FHWA Pulls Backing From North Carolina Toll Road

BRADENTON, Fla. — The Federal Highway Administration put the brakes on North Carolina’s second toll road this week and rescinded its so-called Record of Decision approving the Monroe Connector/Bypass project.

The federal action came after the state lost a legal battle with environmentalists in its quest to build the $725 million project for which three tranches of bonds have been sold since 2010.

The North Carolina Turnpike Authority called revocation of the federal approval a “procedural step.”

Environmentalists said losing federal permission for the project means the state must redo critical underlying studies, and that the state should consider less expensive alternatives to building the toll road.

The FHA could not be reached for comment about why the Record of Decision was rescinded.

The NCTA said in a statement that additional data is being gathered to address the court’s concerns, which will be released for public comment.

A new Record of Decision from the FHA will be sought. It is not clear how long that process could take. Work on the project has stopped.

The FHA’s “decision to withdraw approval on the Record of Decision was a procedural step and will not impact the process before us,” the authority said. “NCTA remains dedicated to providing the citizens who live in the Monroe area the transportation option they have asked for — the Monroe Bypass.”

The 19.7-mile Monroe Connector is a tolled, limited-access bypass around heavily congested U.S. 74 from Monroe to Charlotte.

To fund most of the project, the NCTA sold $234 million of state-appropriation revenue bonds as federally taxable Build America Bonds in October 2010, and $214.5 million of tax exempt, state-appropriation revenue bonds in November 2011. The state also sold $145.5 million of grant anticipation revenue vehicle bonds last December. A $10 million loan for the project was privately placed.

No tolls are pledged to the bonds that have been sold. Because no revenues from the project itself secure the debt, bondholders may not receive notices about the legal problem, according to a source familiar with the project.

The bond resolution allows for proceeds of the appropriation and Garvee bonds to be used for other, specific projects.

Just a week after the BABs were sold in 2010, the Southern Environmental Law Center bought a federal suit on behalf of Clean Air Carolina, the North Carolina Wildlife Federation, and Yadkin Riverkeeper claiming that the environmental review process supporting federal approval of the project was tainted.

In October 2011, federal Judge James Dever ruled that the state did not violate the law, and additional bonds to finance the project were sold during the last two months of the year though an appeal had been filed.

On May 3, an appellate judge overturned the lower court ruling and said “critical assumptions” about building the toll road were not disclosed in violation of the National Environmental Policy Act.

Though the BABs were sold before the Southern Environmental Law Center filed its suit, attorney for the center Kim Hunter said that her organization asked the North Carolina Local Government Commission not to approve additional bond financing.

“We outlined our legal concerns, and asked that they hold off approving the bonds until the project had permits, until the lawsuit was resolved,” she said.

The legal problems were disclosed in documents for bonds sold last year.

Hunter also said that environmentalists are also opposed to the only other two projects on which the appropriation-backed bond proceeds can be used.

In meetings last month, state transportation officials said they hoped to restart the Monroe project early next year.

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Transportation industry North Carolina
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