A tax watchdog questions feasibility of Florida toll road plan
A government watchdog group in Florida is questioning the potential cost and feasibility of one of three major toll road projects that are part of the largest infrastructure initiative in the Sunshine State.
The Suncoast Connector would be a 150-mile-long road along the state's northwest coast potentially traveling through Citrus, Levy, Dixie, Gilchrist, Lafayette, Taylor, Madison and Jefferson counties, depending on the final route chosen.
The Connector would become part of the Turnpike Enterprise by extending the existing 60-mile-long tolled Suncoast Parkway, which runs from Hillsborough County to Citrus County, to the Florida-Georgia state line. The Parkway has never met revenue projections.
Florida TaxWatch generally supports state investments in transportation infrastructure “but there is legitimate concern about the financial prudence of the investment in the Suncoast Connector as a bond-financed toll road,” President Dominic Calabro and Kurt Wenner, vice president of research, said in a joint statement to The Bond Buyer.
TaxWatch performed its own analysis of the proposed toll road because the organization questioned its economic and financial feasibility, they said.
“If there is not sufficient demand on this proposed corridor to generate the revenue needed to make the project financially sound, the decision to move forward could have a negative and lasting impact on the turnpike system and, ultimately, Florida taxpayers,” the men added.
“Toll revenue has fallen considerably since the COVID-19 crisis began in Florida,” they said. “So the feasibility studies will be especially important in determining risk,” of the Suncoast project.
In a 32-page paper called "The Suncoast Connector: What We Still Need to Know," TaxWatch found that although no official cost estimates have been developed for the road since the exact route hasn’t been determined that construction of the Suncoast Connector could range in cost from a low of $4 billion to a high of $10.5 billion – or between $25 million and $70 million per mile.
If the cost fell at the midpoint of Florida TaxWatch’s estimated range, and only 70% of total costs are financed with bonds, the Connector would need to generate $2.37 million in toll revenue per mile to satisfy projected bond costs, which is 10% more than the average revenue per mile of the entire Florida Turnpike System, the study said.
"It is questionable that ridership on the Suncoast Connector would be sufficient to pay off the bonds in the statutorily required time frame," said the study. Most bonds issued to finance Florida's transportation projects mature in 30 or 35 years.
For a proposed bond-financed turnpike project, FDOT must determine that the estimated net revenues of the proposed road, excluding feeder roads and turnpike improvements, will be sufficient to pay at least 50% of the annual debt service by the end of the 12th year of operation and to pay at least 100% of the debt service on the bonds by the end of the 30th year of operation, according to chapter 338 of Florida Statutes.
The Suncoast Connector is one of three major toll roads the Republican-led Legislature ordered to be studied and constructed as part of the Multi-use Corridors of Regional Economic Significance (M-CORES), a program championed by Senate President Bill Galvano, R-Bradenton.
Gov. Ron DeSantis signed Senate Bill 7068 approving the M-CORES program on May 17, 2019, despite the fact that a needs assessment had not been done on the Suncoast Connector by the Florida Department of Transportation.
"These infrastructure improvements will be built with great sensitivity toward the protection of the environment and there are mechanisms within the legislation that help ensure that occurs," DeSantis, who is also a Republican, said when he signed the bill.
In addition to the Suncoast Connector, a second project in the toll-road program is called the Northern Turnpike Connector and it would extend Florida’s Turnpike 40 miles to the west from Wildwood to the Suncoast Parkway. A third project, called the Southwest-Central Florida Connector, would build a new 140-mile toll road from Polk County to Collier County.
While the exact routes of the corridors are currently being studied by three task forces, they potentially will bring 300 miles of new toll roads to the state in areas opposed by environmentalists because they are largely undeveloped and support habitat for animal species unique to the state such as the Florida panther.
Opponents of the M-CORES program, including 1000 Friends of Florida, are urging state officials to stop the current planning process and to follow state and federal statutes requiring the determination of need and financial feasibility for the toll roads.
Supporters of the projects include the Florida Chamber of Commerce and various road-building groups have touted the economic benefits the routes will bring to rural areas, which include plans to install broadband internet service.
SB 7068 required the task forces for each corridor to produce written reports on their planning efforts by Oct. 1. That date has been pushed back to Nov. 15.
The bill also states that “to the maximum extent feasible,” construction of the projects must begin no later than Dec. 31, 2022, and that the roads should be open to traffic no later than Dec. 31, 2030.
TaxWatch’s Calabro and Wenner said there aren’t plans to analyze the Northern Turnpike Connector or the Southwest-Central Florida Connector because studies of those projects or similar routes have been done in the past.
In 2007, for example, the FDOT produced a toll feasibility analysis of the Heartland Parkway, a proposed road connecting eastern Lee County and Fort Myers with Polk County and the Lakeland area, a project area similar to the Southwest-Central FloridaConnector.
“The financial evaluation concluded that the project would not be feasible as a Turnpike project, based on statutory requirements,” the analysis concluded. “The substantial costs required to implement the corridor would not be sufficiently covered by the predicted toll revenue earnings of the project.”
The Florida TaxWatch report said the M-CORES law was passed before an analysis of the need and impacts of the Suncoast Connector could be done, and that the project was not in FDOT's work program.
"There are many prominent supporters of M-CORES and they believe it is a forward-looking project that will accommodate the state’s rapid growth, bring economic development and needed infrastructure to rural communities, and relieve congestion," the report said. "There are also many opponents who are vocal in their concerns that the road is not needed, will be expensive and not economically feasible, [will] bring sprawl and development to communities that do not want it, and [will] cause considerable damage to the environment and agriculture."
TaxWatch said it used cost estimates and data from other toll projects to establish a potential range of estimated costs for the Suncoast Connector. Using those projects, the report estimated costs could be between $4 billion and $10.5 billion, a range that "makes it doubtful that using bonds alone to pay for the construction portion of total costs would be feasible, at least with toll rates that are in-line with the rest of the Turnpike."
When asked to comment on the TaxWatch report, FDOT spokeswoman Beth Frady said in an email the M-CORES program is in the pre-planning phase and no routes for each corridor have been determined by the task forces yet.
"Any estimation for a cost for a corridor would be very unreliable as the proposed corridors are yet to be determined," Frady said. "Also important to add into any cost equation is traffic and revenue studies that have yet to be conducted."
Frady said that per the M-CORES law, the proposed corridors must meet environmental and financial feasibility or they cannot be constructed. "These feasibility studies can only be conducted once a proposed corridor is determined," she added.
After reading the executive summary of the Florida TaxWatch report, Robert Poole, director of transportation for the Reason Foundation, said he agrees with some of its findings.
"I think the Florida TaxWatch has raised exactly the right questions about this," he said in a phone interview with The Bond Buyer Monday. "We don't actually have much of a plan yet, although the Legislature seems to think this is a fait accompli.
"I've never seen a project originate or be planned in this manner," he said.
Poole pointed out that no traffic and revenue study has been done, nor have project costs been estimated. Toll and fuel tax revenues probably have declined due to the impacts of the coronavirus pandemic, and both FDOT and the Turnpike Enterprise have major projects to fund, he added.
The M-CORES projects have some value as additional evacuation routes and to bring economic growth to more rural areas of the state, he said, although he also suggested there may be alternatives for accomplishing those goals by expanding existing corridors.
While the M-CORES projects have support from agencies such as FDOT and the Florida Transportation Builders' Association, Poole said they also expect the Reason Foundation to "step up and support" the program.
"We haven't" supported the program, he said. "It would be premature without seeing anything like a traffic study or even a non-investment grade study to see where things are."
The M-CORES projects became reality through a legislative process, as opposed to the typical planning process used by FDOT, which TaxWatch’s Calabro and Wenner said is still the law.
“M-CORES gives people the knowledge that major transportation projects can be mandated through the Legislature without first going through the normal process,” they said. “Hopefully, this will not happen again.”