Tue July 8, 2014
For NCDOT Official, A Thorough Grilling Over I-77 Tolls
Rodger Rochelle is the NC Department of Transportation’s director of technical services, working deep in the trenches on contracts, technical specifications and research and development. After Monday night’s Town Board meeting at Cornelius Town Hall, he can add “punching bag” to his job description.
That’s because Rochelle also is the point man for the DOT’s plan to widen 26 miles of I-77 north of Charlotte using high occupancy toll lanes, or HOT lanes.
More than 120 people packed the Cornelius Town Board meeting room for the meeting. Although it was not a public hearing, eight residents from Cornelius, Davidson, Charlotte and Statesville spoke during the meeting’s usual public comments period. None came to support the project.
Even former Cornelius Mayor and now state Sen. Jeff Tarte, who supports HOT lanes, said he had questions.
Then, Rochelle gave a dispassionate update that defended the HOT lanes project, offered new information about planned ingress and egress into the toll lanes, and clarifying the state’s potential financial exposure.
Since state officials signed a preliminary contract on June 26, 2014, with Spanish contractor Cintra Infraestructura, the DOT has continued to work on a final financial deal, which could close by Dec. 31.
The DOT is looking at a toll lane project with a private partner because it says there’s not enough money to pay for all the state’s highway needs. “In our recent re-prioritization of projects we had 3,100 transportation projects from across the state,” Rochelle said. Altogether they would cost $70 billion to build.
That’s money the state doesn’t have, he said.
He outlined costs and requirements for the project, which would be the first toll road in the Charlotte area. It also would be North Carolina’s first major road project to be financed, built and managed by a private company, in what’s called public-private partnership, or P3.
Then he listened to commissioners’ statements and coolly answered their questions, in a back-and-forth that was at times almost mocking.
Commissioner Dave Gilroy led the charge, acknowledging that the state has put a lot of work into planning for toll lanes, but telling Rochelle he opposes the project.
“Thanks again for coming,” he told Rochelle. “This is a little bit of a lion’s den for you. We appreciate your courage.”
Gilroy criticized the whole idea of tolls, arguing it would hurt families. He called on the DOT to use the available right-of-way to build general purpose lanes, instead of toll lanes. And he said toll-lane projects elsewhere around the US have failed.
“It also defies common sense when you look at the failures around the country,” Gilroy said.
“The other thing we see around the country is an utter hatred from the people who pay the tolls,” Gilroy added.
The potentially high cost of tolls is a major sticking point for opponents. The only data made public so far about the project – a 2012 report from Stantec, a consultant for the DOT – estimates that drivers making the full 26-mile commute at peak hour between Mooresville and Charlotte would pay $9 inbound and $11.75 outbound.
Gilroy borrowed a term common elsewhere, calling the toll lanes “Lexus lanes.” Those who can’t afford to pay or won’t pay will be “condemned to congestion.”
“Even if the tolls are half these projections … these are going to be expensive lanes,” he said. “You’re looking at hundreds of dollars to a family’s budget. …
Rochelle said the Stantec report is only one of a variety of models that try to estimate future toll rates. Each uses different assumptions about how congested the road is at different times of the day. He suggested that people look at average toll rates – which he said might only be a few dollars. He said additional information would be released along with the full draft contract in the next few days.
But, he added, “we could release all the sensitivity runs that Stantec did for us and none of them would be material.” The only projections that matter are those that Cintra uses to set its prices. And those aren’t public yet.
Gilroy asked why the state can’t just use money devoted to this project to add two lanes in the congested stretch of I-77, between Huntersville and Cornelius.
Rochelle replied that widening with regular lanes may help ease congestion in the short term. But as the area grows in the coming years, and traffic increases, the congestion would return. Then, without toll lanes – also known as “managed lanes,” the state would lose the ability to manage traffic and guarantee a reliable commute.
Gilroy jumped on that, noting that the DOT’s model would provide that reliable commute at the expense of drivers using the conventional lanes. “The whole economics of the project depends on making those general purpose lanes worse,” Gilroy said
Gilroy also pointed to another chart from a DOT study that projects toll lane revenues at $13 billion over the 50-year life of the project. “A lot of us are trying to understand how that could make any sense. We have this bottleneck today, and that’s the problem we’ve got to solve,” Gilroy said. “It’s been said this is an $80 million problem, a $100 million problem. As a percentage of the $13 billion people are going to pay in tolls … that’s a rounding error.”
“Why wouldn’t we build those general purpose lanes?” Gilroy asked, his voice rising. “I-77 is very much a local road around here, and most of that revenue would come out of the pockets of people here.”
Rochelle dissected the $13 billion figure, saying it doesn’t account for the future value of money. Using an annual discount rate of 3 1/2 percent, he said a better figure for the future revenue is $4 billion. He also said that figure doesn’t account for risk, doesn’t deduct upfront investments in the project, and doesn’t take into account hundreds of millions of dollars in maintenance costs, so that at the end of the 50 year, Cintra can hand back the road to the state in the required condition.
Rochelle noted that once the HOT lanes project is underway, the area would qualify for additional “bonus money” to pay for other projects. Those could include widening and improvements for two major roads parallel to I-77 – US 21 and NC 115.
He was asked if those projects would incur any penalties under the contract with Cintra, because they might reduce demand for the toll lanes. “It would not,” Rochelle said.
Mayor Chuck Travis asked Rochelle what would happen if Cintra defaults on the project.
If that happens during construction, the DOT and/or Cintra’s lenders would pick a new contractor to finish the project. Cintra would lose its entire $234 million equity investment.
The DOT also would have the right to take over the road, by paying back 80 percent of any outstanding debt. Subtracting Cintra’s investment, that would mean “Wed’ get the asset and rights to the toll revenue for 50 to 60 cents on the dollar,” Rochelle said.
If the DOT took over, it likely still would need tolls, since it would have to finance its purchase, he said.
At the end of the session, Gilroy got in one last dig, asking Rochelle why three of the four bidders on the project dropped out, and only one made a final bid.
“These bidders did a ton of work, but declined. What does that tell you?” Gilroy asked.
“It’s not as simple as that,” Rochelle insisted. He said the other bidders wanted the DOT to relax requirements in the contract, more money for the state, and “certain key protections,” such as taxpayer protections. The DOT wouldn’t back down.
Gilroy pressed his point. “Was there a wisdom on the three out of four (not bidding)?” he asked.
Rochelle ended the session by saying: “I think we’ll have to ask Cintra that.”
He said Cintra would be involved in future meetings.
LACK OF COMMUNICATION – AND TRUST
Even elected officials who have supported the HOT lanes project expressed concerns.
Cornelius commissioner John Bradford, who has supported toll lanes, also took Rochelle to task for the way the DOT has shared information about the HOT lanes project.
“The communication has been nothing short of terrible, and I mean that respectfully,” Bradford said. “Every time questions are raised, it takes a long time to get answers.”
Bradford urged Rochelle and the DOT to do a better job.
Monday’s meeting gave opponents a chance to ask lots of questions, and not all were answered.
“The speed with which you get answers after tonight is going to be a real tell tale for a lot of people. When you’re not answering questions, it appears you have something to hide,” Bradford said.
Commissioner Jim Duke also unloaded on Rochelle, saying the comments at the meeting were “just a small sample of what we residents have had to endure.”
“We’ve had friends lost and people angry over this whole process. I blame this whole project, the way it was shared, the lack of information,” Duke said.
“This has been a very painful experience for this community,” he added. “You need to understand, these folks don’t trust you.”
AREA OFFICIALS ATTEND
A variety of public officials attended Monday’s meeting, including state Sen. Jeff Tarte (R-Cornelius) and state Rep. Bill Brawley (R-Matthews). Mecklenburg County At-Large Commissioner Pat Cotham was there, as were three members of the Davidson Town Board, Beth Cashion, Jim Fuller and Rodney Graham. Bill Thunberg, former Mooresville mayor and now director of the Lake Norman Transportation Commission, introduced Rochelle.
After the meeting Brawley, a HOT lanes supporter, said the many questions raised by opponents won’t change the fact that the state doesn’t have the money to widen I-77 right now.
He handed a reporter a copy of a letter from US Transportation Secretary (and former Charlotte Mayor) Anthony Foxx to NC DOT officials warning of shortfalls later this year in the federal government’s main source of road money, the Highway Trust Fund.
During Monday’s meeting, NCDOT’s Rodger Rochelle gave a variety of project details, including:
TIME LINE: Assuming the NCDOT signs a contract with Cintra by Dec. 31, 2014, construction of the 26-mile project could begin in Spring 2015, and completed four years after that. That’s as many as two decades earlier than the road could be widened with conventional lanes and funding, he said.
TOLL LANES: The highway would get two toll lanes in the 18 miles from I-277 in north Charlotte to Exit 28 in Cornelius, and 1 toll lane in the northern 8 miles between Cornelius and Mooresville. The tolls would be collected electronically using a system compatible with what’s used at other NC toll roads and those in other states.
INGRESS/EGRESS: Toll lane entrances and exits would be allowed at up to 12 points in the 26 miles, six of which are required by NCDOT, and another five or six that Cintra would add. Those would include between exits 13 (I-85) and 16 (Sunset Road), exits 16 and 18 (Harris Blvd.), Hambright Road and Exit 23 (Gilead Road), Exit 25 (Sam Furr Road) and Westmoreland Road, Exit 31 (Langtree) and 33 (Williamson Road).
TOTAL COST: The project would cost $655 million total. Cintra would finance the work itself, including a $234 investment of its own money that would be fully at risk if the project failed.
$215 million of that would be a Federal Highway Administration Transportation Infrastructure Finance and Innovation Act (TIFIA) loan, secured by Cintra.
$100 million would come from bonds sold to private investors.
$88 million would come from the state of North Carolina.
OTHER STATE LIABILITY: If revenues on the toll road fall short and Cintra is in danger of missing debt payments, the State of NC could be asked to contribute additional money. North Carolina could contribute up to $12 million a year, up to a maximum of $75 million over the life of the contract. That money can’t be used to help pay for a profit for investors.
PUBLIC MEETINGS AND INFO: NCDOT hopes to post a draft of the proposed contract with Cintra on its website in the next three days, Rochelle said. NCDOT will hold public meetings later – still to be determined – on tolls, ingress/egress points and other aspects of the deal.
Monday’s Cornelius Town Board meeting was not a public hearing, but it felt like one. Citizens from Charlotte to Lake Norman to Statesville spoke during the board’s public comment session at the start of the meeting – all raising questions about the plan.
Concerns included potential toll rates, the possibility of failure, the state’s long-term liability, and whether side roads like NC 21 and NC 115 could be widened.
Jerry Sossamon of Cornelius said he didn’t want to speak for or against the project, but he’s concerned. “I think the state is trying to sell us a pig in a poke. … If this thing’s going to be done, it oughta be done right,” he said.
DOT officials and supporters of HOT lanes say widening I-77 is important for economic development, maintaining capacity on the road as the area grows. Jay Privette of Charlotte doesn’t believe that. He noted that to maintain demand for the toll lanes, and supply toll revenues, the contractor needs congestion in the regular lanes. And that will be bad for business.
“What businesses are going to want to move into this area … that’s going to be a discouragement. You’ll gain a temporary increase in revenue from a public private partnership, but the long term, 50-year cotnract, this is going to be a discouragement for business in this region,” Privette said.
Ralph Gettings of Cornelius complained that businesspeople using the road would just write off the cost of tolls on their taxes. “That’s the way it’s going to work … we’re going to pay people to use this lane,” he said.
He practically begged town officials to take a stand against the project.
“What would it take for you all to come out against building of the toll lanes? What would it take for you to say we don’t want ‘em built? Tell us, we’ll get it for you.”