The state has engaged a private company to add toll lanes to Interstate 77 in north Mecklenburg County, a historic partnership that North Carolina projects will ease traffic congestion.
But Cintra Infraestructuras has faced problems with toll roads it has built or bought in Texas and Indiana, including revenue shortfalls. A project in Virginia has been delayed.
The Madrid, Spain-based company – which has a U.S. presence – bought the Indiana Toll Road from the state in the last decade. When the recession hit in 2008, it struggled to make debt payments on the road, and caused the former Indiana governor, Mitch Daniels, to gloat that the state got a good deal by selling high, according to news reports.
In Texas, Cintra was part of a company that built state Highway 130, an interstate-quality road to bypass Austin and San Antonio that opened in 2012. The $1.3 billion project was privately funded, but that company struggling to meet early debt payments, according to the San Antonio Express News.
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The I-77 project calls for the state to spend $88 million. Cintra will spend the rest of the $655 million cost to design and build the lanes and will have the right to collect toll revenue for 50 years.
“We’re confident in their financial qualifications,” said Rodger Rochelle of the N.C. Department of Transportation. “We did a rigorous review before they were announced. We have protections in place. If the project were to fail, it’s Cintra’s failure, not the state’s.”
I-77 has long been one of the Charlotte region’s most congested highways. Faced with a lack of money to expand the highway, the DOT in 2007 first studied using a public-private partnership that could use tolls to build the road faster.
Cintra will convert an existing carpool lane into a toll lane, and will add another toll lane through much of the 26-mile corridor from Charlotte to Mooresville.
The toll lanes will have variable pricing. During rush hour, the price to use the lane will go up. During off-peak times, the toll will drop.
In return, motorists will be guaranteed a 45 mph trip for 90 percent of their journey.
The project is scheduled to open in 2018.
A consultant for the DOT in 2012 projected that a one-way, rush-hour toll from Charlotte to Mooresville – a 26-mile trip – could be $11.75 when the road initially opens.
By 2035, that toll could increase to $21.63, according to the state’s consultant.
The possible tolls on Interstate 77 have caused some sticker shock.
But the prices for Charlotte’s express lanes don’t appear to exceed the cost to use high-occupancy toll lanes – or HOT lanes – in other states.
In suburban Atlanta, the peak toll to drive a 16-mile HOT lane on Interstate 85 recently hit $8.50, according to the Atlanta Journal Constitution. In Miami, the state recently increased the toll to $1.50 a mile, or $10.50 for the entire 7-mile express lane on Interstate 95.
Houston also uses HOT lanes. On Interstate 45 south of downtown, motorists are charged $6.50 for a roughly 10-mile trip at 6 a.m. The toll lanes are free from 6:30 a.m. to 8 a.m. – the period of peak demand – but are only open at that time for people who carpool.
The N.C. DOT said that the free market will drive the price of the toll. If it’s too high, few people will pay and the price will drop.
But for Cintra, the main question could be: Would lower tolls be enough to pay off its debt?
State Sen. Jeff Tarte of Cornelius supports HOT. But he grew concerned last week about toll costs. Widen I-77, a grassroots organization that opposes the toll lanes, has fought the plan and first disclosed the toll cost projections through an open records request.
Tarte asked N.C. Transportation Secretary Tony Tata to study the Cintra contract further over the next six months.
The DOT doesn’t seem interested. Tata emailed Tarte on Tuesday that he sees “no foundation” for delaying the contract.
The DOT signed a preliminary contract with Cintra on Thursday. A final agreement could be signed at the end of this year.
The company, whose U.S. office is in Austin, issued a statement to the Observer on Thursday that said “Cintra is pleased to be a provider of effective, efficient and much-needed transportation solutions and economic development in the greater Charlotte region and will continue to work with state and local leaders to deliver traffic congestion relief to regional motorists.”
The company website says it manages toll lanes or toll roads in three states: the Chicago Skyway, the Indiana Toll Road and four highways in Texas.
It also manages toll roads in other countries, including Greece, Spain, Portugal, Ireland and the United Kingdom. It’s considered one of the world’s leading companies in building and managing transportation infrastructure, mostly highways.
Cintra is a subsidiary of Ferrovial, which also builds infrastructure and manages Heathrow Airport in London. It was founded in 1998. Cintra’s operating income was about $10.5 billion for 2012, according to its financial report.
Cintra is also part of US 460 Mobility Partners, a group hired to build a new 55-mile tolled highway in Virginia from Suffolk to Petersburg.
The Richmond Times-Dispatch reported the group had received $250 million from the state, but the project was canceled this year. One problem, the newspaper said, is that US 460 Mobility Partners failed to secure necessary environmental permits.
“In any global company portfolio as large as ours, we have many different projects,” said Patrick Rhode, Cintra US vice president. “It is important to note that each of our projects is alone and ring-fenced, maintains public protections, is subject to its own economies, and has no recourse to any other projects.”
He added: “No other project in the company’s more than 40-year global portfolio presents any impact to the North Carolina I-77 project.”
Neil Gray, government affairs director of the International Bridge, Tunnel and Turnpike Association, said that private companies can have financial trouble when managing new highway projects such Cintra’s Texas project.
“The problematic projects tend to be greenfields,” he said. “If I build it, will they come?”
He said a managed-lanes project on an existing highway is a safer bet.
“It’s been built and they will come,” Gray said.
Gray added that if Cintra can’t cover its debt payments from toll revenue, motorists still benefit because they have the lanes.
“From the public perspective, the benefit still exists,” he said. “I’m not wanting this to fail, but if it doesn’t work, the asset still exists.”
Jen Thompson, a state DOT spokesperson, said questions about Cintra’s performance on other projects should be directed to the company.
Rochelle of the DOT said the state can partially backstop Cintra if revenue projections fall short. The state could pay up to $75 million in addition to the $88 million it will spend, Rochelle said.
But he said that’s only in the event of what he called “an extreme situation,” if traffic counts fall to less than half of what was projected for toll lanes.
To receive all $75 million, the actual traffic counts and revenue collected would have to be 50 percent less.
Mark Burris, a Texas A&M University professor who studies transportation issues, including HOT lanes, said getting accurate projections on who will use managed-toll lanes is difficult.
“We are getting fairly good at predicting (traffic counts) for a toll road,” he said. “There is an added level of complexity of managed lanes.”
He has researched who uses HOT lanes and why. The results, he said, are surprising.
He said many drivers decide to use a HOT lane before they start their commute – even if there is no significant congestion.
“The numbers come out to be illogical,” he said. “Plenty of travelers are spending $1 or $2 to save a few seconds. Some even lose time. There is no model we have that’s going to predict that.”
Rochelle agreed that projections for new toll roads or lanes can be difficult.
“I think that’s a fair statement,” he said. “That’s why we looked at this deal closely.”
Nationwide, there are about 20 variable-priced toll lanes that are being planned or are in use, said Ginger Goodin of the Texas Transportation Institute.
From the viewpoint of moving cars, they work, she said. Some HOT lanes, however, weren’t built as public-private partnerships. The state highway department or local government agency collects the tolls and is responsible for the debt.
“In almost all cases, the facilities are doing what they were set out to do,” Goodin said. “In most cases it’s been successful. That’s why you are seeing more agencies looking at this as a tool.”