PA/I-80 toll valuation consultant runs jails, does deceptive name change

An obscure company whose main expertise is jails is key financial advisor to the Pennsylvania Turnpike Commission in their application to the Feds for permission to toll I-80. Toll industry analysts are amazed that the Turnpike would rely on an unknown and inexperienced group called Provident Capital Advisors LLC for the key financial analysis of the market value of the Interstate that traverses the north of the state.

Federal Highway Administration rejected the previous Turnpike bid to toll I-80 on the basis that they had not made the case that the payments to the state for tolling I-80 reflected fair market value.

Obvious companies to do such critical financial analysis for the Turnpike would be Citigroup, Accenture, Bank of America, Macquarie, Wilbur Smith Associates, Cambridge Systematics, Telvent Farradyne, Parsons, Transurban, Houlihan Lokey, IBI, Morgan Stanley, URS, KPMG, Ove Arup, Charles River, Dain Rauscher, C&M, PFM, Moody's, Chase, PRAG, Booz Allen, Carlyle, JP Morgan or many others with established expertise and a record in analyzing the finances of roads and other infrastructure.

Instead the 41 page analysis "Annex B: Financial Valuation of Proposed Rentals for Interstate 80" is authored by an entity titled Provident Capital Advisors LLC, Baton Rouge, Louisiana (PCA) part of Provident Resources Group of Baton Rouge, Louisiana (PRG).  The 41-page analysis concludes: "we believe the level of Rent (the PTC would pay the state for I-80) is a valid operating cost of I-80 and should be an eligible use of toll revenues under the ISRRPP (federal law on tolling interstates.)"

PRG operates out of two residential houses in the Mississippi delta town of Baton Rouge LA (see picture).

Expertise in jails

Its main activity seems to be operation of 14 jails called 'correctional facilities' in Texas, Oklahoma, Ohio, Georgia, Alaska, North Carolina and Pennsylvania. These jails have about 9,000 beds.

PRG also do student and oldies' housing, and some regular housing. They say they are getting into healthcare.

Not a mention of financial analysis of roads or infrastructure in a corporate presentation recently:

see

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

No record of financial consulting

The group has no known experience in providing capital advice and analysis.

Indeed in what looks like a deliberate deception the title Provident Capital Advisors LLC was only registered June 30 this year in time to be attached to the Turnpike's documentation to the Feds.

Name change to claim credibility

Provident Capital Advisors was formed by a name change of what was previously Provident Healthcare Coalition LLC. We've got the documentation from the company registrar in Georgia.

see http://www.tollroadsnews.com/sites/default/files/NameChange.pdf

Brian Chase, an independent Washington DC-based infrastructure consultant previously with Nossaman and then with Carlyle says the Turnpike's reliance on Provident is very fishy.

"Provident Capital Advisors was just recently established and has no previous experience providing fair market value opinions for toll roads or similar revenue-generating transportation projects.  The name change only occurred a few days before the firm was engaged on behalf of the Turnpike Commission and after the Georgia Secretary of State approved the name change application on an expedited basis," he says.

Chase says he would normally support moves to toll interstates like I-80.

However he says the shady activities of the Pennsylvania Turnpike Commission "will only make it more difficult for legitimate (interstate tolling) efforts to proceed."

see Provident group:

http://www.provident.org/

Turnpike's announcement of filing of Provident opinion

The Turnpike Commission made a big deal of the filing of the Provident opinion. Their statement drawing attention to it follows in full:

HARRISBURG, PA (10/30/2009)-- Pennsylvania has submitted a formal written response to the Federal Highway Administration (FHWA) memorandum issued last fall about the Commonwealth's joint application to convert Interstate 80 to a toll road. The filing - made late in the day Oct. 29 by PennDOT and the Pennsylvania Turnpike Commission (PTC) - includes a detailed financial analysis in support of the I-80 tolling application that was submitted in October 2007.

"By filing this addendum, we're taking a vital step toward closing a huge transportation-funding gap for our state," said PTC Chief Executive Joe Brimmeier. "Without tolls on I-80, state lawmakers and the administration would have to plug a $473 million gap in next year's budget, and that gap will steadily widen, resulting in a $60 billion decrease in infrastructure funding over the remaining 47-year term of the I-80 lease."

The independent financial analysis - completed by Provident Capital Advisors of Baton Rouge, La. - responds to issues raised in FHWA's 2008 application review. It concludes that lease payments being made to the state under Act 44 are reasonable compared to recent North American public-private highway leases. (A copy of the filing is accessible at www.paturnpike.com/i80.) The submission is seen as a milestone by transportation officials who say that the state has done its best to address federal questions to date.

"Act 44 directed PennDOT and the Turnpike Commission to enter into a lease giving the Turnpike oversight of Interstate 80 as a toll road," said PennDOT Secretary and PTC Chairman Allen D. Biehler, P.E. "We have the lease in place, and, with the additional information being provided to the Federal Highway Administration, we hope for a speedy decision."

Under Act 44, signed into law in July 2007, the Turnpike has been making quarterly payments to PennDOT for more than two years. A tenth payment made Oct. 29 brings the total furnished thus far to more than $2 billion in supplemental funding for roads, bridges and mass transit. Today, Act 44 funds are at work on hundreds of infrastructure projects statewide: PennDOT has so far improved 980 miles of roadway and replaced 92 bridges with Act 44 funds. Up to now, Act 44 funds have come entirely from Pennsylvania Turnpike tolls (all new revenue from a 25 percent toll increase in January has been dedicated to support Act 44). In contrast, if Act 44 is fully implemented, I-80 motorists would support about 35 percent of the payment obligations, while about 65 percent would derive from Turnpike travelers under the current financial plan.

Yesterday's filing provides an analysis of the I-80 toll-funded payments being made under the lease agreement between PennDOT and the PTC. A study of comparable highway lease agreements or Public-Private Partnerships (P3s) completed in North America over the past decade demonstrates that the Act 44 payments are within market levels - a key policy concern of FHWA.

"The study provided to FHWA shows that the I-80 rent levels fall within the market range for public-private transactions," Brimmeier said. "The financial terms make sense both for the Turnpike and the Commonwealth, and we're certain that the FHWA will give the information we provided a fair and thorough evaluation as they've done every step along the way."

The filing also includes the following FHWA-requested information: current and future capital needs on Pennsylvania's interstate system and funding available to meet them; existing I-80 condition and planned capital investment; comparison of a 2005 PennDOT I-80 tolling study with the current proposal; and documentation of the nine proposed tolling locations that appear to be most favorable at this time.

If I-80 is tolled, Act 44 provides that annual payments to PennDOT would increase by 2.5 percent per year starting in July 2010, growing to an average $1.67 billion a year over the 50-year lease. However, if I-80 is not tolled, payments would drop to a fixed $450 million per year. Accordingly, Act 44 will produce $83.3 billion in new funding over 50 years if I-80 is tolled, but only $23.7 billion if I-80 isn't tolled - a nearly $60 billion difference.

PennDOT and the PTC formally applied to toll I-80 under the federal Interstate System Reconstruction and Rehabilitation Pilot Program on Oct. 13, 2007. In a response dated Dec. 13, 2007, FHWA requested additional information, including a traffic-and-revenue study and an engineering analysis. That information was provided July 22, 2008. On Sept. 11, 2008, FHWA replied that it could not move the application forward at that time due to technical concerns. Primarily, the FHWA sought to understand how the I-80 lease payments related to market levels for similar rental payments. (FHWA did indicate that paying rent was an eligible use of toll revenues under the pilot program.)

Among the other features in the state's tolling application are:

* a cashless, Open-Road Tolling (ORT) system where vehicles pass at highway speed under one of nine tolling sites - or "gantries" - located between I-80 exits at proposed intervals of 20-50 miles;

* an incentive that would allow all non-commercial E-ZPass customers to travel through their first I-80 toll point without being charged (meaning passenger vehicles equipped with E-ZPass could travel an average of 50 miles on I-80 without paying a toll);

* an E-ZPass rebate for commercial carriers that could lead to savings of up to 20 percent for truckers, depending on their average monthly toll bill; and

* a comprehensive, $2.5 billion, 10-year capital plan to inject $250 million a year in various I-80 improvements - nearly four times greater than the $60 million per year now spent on I-80.

To see more correspondences between FHWA and the Commonwealth or view additional background materials, please visit www.paturnpike.com/i80."

end of PTC statement

TOLLROADSnews 2009-11-01