North Carolina Interstate Toll Project Faces Opposition

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BRADENTON, Fla. - A major toll-road project in North Carolina planned as a public-private partnership to alleviate severe congestion faces resistance from groups that oppose paying to drive on Interstates they consider freeways.

The opposition comes even though the project will only add managed toll lanes while existing roads remain free for travelers.

In the fast-growing Charlotte area, drivers spend an additional 40 hours a year fighting congestion during their commute, according to the 2012 Urban Mobility Report by the Texas A&M Transportation Institute.

To ease overcrowding on Interstate 77 north of Charlotte, North Carolina Department of Transportation officials say a P3 - the state's first - is the perfect mechanism to bring a long-planned series of three pay-as-you-go relief projects to fruition decades ahead of schedule.

Cintra Infraestructures S.A., a subsidiary of Ferrovial Agroman, was selected last week from four proposals as the best value to rebuild 26 miles of I-77, and add managed lanes using variable, electronic toll collection.

The state is now negotiating a 50-year concession agreement with Cintra, which placed construction cost at $655 million.

NCDOT's contribution will be toll revenues and $88 million in cash, an amount that is about half what the state estimated it would have to pay from its budget before proposals were filed.

Toll revenues will go to Cintra to secure debt financing the project, which is expected to include most or all of a $350 private-activity bond allocation from the USDOT, according to Mark Foster, the state transportation agency's chief financial officer.

Cintra keeps the toll revenue, and "they carry the risk," he said. "They are responsible for paying back the debt and their shareholders who provide money upfront."

The private equity contribution amount will not be released publicly until documents are prepared in conjunction with financial close on the contract, expected to take place in the fourth quarter this year, Foster said.

The financing plan is also expected to include a low-interest loan through the federal Transportation Infrastructure Finance and Innovation Act program, and potentially a grant from the TIGER, or Transportation Investment Generating Economic Recovery, program.

Growth in Charlotte and surrounding Mecklenburg and Iredell counties made the I-77 project an ideal candidate for the state's first transportation P3, said Foster.

"Obviously, we looked at this corridor for quite some time and we needed to solve the problem of current and future congestion [in a way] that would last 50 years with a much smaller public contribution," he said.

A P3 is allowing the state to accelerate the project by decades, as opposed to doing it in a piecemeal fashion with cash.

Foster also credited the state's advisors who established the policies, technical and financial objectives that resulted in NCDOT receiving from Cintra "an attractive public finds amount and fully compliant proposal."

"This is a true competitive revenue risk deal versus many deals that are based on availability payments," said Foster. "So the developer, Cintra, takes the revenue risk."

KPMG LLP is financial advisor, while Nossaman LLP is legal consultant. Parsons Brinckerhoff is technical advisor, and Stantec is the traffic and revenue consultant.

Construction is expected to start in 2015 or early 2016, with the project opening in 2018. Cintra's team includes the Lynchburg, Va.-based W.C. English Construction Co., and the Morristown, N.J.-based Louis Berger Group Inc.

"It is a privilege for Cintra to be part of the solution to the traffic congestion problem in Charlotte," Cintra chief executive officer Enrique Díaz-Rato said in a release.

Foster said the project will be submitted to the Legislature's Joint Transportation Oversight Committee, which has 60 days to review the proposal.

"We don't anticipate any problems," he added.

However, two local anti-toll groups representing different communities along I-77 say they hope to influence the project.

They don't identify specific individuals on their websites, and describe their founders as "military veterans, nurses, architects, parents, grandparents, political volunteers, IT consultants, business owners, teachers and corporate executives."

"Our goal is to stop the toll plans and widen our highways with regular lanes, not toll lanes," said

The group also has a political action committee to fund its efforts, which include supporting "candidates willing and able to seek alternatives to these deceptive and fiscally un-sound toll projects."

Sister organization Widen I-77 also supports building additional lanes on the route, but not tolling them. The group has asked NCDOT "to postpone awarding the private company contract until all of the proposed solutions have been thoroughly vetted."

Widen I-77, which claims it has obtained more than 3,500 petitions opposing the toll lanes, also said there is time to convince local and state officials to the change course of the project.

A national group has emerged to argue against tolling Interstates in general to keep transport costs low for businesses.

The Alliance for Toll-Free Interstates - which claims members that include the International Franchisee Association, American Trucking Associations, McDonald's, Volvo Group North America, UPS and FedEx - believes tolling existing Interstates is a bad idea.

They say it is counter to the development of the Interstate freeway system proposed by the Dwight D. Eisenhower National System of Interstate and Defense Highways, and authorized by the Federal Aid Highway Act of 1956.

Federal law, with a few exceptions, banned tolling existing Interstate lanes. But the alliance says some states have advocated lifting the toll prohibition to renovate established routes.

"Our mission is to educate the public, policy makers, and the media about the negative impact that tolling existing Interstates has on American communities and businesses, and why it will not solve our transportation needs," the alliance said on its website. "There are many transportation funding options available - among these, tolling existing Interstates is the worst."

Elsewhere in the Southeast, no major organized campaign has developed against the $2.4 billion "I-4 Ultimate Project" in the Orlando area.

An FDOT selection committee is scheduled next week to choose one of four bidders offering the best value proposal to widen 21 miles of the Interstate through metropolitan central Florida. The project will also add tolled express lanes, but existing lanes will remain free to drivers. Construction on the massive project is expected to take six years.

It is designed to relieve severe congestion through the mega-theme park region and growing Orlando area where drivers face an additional 45 hours a year to their commute due to roadway overcrowding, according to the Texas A&M Transportation Institute's most recent study.

Using a 40-year concession, FDOT plans to shift responsibility for designing, building, financing, operating and maintaining the project to the private sector using milestone and availability payments.

The state has already received a $2 billion private-activity bond allocation, if the winning consortium chooses to use the financing. FDOT has also arranged for the Florida Municipal Loan Council's bond program operated by the Florida League of Cities to be the conduit issuer of the bonds.

Additionally, the state has applied for a federal low-interest TIFIA loan that could finance between 33% and 50% of project costs, according to DOT officials.

The consortiums vying for Florida's the project include well-known national and international companies in the P3 industry, including several firms involved with the Indiana Finance Authority's East End Ohio River Bridges Project. That deal included the first leveraging of availability payments, and was The Bond Buyer's 2013 Deal of the Year.

The I-4 Ultimate proposers include 4wardPartners, whose main equity members are VINCI Concessions S.A.S., Meridiam Infrastructure I-4 Ultimate LLC, and Walsh Investors LLC.

I-4 Development Partners LLC submitted a proposal with equity firms Macquarie Capital Group Limited, OHL Concesiones S.A., and FCC Construccion S.A.

Also submitting bids are I-4 Mobility Partners, whose equity members are Skanska Infrastructure Development Inc. and John Laing Investments Limited, and a group called Ultimate Mobility Partners with equity firms InfraRed Capital Partners Limited, Fluor Enterprises Inc., and Kiewit Infrastructure South Co.

Consultants for Florida's I-4 project are Reynolds, Smith & Hills Inc. as primary engineer, KPMG as financial advisor, and Nossaman as legal advisor. URS Corp. is preparing the traffic and revenue forecast.

In addition to the I-4 Ultimate, state transportation officials are also considering an expansion of the I-4 project to add another 50 miles of express lanes. Studies are under way.

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