PWF Blog

PWF Blog 2/3/16

From Public Works Financing newsletter, January 2016

Charlotte I-77 Toll Politics Go National

by William G. Reinhardt,  PWF Editor

In Charlotte, NC, a positive vote by the metropolitan planning organization on Jan. 20 in favor of tolling a managed lanes network there removes administrative barriers to Cintra’s continuing its work on the I-77  Express Lanes project it started a year ago.

An earlier City Council vote in Charlotte also endorsed a regional network of congestion-priced express lanes. These would be built partly by converting free HOV lanes to High Occupancy Toll lanes and charging premium prices to single-occupant vehicles that opt to use the express service.

The positive vote came over the strident objections of anti-toll voters north of the city who will be the main beneficiaries of the $635-million project, which would expand the capacity of a 26-mile section of I-77 north of the city limits in Mecklenberg County. Charlotte-Mecklenburg County is the third fastest growing region in the U.S.

USDOT also supported the project by approving a $189-million TIFIA loan to Cintra last April. However, recent remarks by Obama’s Transportation Secretary Anthony Foxx suggest that the politics of peak-period tolling in Mecklenburg County, NC, are not yet settled at the U.S. Cabinet level.

Foxx, who served two terms as Charlotte’s Mayor, put his long-time Republican rival, Gov. Pat McCrory, on the spot recently for supporting the I-77 express lanes network. As quoted recently in the Charlotte Business Journal, Foxx said: “I think they [managed lanes] have a place, but we know, throughout the country, that managed lanes have to be managed well from a public standpoint. That’s up to elected officials, usually the state elected officials, because they control most of the resources. So, when they do a good job of involving the public and the public feels connected to it, it can work.”

McCrory faces a difficult bid for a second term, with the primary election on Mar. 15, and a statewide vote in November, concurrent with the presidential election.

(This just in at press time . . .

Also citing transparency concerns, North Carolina Attorney General Roy Cooper ordered a full-blown investigation of Cintra’s I-77 managed lanes project on Feb. 2. Democrat Cooper is running against Republican incumbent Pat McCrory in a tight race for governor in November.

Attorneys from Cooper’s office sat in on the negotiations with Cintra for over two years and approved the contract. A spokeswoman for Cooper said the issue isn’t legality but whether the contract is good policy.)

Termination Penalty. Among other things, the termination clause in the concession contract negotiated by North Carolina DOT has put McCrory on the spot. It requires the state to pay a termination for convenience fee to Cintra of as much as $300 million, if based on a fair-market valuation, or $80 million, if based solely on termination of the senior debt. Both estimates were made for NCDOT by Clary Consulting.

Cintra, the sole bidder for the concession, has gotten caught in the political crossfire.

NCDOT issued a notice to proceed to Cintra in February 2015. Financing closed in May 2015 ($100 million PABs, $189 million TIFIA, $246 million equity). The design is well under way and construction started last November under a 50-year revenue-risk toll concession.

“We hope for the best,” says Nicholas Rubio, U.S. President of Cintra, “trusting that as the project moves forward and we strive to deliver on our commitments and provide the best service to the traveling public, matter-of-fact benefits will prevail over misconceptions and misinformation.

“The case of the North Tarrant Express Managed Lanes in the Dallas-Fort Worth Metroplex is telling: The project is not only offering excellent and reliable service at an affordable price to managed lanes customers, but it has as well dramatically improved traveling conditions for the rest of customers, those opting not to use the managed lanes.

“After the first year of operations, toll-free general purpose lanes by themselves (excluding the managed lanes) are carrying 4% more traffic than before project implementation (with the same number of lanes) with 15% higher average speed and 80% less congestion (measured as the percentage of time average speed falls below 50 mph, down from 26% before project construction to 4% now).

“Opinion polls show now that three out of every four respondents (70% vs. 25%) are favorable to the project vs. 50/50 split in previous polls before it opened to traffic. Misinformation loses ground when confronted with reality.” 

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