Georgia cancels private toll project amidst mounting opposition
Georgia Backs Off on Tolling
Unpopular HOT lane project forces Georgia officials to pull the plug on efforts to impose tolls on existing freeway lanes.
The Newspaper.com
December 29, 2011
I-85 congestionStung by the unprecedented unpopularity of the Interstate 85 high occupancy toll lanes (HOT lanes) in Gwinett County, Georgia officials announced earlier this month that they canceled a high-priority tolling project. The Georgia Department of Transportation (GDOT) had initially planned on replacing freeway lanes throughout the Atlanta metropolitan area with a $16 billion network of toll gates, but that plan came to a halt as the first phase of the overall strategy fizzled.
"The state of Georgia is canceling the Public Private Partnership (P3) procurement of the West by Northwest Corridor contract to add managed lanes to portions of Interstate Highways 75 and 575 in Cobb and Cherokee counties," Georgia Department of Transportation (GDOT) Transportation P3 Committee Chairman Brandon Beach said in a December 14 statement.
The Federal Highway Administration had already offered a loan of $275 million in federal dollars raised from the gas tax to underwrite the $1 billion cost of adding tolls. Though Governor Nathan Deal (R) backed the Northwest Corridor and I-85 tolling projects, they were developed by his predecessor. A survey conducted by pollsters at InsiderAdvantage last month found only 4 percent believed the new I-85 HOT lanes were effective (the margin of error for the poll was 5 percent). Many drivers were angered as they found themselves trapped in gridlock in the general purpose lanes on I-85 while the HOT lane, which was previously free to use for anyone driving with a passenger, remained comparatively unused.
Opponents of GDOT's tolling ambitions believe Deal is responsible for preventing the duplication of a project that has no statistically significant support among his constituents. Critics insist the same problems that plagued I-85 would carry over to the I-75 project.
"My take on this is that GDOT has acknowledged that the changes would make matters worse in the general purpose lanes, as well as the goal of the lane was not to ease traffic for all drivers but those willing to pay in times of need," Howard Rodgers wrote on the Stolen Lanes website.
The group's analysis of traffic data show that the HOT lanes made traffic significantly worse in the general purpose freeway lanes, forcing thousands of motorists to adjust their travel schedules to cope with the added congestion. Link to article here.
Georgia shocks investor groups with late stage cancellation of procurement for toll lanes concession on GA/I-75&575
Toll Road News
December 15, 2011
Georgia generated shock waves in infrastructure investment circles with an announcement last night that it was canceling the managed or toll lanes procurement for GA/I-75 and I-575 to the northwest of Atlanta. The project had seemed to be well past the point of no return.
Three finalists for the toll concessions or PPP agreement were well into writing their detailed proposals, the RFP having been issued in September. Environmental permitting (FEIS) was being finalized.
The financing plan was clear, and a large TIFIA loan for nearly a third of the cost of the project had been granted by the USDOT. Rather than have the state DOT or the feds make the TIFIA announcement Governor Nathan Deal broke the news himself at a special full court news conference. He was a new Governor - sworn in January - but he seemed to be embracing the project and the PPP process.
The news of the killing of the project was given to the three short-listed builder/investor groups at a meeting with Georgia DOT (GDOT) Wednesday night. They were taken completely by surprise. They thought they were at a routine working meeting to discuss the FEIS and to clarify any issues that were arising in their preparation of proposals or bids.
The meeting broke up quickly after the lead GDOT official said the P3 procurement was canceled.
The governing body for transportation policy, the State Transportation Board (STB) had decided on cancellation and would pursue (unspecified) alternative ways of implementing the upgrade of the highway. He couldn't elaborate or discuss the reasons.
Terse statement
A terse statement issued late Thursday in the name of the State Transportation Board and Georgia DOT read:
"Statement Regarding Cancellation of West by Northwest P3 Procurement
"By Transportation P3 Committee Chairman Brandon Beach:
"The State of Georgia is cancelling (their spelling) the Public Private Partnership (P3) procurement of the West by Northwest Corridor contract to add managed lanes to portions of Interstate Highways 75 and 575 in Cobb and Cherokee counties.
"The Transportation Board is examining other available options for the delivery of this project."
It's pretty clear the cancellation was mostly the Governor's doing. A spokesman in his office emailed in answer to a TOLLROADSnews question whether the Governor asked the state transportation Board to cancel the project: "That was a DOT board decision. The governor had publicly expressed concerns about the structure of the P3 agreement. Now, we need to move forward and look at other ways to relieve congestion in that corridor."
Deal's "concerns" were casually mentioned in a couple of interviews but didn't seem big enough to stop the project at this late stage.
In September he reportedly asked whether the toll lanes P3 would prevent adding free capacity as the RFP was about to be issued. He was apparently satisfied and it was issued.
Then Nov 18 the Governor told a radio interviewer he was "a long way from being convinced" the project was worth a $300m state contribution that had been bandied about. (Whether the bidding groups would offer the state a fee or ask for a subsidy couldn't be known until the bids were in - editor.)
And the Governor said to the radio interviewer there weren't major time savings for motorists in the general purpose lanes from the I-75 project. (Toll lanes projects are primarily about speeding motorists who pay the toll - editor.)
Deal said the state was "a long way from actually finalizing the project: and he hadn't signed off on it. However he said it was "too late" to halt the procurement process.
I-85XLs
The Governor apparently also soured on toll express lanes with the startup days of the I-85 toll Express Lanes October 1.
Toll rates were set too high for the first few days and the express lanes were very empty. The Governor intervened asking the State Road and Toll Authority (SRTA) to lower toll rates. They were doing that of their own accord, it turned out.
A better balance has been achieved on the I-85 in the weeks since and usage has grown toward capacity while being managed for reasonable free flow. But the negative first impression persists.
Being a single managed lane alongside at least five unmanaged lanes, and lacking direct connector ramps, the I-85 HOT lane is limited in the benefits it can confer even with the best management.
I-75/575 much different
The I-75/575 project was much more ambitious and promised much greater benefits. It was mostly two lanes reversible and largely separated from the unmanaged traffic. 29.7 miles, 47km long it extended from just inside the I-285 belt route northwest splitting into a 'Y' the right arm of which is I-575. It would be 16.8 miles on I-75 and 11.3 miles on I-575 and a shorter segment of ramps on I-285.
The FEIS document suggests large travel times savings for the toll managed lanes (see tables nearby) and hence good potential for toll revenues and management of traffic - a much different project than the limited I-85 Express Lanes (a simple conversion of single HOV lanes.)
Other available options?
It is unclear what "other available options" there are.
There was talk that Gena Evans of SRTA had been saying the state toller could do more express lanes, but she wasn't involved in the decision to can the I-75/575 P3. We're told SRTA officials were just as surprised by the STB/GDOT announcement as everyone else.
There's no tax money for adding general purpose lanes, either at the state or federal level. Gov Deal and the state assembly are both unlikely to propose raising gas taxes. Also in the environmental permitting process (toll) managed lanes were found to be superior to adding unmanaged free lanes. The state can't very well restart a five year permitting process on the basis that the inferior alternative of the previous EIS has somehow become the preferred one.
Followers of these projects we contacted were unanimous that the cancellation of the I-75/575 P3 was a terrible mistake and that there are no viable alternatives or other options.
Sheer capriciousness
They also say the sheer capriciousness will kill the opportunity for Georgia to get serious investor proposals for many years to come.
The state has spent over $50m on the project in planning and procurement and the three teams asked to submit P3 proposals have each spent several million each. All that is wasted.
Worse Georgia now has the reputation for flakiness and unreliability, a highly risky place to try to do business in infrastructure.
Bob Poole of Reason and longtime proponent of toll lanes says it's "a very big setback" for Georgia and "very unfortunate for congestion relief in Atlanta."
"They had three world-class well qualified teams that were willing to do a lot of work to come up with financeable proposals. It’s hard to see that happening easily again after this. This stamps Georgia as a place with high political risk."
Brian Chase a P3 consultant in Washington DC said: "This is the third time GDOT has fallen down on implementing their P3 program. I think they have now destroyed what little credibility they had left with potential private investors."
Rick Geddes, a Cornell University transportation policy told us the Georgia decision was regrettable because it imposed serious costs on bidders who see no return on their time and money, adding: "It increases uncertainty surrounding future private investment in U.S. infrastructure at a time when America needs every dime of investment it can get."
Why not a freeze for an expert review panel?
Another said that if the Governor was concerned about the project then the sensible thing to do was to follow New Jersey Gov Chris Christie's approach to the Hudson River rail tunnel ARC and call a three or six month 'freeze' on the procurement while he got an expert report on options. Then depending on the report of his experts he could cancel or carry on with the project.
"To just can the project at this late stage in a procurement without any expert advice and without any notion of what the alternatives are is pathetic in its incompetence," another told us. "Who wants to waste time with a flaky government like that."
It is the second GA/I-75 P3 to collapse. A 2005 project adding truck lanes as well as toll lanes was ridiculously over-ambitious and expensive at $3b to $4b and couldn't attract viable proposals. By contrast this latest proposal was costed at around $1b and considered viable by the three bidders.
BACKGROUND: GDOT issued an RFQ for the project in February 2010 for the toll concession on nearly 30 miles of managed lanes along I-75 and I-575 in Cobb and Cherokee counties, but the project also called for a pre-development agreement for an additional 27 mile of toll-managed lanes along I-285 West and I-20 West.
Three teams were shortlisted in June 2010:
- Georgia Mobility Partners: Cintra (equity), Meridiam Infrastructure (equity), Soares da Costa, Ferrovial, Prince Contracting and AECOM
- Northwest Atlanta Development Group: ACS Infrastructure Development (equity), Dragados USA, CW Matthews Contracting and Atkins
- Northwest Development Partners: Vinci (equity), OHL (equity), Archer Western Contractors, Hubbard Construction Company, OHL USA and Parsons Transportation Group
RFPs were issued in September for submission by January.
Odd setup of GDOT
Georgia DOT is an odd departure from the normal American division between executive and legislative arms of government. GDOT is officially "governed" by the 13-member State Transportation Board (STB) which according to law "exercises general control and supervision of the department." One member from each of 13 congressional districts is elected by the majority General Assembly caucus for a 5 year term at the STB.
The leading executive of GDOT, titled Commissioner is Keith Golden, a low profile engineer, not a policy type. The Commissioner of GDOT serves at the pleasure not of the Governor but of the politically appointed State Transportation Board (STB.)
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Link to article here.
DOT pulls plug on $1 billion I-75/I-575 project
By Ariel Hart
The Atlanta Journal-Constitution
11:43 a.m. Thursday, December 15, 2011
In a dramatic blow to the state's transportation plan for metro Atlanta, the Georgia Department of Transportation on Wednesday pulled the plug on its most significant project, a historic $1 billion effort to add optional toll lanes alongside I-75 and I-575 in Cobb and Cherokee counties with private investment.
Board member Brandon Beach said the department would look at other methods for building the project besides private funding. But a spokesman for Gov. Nathan Deal would not confirm that the project as currently drawn should ever be built, saying only that “congestion in the corridor" remained a top priority.
"We just have to be sure to do it in a way that protects taxpayers," said the spokesman, Brian Robinson. More than 200,000 people a day drive that corridor, which is one of the region's most congested. Even with private funding, a public subsidy of up to $300 million would have been required.
The abrupt decision raised questions about the viability of DOT's program to draw private financing into public toll roads, a key initiative in the state since 2003, and to spread optional toll lanes along every major highway in the metro area.
The network of toll lanes became DOT's only plan for major congestion relief along metro Atlanta's interstates after officials realized it was unlikely there would ever be enough money to sufficiently widen the highways traditionally. "We don't have a massive freeway expansion program," Todd Long, the state's transportation planning director, said of the network, before the announcement. "This is it."
Beach insisted the I-75 project was still in the works and the program would go forward.
"We think it’s a good project," said Beach, who chairs the DOT committee that oversees toll roads, "but we think there are some questions that have been brought up and we need to re-examine and refocus." He stressed, for example, that the department would continue to seek private investment in the passenger terminal it is developing downtown as a real estate project. In addition, the DOT is continuing work on an optional toll lane along I-75 in Henry and Clayton counties with state money.
The state has been trying to build some variant of the I-75/I-575 project since at least 2005, and has spent more than $54 million on it so far. The latest version of the project was already out to bid, with three teams of international road builders likely spending millions of dollars to put together proposals, due Feb. 17. It was to be the state’s maiden venture into private financing for public toll roads.
The project would have built two reversible toll lanes alongside I-75 from I-285 to I-575, and one reversible toll lane each along I-75 up to Hickory Grove Road and along I-575 up to Sixes Road. The toll price was to rise and fall with congestion in the main lanes in order to keep the toll lane free-flowing. Unlike the HOT lane on I-85, it was to be financed and built by private companies trying to make a profit. They would lease the road and be repaid by toll revenues.
"Holy smokes," said Bob Poole, a founder of the Reason Foundation credited with inventing the idea of optional toll lanes. "That’s a big setback and very unfortunate for congestion relief in Atlanta."
It represents at least the second time Georgia has canceled and restarted the project, after a variant to add eight lanes was found to be too expensive.
"I’m mystified by why they would do that at this point," Poole said, noting that it would cement Georgia's "checkered history" into an unfortunate reputation.
"They obviously had three world-class qualified teams that were willing to do a lot of work to come up with financeable proposals. ... It’s hard to see that happening easily again," Poole said. "This kind of an action will create an impression that Georgia’s a place with political risk."
Problems in Georgia's public-private road program have arisen with projects such as this one and one on Ga. 400 when a plan developed after months or years of intense work at DOT arrived on the desk of a governor, who took a different view.
"It’s been five, six, seven years that Georgia’s been every year, here’s Georgia, a big newcomer state that might be a big market," Poole said. "It never seems to materialize."
Deal had raised concerns about the I-75/I-575 project following reporting by The Atlanta Journal-Constitution. Primary control of the project rests with DOT, but Deal heads the state agencies that control part of its financing. Both DOT and the governor agreed it was DOT's decision.
In September, Deal delayed putting the project out to bid by a couple of days over questions about whether the contract would prevent government from building roads in the corridor. But he approved it in the end, and it went out to bid.
Then last month, the AJC reported that traffic predictions showed the project was expected to make commutes slightly worse for some drivers, and would not provide major congestion relief for most in the main lanes -- although it would dramatically help those who chose to pay the toll.
DOT responded that the goal of the project was not to ease traffic for all drivers, but to provide an option for all drivers in times of need. Should they choose the toll lane, a state study showed, their commutes would be more than twice as fast.
Beach said that in addition to the news stories, there were concerns about the $300 million public subsidy that could be required for the project -- which the bidders said should be higher, perhaps $450 million. The project may qualify for federal loans.
"There gets a point where if you’re going to do that much public participation, you may want to look at doing the project yourself," Beach said. But where that cash would come from was not clear. "That’s what we’re going to look at in the next few months," Beach said, though he said he did not currently have any ideas.
The whole project is estimated to cost about $1 billion. Toll revenues could pay part of the cost of building it, but not all. That cost would far exceed DOT's entire statewide annual road-widening budget. If the state did attempt to front the investment to be repaid by tolls, there's no telling how much traffic and toll revenue would materialize, Poole noted. That financial risk "would be entirely on the state’s back," he said.
Residents of the area were absorbing the news.
"I would hope that the project is not completely dead because I think the project does have merit," said Cobb County homeowner activist Ron Sifen.
Others were glad to see it go, saying there hadn't been enough publicity about the project, although DOT has held public meetings.
"That was a lot of the problem with the toll lanes in Gwinnett," said Brett Bittner, vice president of the Cobb Taxpayers Association. "The people who would be affected by it in this area haven't been given the full explanation of what would happen. Overall the idea is a good one, but the implementation has been poor."
The three bidding teams did not respond to requests for comment.
Staff writer Janel Davis contributed to this article.
Story so far
2003: State law first allows private investment in public toll roads. The legislation is rewritten, then later replaced.
2005: The Georgia Department of Transportation signs its first partnership to develop toll lanes along I-75 and I-575. The original plan is to add eight lanes, but the estimates skyrocket from about $2 billion to $4 billion.
2009: DOT abandons partnership on the project, scales it back.
September 2011: The latest I-75/I-575 project -- with 29 miles of reversible toll lanes on I-75 and I-575 -- goes out to bid. The $1 billion project is the largest transportation contract in state history. Tolls and private investors would pay the majority of the cost, but the project also is expected to require a public subsidy of up to $300 million.
Oct. 1, 2011: An HOV lane on 16 miles of I-85 in Gwinnett and DeKalb counties becomes a toll lane, leading to an outcry from drivers facing longer wait times in the regular lanes.
Dec. 14, 2011: The state DOT pulls the plug on the current project but says it will look at other ways to build it.