5/4/2017Appeals Court Backs North Carolina Toll Road
North Carolina Court of Appeals refuses to block toll road project in which state taxpayers subsidize foreign company profits.
The controversial Interstate 77 high occupancy toll (HOT) lane project in North Carolina will not be stopped by a lawsuit. The state Court of Appeals on Tuesday rejected a challenge filed by Widen I-77, a local activist group that argues the project rips off residents along the 26 mile route between Charlotte to Mooresville.
Unlike the typical "not in my backyard" opposition to toll roads, Widen I-77 wants more general purpose lanes to reduce congestion, instead of HOT lanes that come with contractual clauses designed to perpetuate bottlenecks in the free lanes. A three-judge panel declined to declare unconstitutional the delegation of tolling authority to a private foreign company free to collect "an unlimited rate of return on investment."
North Carolina specifically passed a "P3" public private partnership statute giving the North Carolina Department of Transportation (NCDOT) full authority to enter tolling agreements that last up to fifty years. The three-judge panel concluded that these projects were in the public interest.
"We are deeply disappointed by these decisions," the anti-tolling group said in a statement Tuesday. "Widen I-77 will meet as a group and discuss our next options."
NCDOT decided in 2014 to hand existing freeway lanes over to Cintra, a Spanish company, despite the failed efforts by the state House of Representatives to block the deal. A majority of the chamber's lawmakers were upset that the deal would cost North Carolina taxpayers $540 million in subsidies while Cintra only pitched in $252 million in equity.
Widen I-77 notes that nearly every US toll road project has defaulted on its debt, and that when this deal goes south, the state's contract with Cintra will leave state and federal taxpayers having paid out a grand total of $728 million. Meanwhile, Cintra has already pocketed $37 million in fees for creating the tolling proposal, plus $52 million to create the I-77 Mobility Partners shell corporation.
The anti-tolling group also suspects Cintra has been vastly overcharging for the project, with $51 million going towards a Cintra subsidiary for the toll collection equipment. Cost overruns have already reached $100 million, as the lead contractor, Sugar Creek Construction, happens to be 70 percent owned by Cintra's parent company.
"The net effect is the vendor and the customer are one and the same," Kurt Naas, Widen I-77's leader, explained. "This enables a situation where the vendor has a perverse incentive to overcharge the customer with the parent pocketing the difference, especially if a third party is paying."
NCDOT's contract grants Cintra the ability to collect revenue tax-free. By Widen I-77's calculation, Cintra will have recouped its entire equity investment by the time it begins collecting tolls that will be worth $8.3 billion over the life of the contract, and the state will have overpaid by $410 million to create this tolling project.
Widen I-77 has also blasted the project for "throwing safety to the wind" by creating massive dust clouds and leaving obstructions in the middle of the highway. A copy of the ruling is available in a 170k PDF file at the source link below.