On the Wiregrass Turnpike controversy - critics seize on our not-for-profit comment

Our report on the proposal for a tollroad between the Wiregrass region of southeast Alabama and I-10 in the Panhandle of Florida - we dubbed it the Wiregrass Turnpike - has been picked up by local critics based on a short comment at the end on the history of Not-For-Profit (NFP) tollroads. They are quoting TOLLROADSnews as saying it has been a disaster.

Ed Holman a Washington County FL commissioner is one who misinterpreted our comment.

We expressed an editorial opinion that the NFP model is not the best longterm financing model based on the built-in incentives, and on the experience of the two tollroads built so far using it. We like the for-profit concession model better.

However the positive facts about the Not For Profits, the Pocahontas Parkway in Richmond VA and the Southern Connector in Greenville SC are:

- the roads got built as their promoters promised

- neither has cost taxpayers

- they provide improved mobility, more efficient and safer travel

- they have enhanced the economies of the regions in which they were built

- environmental and local concerns were met

Those are major benefits!

In both cases the NFP model proved non-viable in that its debt was too large for the prospective revenues to service.

The Pocahontas Parkway is the older of the two and it has played out most fully. Opening in 2002 it was clear by 2004 that it faced the prospect of default several years out, though reserves kept it going for the time being. No way was traffic and revenue going to grow sufficiently to service an all-debt capitalization as structured in the NFP Pocahontas Parkway Association.

Though the NFP proved non-viable it did not - as some critics are saying in Alabama and Florida - prove a disaster. Far from it. 2005 into 2006 the association and the state DOT managed to negotiate a wind-up of the nonviable NFP that was satisfactory to everyone concerned.

The windup agreement announced in May 2006 in which Melbourne Australia based Transurban took over the project as a for-profit 99-year toll concession:

- paid off the NFP debt 100 cents in the dollar

- paid off expenses incurred by VDOT

- took responsibility for operations and maintenance to levels specified by contract

- committed the concessionaire to build an important Airport Connector spur road

- provided for revenue sharing with the state if return on investment passed a specified threshold

VDOT has documented the Pocahontas Parkway transaction here:

http://www.virginiadot.org/business/ppta-CompletedProjects.asp

Greenville more problematic

The Greenville Southern Connector project in South Carolina is the other NFP project that has proved non-viable because of too much debt and too little traffic and revenue. The NPF Connector 2000 Association is looking for a for-profit concessionaire to take over the project too.

Its longterm prospects look poorer than the Pocahontas Parkway. Greenville SC is a smaller, poorer city than Richmond VA and hence has less traffic potential. The Greenville tollroad is a peripheral road dependent on future development and not of much help to through-traffic.

The Richmond tollroad is more centrally located, able to relieve congestion, and provides a useful route for the southern third of the Richmond metro area to the airport and to the coast. It is also likely to open up attractive housing and industrial development.

The investors think it is viable and they recently announced they are going ahead with the airport spur which will considerably enhance the value of the Parkway to the people of Richmond and hopefully to the investors too.

Our guess is that unlike the Richmond case no concessionaire will be willing to pay off all of the Greenville SC project's debt, and that the NFP bondholders will take a major hit. But the traffic is certainly sufficient to pay all the operating costs and to service a significantly reduced capitalization.

It looks bad for the bondholders of the NFP in the case of Greenville, but the locals are doing alright. They've got an alternate to I-85, and something of a belt route, and industrial sites with excellent road connections. They haven't lost anything.

It is our editorial opinion the for-profit model is better because it gets those with a longterm commitment to the operations and viability of the project involved from the get-go. The operators and longterm managers get involved in the design of the project and its financing at the very beginning.

That doesn't mean a not-for-profit project can't be made to work, or even that if it doesn't work, that's it's some kind of disaster. Neither Pocahontas Parkway VA nor the Greenville Connector SC has been bad for the local communities.

Focus 2000 AL-FL

The Focus 2000 group based in Dothan AL pushing the Wiregrass Pike is comprised of good local people, and they are enlisting experienced people from outside. We don't think their financing model is the best, but it is wrong to twist what we wrote into opposition to what they are about, or predictions of disaster.

Every project is different and deserves to be considered on its merits.

One complaint we read is that the Wiregrass tollroad would take business away from local merchants on the arterial US231 that goes through towns. That complaint goes back to the beginning of modern roads built for long distance traffic - expressways, motorways, autostrade, autobahnen, autopista etc.

In the US potential main street business loss was the staple of opposition to construction of the interstates from 1950 onward. The complaint was invalid then, and it's invalid now. Most of the traffic going past on main street wasn't customers anyway. It was locals struggling in traffic with people just wanting to get through town.

If the complaint had been heeded there would be no interstate network and the nation's productivity and living standard would be far lower, so great would be the cost of moving people and goods. And road deaths would be something like 10,000/year more because modern roads with access control and grade separation are much safer.

Business on main street has to adapt to changing travel patterns just as it has to adapt to other changes in the business environment. Improved roads and better mobility open new opportunities off the interchanges.

There has to be some give and take. One county located on I-10 shouldn't be able to deny more remote counties high standard connections to the modern road network with a selfish "What's in it for us?"

We're all in it together.

Here is an Overview of the proposed project by the Focus 2000 group:

http://www.tollroadsnews.com/sites/default/files/F2000.pdf

Link to our first report:

http://www.tollroadsnews.com/node/3593

TOLLROADSnews 2008-06-23