DOT: Cintra has spent $107M so far
Fresh on the heels of an infuriating trip by mayors gone rogue comes more disturbing evidence of an agency gone rogue. On June 7th, the day before Mayors Woods and Travis snuck off to Raleigh, the Fiscal Research Division released their report on the fiscal impact of HB954.
FRD is roughly analogous to the Congressional Budget Office; they are tasked with developing non-partisan, objective analyses of the fiscal impact of proposed legislation. By law, they take the inputs provided by the legislature or appropriate government agency as correct and make no judgment as to reasonableness.
Therein lies the problem, because guess who provided the input? NCDOT.
The FRD report quantified contract cancellation costs. There are two scenarios for cancellation: termination for convenience, and termination for default. You may recall earlier this year NCDOT hired a tolling company founded by the former head of Florida’s tolling division to calculate the cost for terminating for convenience. They took Cintra’s revenue estimates and came up with a number of around $300M. That estimate was done even before a single cent had been spent on construction, meaning Cintra captured $300M in value just for signing the contract.
It’s an absurd conclusion, of course, but it pales in absurdity compared to the input they provided for the default termination estimate. Under a default scenario, DOT must pay 80% of the outstanding debt. The debt comes from two sources: private activity bonds (PABs) and federal loans from a program called TIFIA. Per the FRD report:
DOT stated that all of the $100 million from PABs has been used and approximately $7 million to $10 million of the TIFIA loan has been used as of June 2, 2016.
So, the report concludes, termination for default would cost $88million (80% of $107M).
Apparently clearing and grubbing of about ten miles of trees in the median has cost $107M. We’re not construction estimators, but that number strikes us completely ridiculous. Sure, there are some design and engineering costs included in that number, but by way of comparison, the entire I-85/I485 interchange cost $92.2M. The 5.7 mile completion of the I-485 outerbelt, comprising six concrete lanes and two new interchanges, cost $132M.
Taking out some trees cost more than constructing an entire interstate interchange?
Remember, previously DOT Chair Ned Curran and others said, quite publicly and loudly, that the private developer bears all the financial risk if the project fails. Now, when the actual calculation is made, they pull out a pretty big number.
This is the same agency that wrote an I-77 widening project back into the non-compete clause and didn’t tell CRTPO until after the contract was signed.
This is the same agency that ignored contractual safeguards and extended the financial close three times at taxpayer expense.
This is the same agency that set the revenue sharing thresholds so high that revenue sharing will never take place… just so they could achieve financial close.
For years now we’ve avoided accusations of corruption. But with the mayors’ visit and these latest shenanigans, there is no other plausible explanation.
As it turns out, government corruption regarding toll lanes has already happened in the U.S:
Former Illinois Governor Rod Blagojevich is currently serving federal prison time for attempting to sell a U.S. Senate seat. What was not so widely reported was the same indictment also included charges of corruption regarding the Illinois Toll Road. The scam worked like this:
Contractors were required to hire “consultants” to whom they would pay a “finder’s fee” if they were put on the official state “approved bidder’s” list. The consultant was really a stooge for the governor, of course, and would transfer a good portion of the fee to a private account while keeping a cut for himself. The transaction would be noted on the contractor’s books as an innocuous consultant fee. No PAC or super PAC contributions, no public record.
In Blago’s case, he wanted $500K from a concrete contractor. Fortunately, the contractor had a conscience and cooperated with authorities.