly, tens of thousands of those workers died after working on that cover. Millions of lives were lost and impacted in about a thousand mile radius. In fact, my uncle today is fighting cancer as a result of being a Chernobyl construction worker.

Two years after the Chernobyl disaster, I was in Kiev, Ukraine, for a one-month training for my job. Kiev is 60 miles from Chernobyl. Several people, including me, could taste the radiation two years after the disaster. It had a specific metallic flavor in your mouth.

Now all the area within a 20 miles radius of Chernobyl is closed off to the public. It is a place where you can find animals with two heads, or three eyes, and apples the size of melons. It is a scary place still today. And it will be for a thousand years.

All of us residents of Cornelius, Davidson, Huntersville and Charlotte live VERY close to TWO nuclear stations, not just one! We are within 50 miles of the Catawba and the McGuire nuclear stations. Many folks do not realize this. If something happens, as it happened in Chernobyl and Fukushima and other nuclear plants — we are screwed. Really screwed! Here’s a direct quote from Wikipedia, “According to a 2010 survey of energy accidents, there have been at least 56 accidents at nuclear reactors in the United States (defined as incidents that either resulted in the loss of human life or more than US$50,000 of property damage).”

None of the pills the nuclear operators are providing to us will do much to help us — forget about the pills. Nothing will help, unless we RUN… Run, baby, run! It will be the one and only action that can help. Scary? Yes, it is scary. But when you are prepared and nothing negatively impacts your evacuation route, you have a better chance of survival.

North Carolina built a beautiful road (that few use) around Fayetteville for military reasons. Shouldn’t we build more lanes (NOT TOLL LANES) on I-77 to protect the millions of people who live in our region?

It is estimated to cost between $75 to $130 million for general purpose lanes to relieve the congestion between Huntersville and Mooresville. By adding one lane in each direction where it is needed, we will not need to redo 9 bridges and a flyover between I-77 and 277. That is a wasteful project that will be a road construction nightmare. It will eliminate an efficient evacuation route for several years. We need to do what is the fastest way to widen the road given our close proximity to two nuclear stations. That is by using existing public funds under Governor McCrory’s new transportation plan that would put I-77 at the top of the list for the funding of regular lanes, not toll lanes.

Robert Ageenko

The Toll Lane Financials…..work????

As the elected establishment began touting how the financing model works so well for this project, we believe that is fuzzy math at best.  If the state does not have $85 to $120 million to build a lane each way from Exit 23 to 30, but not only has $170mm to contribute to the $550mm HOT lane project – claims they are being made that the 4 access points will be 8 @ est $20m per adds $80mm to move the total to $630mm AND suddenly $200mm of apparently FREE money is falling out of the sky to pay for an assortment of local road projects.  IF IT SOUNDS TOO GOOD TO BE TRUE ?   Then re-read the reality of the situation based on referenced facts that we initially published on June 17, 2013

Some elected officials justify toll lanes as a means to generate revenues for roads.  They note gas tax receipts are expected to decline while road construction needs will increase.  These trend lines are headed in the wrong direction and to reverse that, these advocates point to toll lanes (and roads) as an important revenue-raising tool.

This implies that toll lanes must not only cover their operating costs, but also bring in enough revenue to pay for the lane itself. Ideally they would generate a surplus that can be used as a source of funding for other transportation needs.  For I-77, the current plan is a $550M project consisting of toll lanes for 27.5 miles from downtown Charlotte to the middle of Iredell County.  The project is proposed as a public-private partnership, where the NCDOT would lease the lanes to a private company under a 50 year contract.  The $550M includes $170M in public funds, and the rest would be financed through a combination of private debt and equity.

Before we begin our analysis, a word about sources.  Population data comes from the U.S. Census Bureau.  The financial data was taken from the 2012 Managed Price Lane Guide published by the Federal Highway Administration.  This document is basically a how-to manual for getting toll lanes built.  It was written by Parsons-Brinkerhoff, an engineering consulting firmly deeply involved in the toll lane business.  Among its authors is David Ungemah, the featured speaker at a local toll lane information session.  He is nationally recognized as a “managed lanes expert.”  Thus, any bias in the information presented is in favor of toll lanes.

With that in mind, we’ve undertaken a study of existing toll road financials.

Revenues

The chart below plots annual toll revenues vs metropolitan served area (MSA) population for 11 toll lanes currently in operation. In addition, we plotted the required Revenuesrevenues ($20M) for the proposed I-77 toll lanes.  Toll lane experts have placed this number as high as $30M; we erred to the low side.

A couple of observations.  First, toll revenues are roughly correlated to the MSA.  On the low end are the I-15 lanes through Salt Lake City with a metropolitan area of approx one million and revenues of $500K.  On the high side- indeed an outlier- is SR 91 connecting North Orange County to Riverside.  Combined, over 7 million people live along this route, and toll revenues were $41M.  We’ll discuss SR 91 in more detail in a moment.

This correlation is not surprising as urban sprawl is necessary for the toll lane model to work.  As we have stated elsewhere, toll lanes rely on congestion in the general purpose lanes to entice people to pay the toll.  Robert Poole of the Reason Foundation affirms this in a recent article he wrote examining toll revenues in Miami.  (Poole invented the term “HOT lanes” and is widely viewed as the father of the concept.)  Poole states:

I could imagine that a managed lane project in Minneapolis or Salt Lake City, say, might not relieve enough congestion to cover its costs out of toll revenues. But congestion on I-95 in Miami was nearly as bad as on the Los Angeles freeways, and the prices charged during peak periods are considerably higher than on many other managed lanes around the country.

In order to cover its costs, Poole implies, toll lanes must be in a large metropolitan area.

The second observation is that the required revenues for I-77 are out of proportion with the region’s population.  I-77 toll revenues will need to surpass those in Seattle, San Diego, Houston, Atlanta, and Miami, among others.  In fact, the I-77 project would need to be the second-highest grossing toll lane in the country.  It would require revenues greater than the eight lowest-grossing toll lanes combined.  This should be especially concerning in light of the fact that the project’s northern terminus (Iredell) has the smallest population (160K) of any of the existing toll lanes.

Operating Income

Operating Income is defined as revenues minus operating costs and does not include debt repayment.  Whatever is left over from operating expenses is what is available to pay for the capital cost of the project.  Toll lanes incur several operating costs that are unique to toll lane operation.  Among these are advertising, toll billing, toll collection, credit card fees, toll enforcement, occupancy enforcement, administration of the tolling authority, insurance claims and premiums, and ROI to private equity and debt investors.  General purpose lanes incur none of these.

The chart below shows annual operating income vs population, with projects sorted in order of increasing population.  Of the 11 projects, 7 have negative operating income.  IncomeThree generate significant positive income and one generates a modest income.

With one exception, no toll lane serving a population of less than 5.5 million currently covers its operating cost.  The exception (Denver) is an HOV-HOT lane conversion with a modest capital cost of $9M.  It was built with public funds and is run publicly, thereby avoiding some of the expenses previously mentioned.  The other HOT lanes with positive income are in Houston, Miami and Riverside/NOC.  SR 91 (Riverside/NOC) generates a significant income of nearly $20M.  This stretch of road is ten miles long and serves the relatively affluent North Orange County and more working-class Riverside.  The total served population is over 7 million and traffic on this road is over 300K vehicles per day, about twice what the busiest freeway in North Carolina carries.

However, even this “success” story is not without a cautionary tale.  The project originally opened in 1995 as a private, for-profit investment at a cost of $135M.  When the state tried to make improvements to ancillary roads, the operator sued, citing a clause in the contract that would prevent the state from making improvements that would ease congestion and impact toll revenues.  In 2003 the Orange County Transportation Authority bought the project back for $207M, 50% more than its original cost.

I-77 is not included here because the financials are not yet public.  At 27.5 miles the I-77 toll project would be the second longest in the country, so operating costs can be expected to be on a par or greater than those currently in existence.

Capital Cost

The chart below shows the total project capital costs.  I-15 in San Diego is the highest, Capitalat $1.3B.  The project was financed through general bonds issued by the state of California.  This differs from the proposed financing in North Carolina, where bonds will be issued using anticipated toll revenues as surety (“toll revenue bonds”).  Implicit in the San Diego project is the consideration that toll revenues will never be sufficient to retire capital cost.  Conversely, as we reported here, North Carolina plans to issue hundreds of millions in toll revenue bonds.  In fact, by the end of FY 2015, North Carolina will have issued over $2B of these types of bonds.  These will be used for toll road construction (not toll lanes), but proponents of this method should take heed that even in Southern California, tolls are not viewed as a source of additional revenue.

The variation in capital costs are largely due to whether the project is a conversion of an existing lane or an entirely new project.  Houston, Riverside/NOC and Miami are new construction while the remainder are conversions of existing HOV lanes.

Of course, new construction is significantly more expensive than conversions.  I-77 is primarily new construction (10 lane-miles out of 90+ will be HOV conversion), and this is reflected in the project’s capital cost of $550M. The I-77 project would be among the most expensive currently proposed, and more expensive than any toll lane financed through toll revenue bonds except the Capital Beltway in DC.  (The recently opened Capital Beltway cost over $2B.  Operating financials are not yet available.)

As far as the implications for the rest of North Carolina, I-77 has the only HOV lanes in the state.  Therefore, building toll lanes will require either new construction- and the associated expense- or conversion of existing general purpose lanes.

Superlatives

Compared to projects in the rest of the U.S, I-77 toll lanes would be:

  • the second-highest grossing to make the project financially viable
  • the second most expensive project financed through toll revenue bonds
  • the second longest project in terms of miles
  • the first to have four toll lanes beside four general purpose lanes
  • located in the second smallest metropolitan area

In addition, I-77 toll lanes would be North Carolina’s first:

  • privately operated toll lane
  • toll lane or road to be operated on a for-profit basis
  • road under a 50 year contract

Historically, no toll lane:

  • serving a population the size of Mecklenburg-Iredell has ever had a positive operating income
  • has ever repaid a debt obligation as large as the proposed I-77 project, regardless of metropolitan population

Conclusions

The proposed I-77 project therefore requires revenues and income that have been historically unattainable.  This raises an obvious question:  shouldn’t the bond underwriters- the people who do this for a living- walk away from this?  When we were in Raleigh we asked this question.  The answer was if they do not think the project is viable, they will simply not fund the project.

Not so fast.  As we have pointed out previously, under the terms of the existing contract the taxpayer will be responsible for all but the equity portion of the total project cost.  (Equity is typically about 20% of the total project.) If the project fails, advocates tout that taxpayers could buy the project for “pennies on the dollar.”  To most people, eighty cents on the dollar is a lot of pennies.

Even if that were the case, the toll lane project requires several improvements that are otherwise unnecessary.  Foremost among these are the replacement and/or construction of 9 bridges.  According to the NCDOT none of the existing bridges require replacement.  So taxpayer money that could be spent elsewhere would instead pay for replacing structurally sound bridges.

The above analysis shows that North Carolina lacks both the population centers and existing infrastructure of readily-convertible lanes to make toll lanes financially viable. If we pursue this route the scenario for North Carolina is one of high capital costs, low revenues, and negative operating income. Indeed, rather than generating additional income for roads, toll lanes pose a substantial risk of making our funding problem worse.

Toll lanes may work elsewhere, but they should be removed from consideration in North Carolina.

A Mother’s Take on the Tolls

By Vallee Bubak
Volunteer for TollFreeNC/WidenI77

Bubak FamilySince December I and other moms have been working day and night to stop the I-77 tolls. These are not the pocket-change tolls of yesteryear. These are tolls operated by a private and most likely foreign corporation for 50 plus years that will cost drivers anywhere from $5 to $28 dollars or more to travel one way between Charlotte to Mooresville.

In addition to moms like me worried about our children’s future and the impact on local businesses, real estate values, and more traffic on our neighborhood roads because of unaffordable and ill-planned tolls,  men and women from various political backgrounds have come together to form and support the outreach efforts of TollFreeNC and WidenI-77. We have one mission: to inform the public about the proposed tolls for I-77 and North Carolina. Our volunteers are everyday people from Charlotte, Cornelius, Davidson, Huntersville and Mooresville. They have given of their personal time as well as their personal financial resources to get the word out and inform their neighbors, co-workers and fellow citizens about the tolls.

As a mother, I am extremely disappointed in the elected leaders who could have spoken up against this exploitative plan — but didn’t. Instead, they relied on a so-called consultant who is in the tolling business, Parsons Brinckerhoff (www.PBworld.com), to recommend how best to widen I-77. What did we expect Parsons Brinckerhoff to come back with but a recommendation for tolls? Parsons Brinckerhoff has orchestrated the tolls like a high-paid wedding planner. For moms like me (as well as the fathers in our groups), the poor research and decision making of a number of elected officials have stolen from us precious time away from our families and kept us from volunteering in other ways for our community.

The good news is that we have numerous hard-working citizens who have stuck their necks out to do the right thing and speak up against an unfair, unwise and deceptive tolling scheme. It is not easy to go up against politicians, and especially those who have the support and resources of powerful political forces in the Lake Norman area.

A little over a week ago, the TollFreeNC group put up signs that both supported anti-toll candidates, and also signs that said Fire Bradford: He Supports Toll$ and Fire McAulay: She Supports Toll$. The volunteers of WidenI77 and TollFreeNC who produced the signs are everyday citizens and not political consultants. Their intention was not to offend, but to inform citizens about the toll issue and to identify the Town Commissioners running for re-election who had voted for the tolls. Also, TollFreeNC felt that McAulay’s actions toward the public at the May MUMPO meeting should be known. The video of that incident can be viewed at http://www.youtube.com/watch?v=ot9f4bJilCk or via the website www.tollfreenc.org.

It has been reported that Commissioner Bradford of Cornelius was concerned about how he would explain the signs to his kids. I ask, how will we all answer to our kids and grandkids when they ask us who allowed 50 years of thousand-dollar tolls on I-77? For all of the mothers and fathers and concerned citizens who have spent countless hours away from our families and jobs to stop the tolls, isn’t that loss of time, money and energy more harmful than a truthful sign about an elected official who is expected to be held accountable to his electorate?

In response to the signs that said Fire Bradford: He Supports Toll$, Bradford came forward with 61 endorsements from other pro-toll politicians and his allies, and referred to us volunteers as “fringe group activists”. However, his 61 endorsements is a very small number compared with the approximately 3,500 petition signatures against the tolls and the more than 25,000 hits to the WidenI77.org website.

Upon hearing that some people were upset about the signs, we removed the signs in order to have time to check with other volunteers, citizens and business owners for their perspective. We also wanted to make sure that the conversation around the signs did not overshadow the topic of the tolls.

While some people felt that the signs were a bit harsh, the overwhelming majority of citizens and business owners felt that the positives of the signs outweighed the negatives. So the signs have gone back up. Are the signs harsh? For some, yes. Are they truthful? Yes. Do I wish that our months and months of polite and kind requests were effective in getting elected officials to represent the will of their constituents? Yes. Have Bradford and McAulay listened to their constituents’ kind requests? No.

It is crucial that we have proper representation and elect Town Commissioners who will stop a plan that benefits a foreign tolling corporation at the expense of the public for the next 50 years. One of the unintended consequences of the signs is that they showed us which of the candidates would have the courage to continue to fight the tolls even when under pressure from the area political power players. As has been the case before, opponents of tolls often come under fire from a few Raleigh legislators and their allies to “NOT” voice opposition to the toll plans. The tolls have become a litmus test for elected officials by revealing to the public who will have the courage to speak up for their constituents.

While as a mother I am frustrated and hurt by the selfish and self-serving actions of some elected officials that I had previously trusted, I am encouraged to see numerous other mothers and fathers working together to stop a catastrophic plan that will impact our children for decades. I encourage each person to take the time to visit the website www.tollfreenc.org and our Facebook pages: TollFreeNC and WidenI77 to learn more about the tolls and the candidates, and to vote this November 5.

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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