Concession on Greenville Connector on hold waiting full T&R study
The Greenville Southern Connector in South Carolina is getting an investment grade traffic and revenue study, and meanwhile the procurement of a concession is on hold. Peter Femia, general manager of the Connector 2000 Association a not-for-profit which operates the tollroad under a 50 year license from the state told us their financial advisers Goldman Sachs recommended the T&R study and other measures before the association pressed forward with the private concession.
This week Femia wrote to six T&R firms asking them about their interest in doing the T&R study. Firms he approached are: Stantec, Steer Davies Gleave, IMTech, Booz Allen, Halcrow and Aecom.
The association also announced a deadline of May 21 for proposals and said they intend to choose a T&R firm by June 5:
The study will attempt to forecast traffic and revenues 50 years ahead under a variety of scenarios. This is designed to support either a concession or a restructuring in which some debt would be restructured or written down.
The 26km (16 mile) tollroad on the southern fringe of Greenville began tolling in March 2001 funded with $290m of bonds, but has struggled from the start. As with the other 1990s US not-for-profit Pocahontas Parkway in Richmond VA it faced eventual default on its bonds from the outset.
Toll revenue in FY2007 was $5.48m based on average daily transactions of 16k.
The last annual report - for FY2006 - shows operating expenses of $2.43m off toll revenues of $5.08m for an operating surplus of $2.65m.
Interest on bonds was $16.40m less interest earnings of $0.96m, amortization $5.38m and SCDOT fees payable $1.78m for total non-opertating expenses of $22.6m.
That made a total loss for the year of close to $20m.
BACKGROUND: 26km (16 mile) the tollroad has interchange connections at each end with I-85 and I-385 and four intermediate diamond interchanges.
It has two mainline plazas and two pairs of ramp toll points, so the majority of trips on the road involve two tolls.
The Southern Connector is officially described: The tollroad extends from existing I-85 at its interchange with I-185, in Greenville County, South Carolina, proceeds southeast and interchanges with the SC153 Extension, continues east and interchanges with SC20, with US25 south of Donaldson Center Industrial Park and with Fork Shoals Road before turning northeast and interchanging with I-385 at its intersection with US276 and Standing Springs Road east of the city of Greenville between the cities of Mauldin and Simpsonville.
It is the only new tollroad in recent years to get an official FHWA Interstate designation - I-185.
The Southern Connector opened mid-March 2001 and in its first full year of operations in 2002 toll revenues were $2.96m based on 10.9k average daily transactions. Since then traffic has grown 47% and revenue 85% but the road has never performed near to the projections of the 1997 WSA traffic and revenue study on which its business plan was based.
WSA projected 28k daily transactions after a nine month ramp up period but in reality traffic was 39% of that (10.9k/28k). Assumed development along the corridor did not occur so much less local traffic generation occurred. Also the road seems to be too circuitous to offer the time savings for long distance traffic needed to justify the tolls for a significant portion of those forecast to use it.
The Connector 2000 Association (C2000A) has a 50 year license to operate the tollroad from the SCDOT. The not-for-profit like most such outfits was formed by a group of development companies who got paid for their work in planning, designing and building the road and who handed it over to the not-for-profit on opening to oeprate as a business. The developer was Interwest Carolina Transportation Group LLC, consisting of Interwest Management, Kutok Rock, Wilbur Smith Associates, Thrift Brothers, Florence & Hutchinson, Mesirow Financial, and Lehman Brothers.
The tollroad has been paying bond interest so far out of reserve but in a few years this will run out. The debt service schedule is backloaded with repayment of principal due to start this year.
In October last year the Association began the process of seeking proposals for a private sector takeover through a toll concession. Several groups expressed interest and submitted statements of qualifications.
Femia declines to identify them.
He told us that late last year the Association decided on the advice of Goldman Sachs to put an "indefinite hold" on the concession procurement. With a new T&R study before the end of the year they'll be better placed to decide their best course of action.