Critics of the Interstate 77 toll lanes near Lake Norman say a bankruptcy filing by the builder’s subsidiary offers Gov. Pat McCrory new grounds to scrap a project that’s just starting to move dirt.
SH 130 Concession Co. operates a similar toll road in Texas between Austin and San Antonio. SH, of which I-77 contractor Cintra owns 65 percent, filed for bankruptcy protection Wednesday after struggling to make debt payments.
N.C. Transportation Secretary Nick Tennyson told his board Thursday that the filing “came as a surprise” but has no direct impact on the Lake Norman project. The Spanish-based Cintra says its projects are financially separate.
Still, Tennyson heads out Monday to meet with Texas transportation officials. McCrory has ordered DOT to “review every available option, both legal and financial” of the business model and contract in place in North Carolina.
“This particular (Texas) project is obviously not a success,” McCrory told WBTV, the Observer’s news partner. “It’s a separate corporation and what I need to determine is does this impact our existing project?”
“There’s some differences, but they’re basically the same kind of project by the same company,” said Rep. Charles Jeter, a Huntersville Republican. “It kind of goes along with what some of us have been saying, that this project has significant flaws and is destined to fail.”
By quickly dispatching Tennyson to Texas, Jeter added, the administration is “certainly giving all the signals that their feelings about this contract aren’t as solid as they were yesterday.”
Sen. Jeff Tarte, a Cornelius Republican, said McCrory is right to investigate. The Texas case, he said, “indicates that the I-77 managed toll lanes project is too high a risk and carries potentially disastrous consequences for our community.”
The state has in the past said penalties for canceling the $650 million contract could reach $300 million. Opponents say that estimate was absurdly high.
Two toll lanes will run between Charlotte’s Brookshire Freeway and Exit 28 in Cornelius. One toll lane would continue in each direction from Exit 28 to Exit 36. Construction is expected to be completed in 2018.
The toll lanes have been controversial for years, but the issue flared up again after it was reported that the N.C. Department of Transportation's contract with a private developer included a noncompete clause that would make it difficult to build new lanes on I-77 for 50 years.
A despised state project on his home turf is a political pickle for McCrory as the former Charlotte mayor runs for reelection. Some observers say the Texas bankruptcy filing gives the governor cover to cancel the toll lanes.
“This can do nothing but help him. He’s finally been given the out he needs to decide this contract is no longer viable,” said Republican consultant Larry Shaheen.
Robert Brawley, a former legislator from Mooresville who’s running against McCrory in the GOP primary for governor, predicted the problems in Texas would repeat in North Carolina. Canceling the I-77 lanes “would be a very good move on his part, and I would support him in that,” he said.
Attorney General Roy Cooper, a Democrat running for governor, attacked McCrory’s “boondoggle.” McCrory’s campaign has suggested Cooper too tacitly approved the project.
“In light of this company’s bankruptcy, even Gov. McCrory has to admit now that he cut a bad deal for North Carolina,” Cooper said in a statement. “He should stop stalling and cancel this contract that never should have been signed to begin with. Unfortunately, this boondoggle will leave people who deserve better waiting in traffic.”
McCrory’s campaign swapped barbs with Cooper.
“The Attorney General is failing to take responsibility for the very contract his own office legally reviewed, instead making a knee-jerk political statement and interjecting politics back into road building. The governor ran on taking politics out of road building, and Attorney General Cooper’s fake political opportunism rings hollow,” it said.
Past Cintra problems
I-77 Mobility Partners, the Cintra company that will build and operate the Mecklenburg County toll lanes, says the Texas filing will have no financial impact on the Mecklenburg County project.
“While Cintra is an equity sponsor of both projects, each project maintains a separate financial structure,” it said. “This matter has not impacted our construction schedule and we look forward to continuing our work here in North Carolina.”
Less-than-expected traffic volume on the Texas toll road has led to lagging payments on the $1.7 billion debt owed on the project, the Austin American-Statesman reported. Cintra, in a statement, said the bankruptcy filing will not affect Texas taxpayers or operations of the road.
“I think that’s why (Tennyson) has the directive to go down to Texas, to get a better understanding from Texas DOT what their process has been,” said North Carolina DOT spokesman Mike Charbonneau.
The Observer reported in 2014 that Cintra had faced problems, including revenue shortfalls, with toll roads it built or bought in Texas and Indiana. The Indiana Toll Road, which Cintra bought in 2006, later filed for bankruptcy.
Transportation officials defended the North Carolina contract, saying it had done a rigorous review of the company’s history. Under the deal, I-77 Mobility Partners has a 50-year lease to manage the lanes, set the price of tolls and collect revenue.
DOT has called the project a good deal because it will build $500 million in infrastructure for only a $88 million taxpayer investment. But Kurt Naas, founder of the anti-toll group Widen I-77, says taxpayers could end up bailing out Cintra if the project fails.
“From a broader context, this is the playbook for private toll lanes – take out government loans, defer interest and principal, then when the big payment comes due they declare bankruptcy,” Naas said. “To my knowledge, there has not been a private toll lane under the same owner 15 years after it started.”
The (Raleigh) News & Observer contributed.