Gov. Bev Perdue announced Monday an innovative public-private partnership — the first of its kind in North Carolina history — designed to accelerate completion of the conflict-ridden Interstate 485 outer loop in Charlotte.
The new funding strategy, unveiled at a press conference by Perdue and N.C. Transportation Secretary Gene Conti, combines public and private resources to build a new interchange and connect the only unfinished portion of the highway between NC 115 and I-85. The estimated price tag is $340 million.
Supporters say the approach, known as design/build/finance, will be faster and save taxpayer dollars.
“Unlike the old way of doing highway projects, contractors hired for this plan are going to do the design, they’ll do the construction, and they will have to invest some of their own money,” Perdue said.
But critics say toll roads would be a better way to fund the project. With long-term toll concessions, a private company “not only has to finance and build the project itself, but to operate it for a long term — typically 25 to 50 years,” said Bob Poole, director of transportation policy for the Reason Foundation, a libertarian think tank in California.
“With the concession model, the winning bidder has powerful incentives to use life-cycle cost analysis,” Poole said. “That means they may use a higher quality design and construction that will cost less to maintain over its lifetime — and that can mean substantial life-cycle cost savings.”
Under Perdue’s plan, taxpayers would still foot a majority of the bill. Most of the funding would come from the state Highway Trust Fund and Grant Anticipation Revenue Vehicles, popularly called Garvee bonds, the latter of which allow the state to borrow against future federal highway funds, Conti said.
Private companies would fund the remaining portion, Conti said, and the state would pay back that outlay over a 10 year period. He added that the DOT would begin awarding contracts in May.
Queen City residents have long decried state funding delays for the highway, and it’s been a bone of contention between eastern and western politicians for years. Perdue previously backed diverting funds from other road construction projects in Charlotte to fund the loop, a suggestion that met strident opposition from local leaders.
Not everyone is a fan of the new idea, either. “Calling it a public-private partnership is merely making it more politically palatable,” said Randal O’Toole, a senior fellow with the Cato Institute and an expert in transportation issues, in a telephone interview. “If it’s not a toll road, I’m pretty suspicious that they’re putting some kind of rhetorical patina on it to make it more acceptable.”
O’Toole said that taxpayers would still end up heavily subsidizing the project.
UNC-Charlotte emeritus professor of transportation David Hartgen said the strategy would benefit large contractors flush with cash or lines of credit.
“If we need money, we should use the usual mechanism, which is to go to the bond houses. But now we’re putting the onus on the contractors, so essentially it’s a form of coercion,” Hartgen said.
State Rep. Thom Tillis, a Charlotte Republican and minority whip in the House, praised the new model in a telephone interview but wondered why state leaders hadn’t taken advantage of it sooner.
“These are devices that have been available for years,” he said. “On the one hand, I’m glad to see we’re stepping this up. On the other hand, I’m sad see we haven’t stimulated this innovation sooner.”
Perdue said Monday that completion of the outer loop, which could happen as early as 2014, would be the “first step” in transforming transportation around the state. A press release from the governor’s office says the new method will save between $50 million and $100 million.
David N. Bass is an associate editor of Carolina Journal.