An Imaginary Conversation with Speaker Tillis
*This article written jointly by Kurt Naas and Sharon Hudson of WidenI77.org
For months the citizen’s group WidenI77.org has been trying to have a conversation with our N.C. House Representative, Thom Tillis, regarding plans to build HOT lanes on I-77. During that time we heard from a number of surrogates, but never from the Speaker himself. So it was interesting to hear his comments in front of the N.C. Republican Party Executive Committee last month concerning a resolution we submitted regarding HOT lanes.
In the tradition of “Eastwooding” President Obama at the Republican National Convention in Tampa last summer, here is our imagined conversation with Speaker Tillis taken from an actual transcript of his speech:
Speaker Tillis: “Members of the body I just want to make you aware of something that’s going through the Legislature right now, you may or may not be aware of. Yesterday when we had two, three or four standing ovations for our Governor. One of the things he talked about was his transportation plan, something that went to the front of the House and then the Senate. It provides a framework for identifying areas where you may want to use tolls to advance road projects that otherwise could be ten, fifteen, twenty years down the road sooner. And that framework has been passed over to the Senate.”
WidenI77.org : While tolling works for focused projects like tunnels and bridges, it has been a historically poor way to pay for roads. For instance, in Orange County, CA, the tolling authority built over $2B worth of toll roads in the 1990’s. Toll revenues consistently failed to meet debt obligations, and that debt has swollen to over $4B. Now teetering on junk bond status, the tolling authority refinanced at a cost of $6.5B.
North Carolina’s sole toll road, the Triangle Expressway, cost $1B. Revenues there are not expected to cover debt service for another decade, so in the meantime the General Assembly authorized $25M/yr for the next 30 years to cover anticipated shortfalls. The road carries as much traffic in a day as a single interstate lane carries in about three hours. In twenty years, it’s projected to carry half the traffic I-77 does today.
We could go on, but suffice it to say we have real concerns regarding toll roads in general and the I-77 HOT lanes specifically.
Speaker Tillis: “And that framework actually requires the DOT to go down to the local governing bodies, local elected officials to ultimately decide if they want to authorize their project, through a deliberative, public, well-vetted representative process.”
WidenI77.org: The process we just witnessed firsthand was one of closed meetings and elected leaders being pressured into accepting the HOT Lane plan. Citizens were summarily ignored and shut out of the discussion. We can only infer that plenty of arm-twisting also went on in the House and the Senate. This was the opposite of a fair process.
Speaker Tillis: “The effect of this resolution will basically be, and any Senator who is in the room today, to kill the Governor’s transportation plan, which he’s held out as one of his first (gifts?) because it’s actually in the plan, I mean, it’s in the bill that this is a mechanism, this is an option. So to do this, the net effect is you telling your duly elected Senators and the House members who are here who voted for the transportation plan that you’re going to hold them accountable for something that the Governor wanted, that he firmly believes with the DOT it is an essential option, it’s only an option. It still requires local elected officials to vote for it.
WidenI77.org: Regarding the Governor’s new transportation plan, our understanding is it has three tiers. 40% of funding would be at the state level, 40% at the regional level, and the remaining 20% at the division level.
The state level would be based 100% on merit- i.e. a “data-driven” approach, the regional level 70/30 state/local consideration, and the divisional level 50/50 state/local.
So it appears to us that projects of statewide and regional interest, like tolls, would have limited local input. If it’s a great plan, then let’s wait for it to be implemented before we sign a 50year contract to toll I-77.
Speaker Tillis: “If you don’t want it, vote out the local elected officials who support the tolls and put people in who don’t and then figure out how to pay for the roads if it happens to be something that makes sense.”
WidenI77.org: Are you suggesting we “primary” the elected officials who were told by you that there is no other way to widen the road except by HOT lanes for at least 20 years?
Speaker Tillis: “But the net effect of this resolution is sending a message to the Governor that you want to kill one of his three major initiatives that have come out this year.”
WidenI77.org: Our understanding is the Governor’s transportation initiative is about using our limited transportation funds more effectively. Privately operated toll lanes incur expenses for advertising, toll billing, toll collection, credit card fees, toll enforcement, occupancy enforcement, administration of the tolling authority, insurance claims and premiums, and ROI to private equity and debt investors. These expenses significantly decrease the amount left over to cover capital costs and additional transportation improvements.
Also, toll lane projects, because of their scope, often require improvements that are otherwise unnecessary. For instance, the I-77 HOT Lane project requires the replacement and/or construction of 9 bridges. According to the NCDOT none of these existing bridges require replacement otherwise. So taxpayer money that could be spent elsewhere would instead pay for replacing structurally sound bridges. A road widening project that should cost less than $100 million instead becomes bloated to $550 million, including $170 million in taxpayer funds.
Transportation officials at all levels of government have said toll lanes offer an alternative to congestion, not a solution. Toll lanes will only be used when the general purpose lanes are congested. Therefore, toll lanes ensure congestion instead of relieving it.
Toll lanes are in direct opposition to the spirit of the Governor’s initiative: they are bloated, put the taxpayer at risk of a bailout and do not solve the problem for which they were considered in the first place. Rather than killing the Governor’s initiative, this resolution reinforces it.
Speaker Tillis: “It’s not like he’s going to put HOT lanes all over the place. We’ve got a resol, we’ve already passed a bill that will not allow tolls to be put on existing roads. In other words the lanes that are already there that have already been paid for by taxpayer dollars and gas taxes cannot be tolled. It’s against the law. I also supported that bill I believe it’s House Bill 267. They cannot be tolled.”
WidenI77.org: Yes, but HB 267 does not prohibit tolls from being put up on existing roads if there are new lanes. That’s exactly the plan with I-77- and every other toll lane now or in the future. That list includes I-40, I-85, I-95, I-485, and Hwy. 74. HB 267 has a loophole you could literally drive a truck through.
Speaker Tillis: “That the house and the Senate cut the gas tax. You wanted it cut, we cut it.”
WidenI77.org: The N.C. gas tax increased from 37.5 cents to 37.6 cents on July 1, 2013. When combined with the federal tax of 18.4 cents, N.C. has the highest gas tax in the Southeast and the sixth highest nationwide.
Speaker Tillis: “The effect of that is hundreds of millions of dollars over time that we’ve got to make up somehow. As we move forward, as the state grows, as we add another million people over the next ten years, we’ve got to find a way to have infrastructure that allows businesses and industry and everybody else to grow. Without that this state will not grow. (Moot only?)”
WidenI77.org: NC’s gas tax historically had a fixed component of 17.5 cpg plus a percentage based on the wholesale price of gas. In 2012 House Bill 950 capped the gas tax at 37.5 cpg, effective through June 30, 2013, at which point the tax returned to the fixed/variable formula. We do not see how this short-term freeze translates into hundreds of millions in lost revenue.
Speaker Tillis: “The HOT lanes, the proposal in the Governor’s budget is to consider corridors where they believe the economics are right to enter into private public partnerships to build roads. And then after the debt is retired over a forty or fifty year period, which is roughly the period of time the bonding would occur, that asset becomes the state’s. Although the majority of the cost and the risk associated with building the road was incurred by a consortium who won’t actually issue the bonds to do it.”
WidenI77.org: We have only seen one contract for this type of arrangement- the proposed I-77 HOT lanes. The contract contains 18 pages describing how the taxpayer will bailout the private company if the contract is terminated. So the majority of risk is actually borne by the taxpayer. As far as costs, we hope our leaders keep in mind that these are ultimately borne by the people who pay the tolls.
Speaker Tillis: “So then we need to renegotiate with the concessionaire and continue the revenue.
“Now here’s the other thing about HOT lanes, the agreement with these concessionaires is to have a reasonable rate of return, which is (fairly a loan?) for them to pay for the road. If they underachieve, tough luck.”
WidenI77.org: Like we mentioned earlier, the agreement for I-77 HOT lanes contains 18 pages describing how the taxpayer will bailout the concessionaire. In fact, the bailout happens even if the concessionaire defaults.
Speaker Tillis: If they overachieve a portion of that money stays within the transportation district where the toll is collected and it’s used to improve the general purpose lanes.”
WidenI77.org: The only toll lanes in the U.S. that generate significant income are located in Southern California, Houston and Miami. All of these have populations exceeding 5 million. Mr. Speaker, we’re not Southern California, Houston or Miami.
Right now, no toll lane in a metropolitan area the size of Mecklenburg-Iredell has ever covered its operating costs, and no toll lane period has ever repaid a debt as large as the one we’re about to incur on I-77.
It’s difficult to see how toll lanes in North Carolina will ever “overachieve.”
Speaker Tillis: “In fact the toll agreement, even for I-77, allows for an additional general purpose lane to be built. You have to renegotiate it with the concessionaire but that’s possible. But only in that corridor are you really limited to building any new capacity.”
WidenI77.org: Unfortunately the proposed project uses up all of the existing right-of-way for toll lanes. Additional general purpose lanes would therefore be very expensive, and the concessionaire has the right to seek compensation for lost toll revenues if we ever did widen the road and got traffic moving. The contract is for 50 years, which for all intents and purposes means (a) the road would not be improved with anything but more toll lanes until 2065 and (b) we relinquish control of a critical transportation artery for five decades.
Speaker Tillis: “On 21 that runs adjacent to 77 or parallel to it, you could add a seven lane highway there legally by virtue of the contract that we’ve put together. But I’m telling you, until we find another way to fund roads, I hate tolls too.”
WidenI77.org: Estimates we’ve seen put widening an existing interstate at ~$10M/mile, and widening 21 at $30-40M/mile. Our money would be better spent simply widening the interstate.
Speaker Tillis: “I use them, when I want to get somewhere quick and I don’t when I don’t need to. But if we don’t find another way to fund roads in this state, with energy efficiency with cars that don’t even use gas anymore we’re gonna run out of money to build roads.
“Do we want to increase the personal income tax? Do we want to increase the sales tax? Do we want to do a bunch of pile up push it down on the counties and increase the property tax? Sooner or later we’ve got to figure out how to pay for roads.”
WidenI77.org: We feel compelled to point out that in 2007 you editorialized in favor of a transportation sales tax for Mecklenburg County.
Speaker Tillis: “It’s not easy, but it’s a – and then – oh wait, wait, how about vehicle miles traveled, that’s a real popular one right?
“So, for those who oppose tolls, please put in the resolution how you’re going to pay for them, because you’re telling legislators what they can’t do, but you’re not telling us how we can do it, and I would oppose the resolution.”
WidenI77.org: Again, toll lanes lose money and therefore are not a solution to funding. We look to our elected leaders to develop solutions, not vice-versa, but in the spirit of the question:
For this fiscal year the legislature diverted $258 million in gas tax receipts to the General Fund. Our first suggestion: that needs to stop. Use gas taxes for their original purpose- to build roads. Second, stop pursuing bloated $550 million toll projects when viable solutions cost a fifth of that amount.
Third, if efforts at becoming more efficient still fall short, consider a modest vehicle registration increase, indexed to offset the decline in gas tax receipts. For instance, the projected 2% decline in gas tax receipts can be recouped by a vehicle registration increase of around $4. The average driver would still pay the same amount in road taxes, but we replace an obsolete funding source with one reflective of new realities. This begins to decouple road needs with fuel consumption, is broad-based, and is paid for by the people who use and benefit from good roads in North Carolina.
We support the resolution.
Hear Speaker Tillis’s remarks above by clicking here.
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