Sometimes if you build it, they don't come! It was mentioned earlier today in the Greenville Elements of Urbanism article that this city has a privately funded toll road. Our proposed +$2 billion Outer Beltway is supposed to be of the same cloth. Before we get in too deep, taking a closer look at Greenville's situation should be considered.
Greenville Southern Connector headed for bankruptcy - default likely Jan 1 2010
US Bank, trustees for the bondholders of Connector 2000 Association, the owner of the Southern Connector tollroad in Greenville South Carolina have issued an official notice that they expect a default Jan 1, 2010 with insufficient funds being available from the pike to make debt service that's due. They say the Association concluded that converting the not-for-profit into a for-profit toll concession to avoid default - as occurred with the Pocahontas Parkway in Richmond VA - is not feasible.
In or outside bankruptcy there will be a forced "restructuring" of the bond capital, the US Bank trustees say.
Investors will take a hit. (NOTE: US Bank would like us to note that they did not use the word "forced" of the capital restructing, though that's what we think it is! Also we have corrected the second sentence to reflect that the Association concluded sale to a for-profit concession was infeasible ahead of bankruptcy restructuring, not US Bank - editor 2009-10-07)
South Carolina DOT has already declared "an insolvency Event of Default" in a letter of June 12 which called on the not-for-profit owners to seek a "plan of adjustment." SCDOT says it reserves the right to terminate the Association's License Agreement under which the Connector Association operates the tollroad. Macquarie Capital is working for the trustee.
Accountants blast AssociationThings may be worse than the official reports. Association accountants Bradshaw Gordon & Clinkscales in a statement accompanying an Update on the association's financial condition say that accounting standards board (GASB) requirements have not been met, and warn that the effect of the pike's departure from accounting standards has not been determined.
They say in one passage: "Management has elected to omit substantially all of the disclosures and statements of cash flows required by accounting principles generally accepted in the US...."
Deficiency of $163mThe statement reports as of June 30 liabilities of $322m against assets of $160m for a net deficiency of $163m - comically they report cents as well as individual dollars. The largest liabilities are bonds of $304m but the Association also owes the state DOT some $8m in unpaid license fees and interest.
Interest ten times operating profitToll revenues in the first half of the year were running at barely $5m/yr against operating expenses of $3.2m for an annual operating surplus of just $1.8m. Interest expense was ten times that and net loss was running at $22.8m after interest, depreciation and amortization.
Accumulated deficits are $163m, and they are being added to at about 14%/year.
Toll revenues for the first half of 2009 were running at 4% below year-ago levels, pretty much within the normal range for tollroads around the country. Since then they have been flat or slightly above year ago monthly levels.
Trouble from the get-go, traffic below half forecastThe Connector looked to be in trouble from virtually the day it opened in March 2001.
Traffic had been forecast after 'ramp-up' at the end of the first year to be around 28k/day so traffic of 20k was expected in the beginning.
Traffic has always been below half forecast levels, starting at 10k and rising at about expected annual percentage rates, but from the disappointing base.
Eight years after opening traffic is 15k to 16k/day versus 33k forecast when the original financing was done in 1998.
The original traffic studies seem to have been fundamentally flawed.
Law suits on forecastsRobert Bain - UK-based author of the recent book on toll road forecasting - tells TOLLROADSnews that he has been engaged as an expert witness twice in the last 18 months by lawyers contemplating taking legal action against traffic forecasters for over-optimistic predictions. Neither engagement resulted in lawsuit to date. "It's only a matter of time", says Bain.
Why forecasts failedOur analysis is that the Connector (I-185) simply does not serve major commuter flows within the 540k pop metro area. These flows are on a southeast-northwest axis Simpsonville, Mauldin, Greenville and along US276 and I-385. This is mostly to the north and east of the Connector.
The Connector including the toll-free portion of I-185 swings too far south, southwest and west to compete for major internal metro area traffic.
Located to serve development, not to relieve congestionThe pike was loccated to serve new industrial and residential development on the southern and southwest fringe of the area, development which has occurred, but more slowly than the tollroad promoters predicted.
Higher paying truck traffic is tiny. 96% of vehicles are 2 axle.
Slower employment growth than predicted in the area has meant that for the most part the free roads have adequate capacity even for peaktime work trips. The exception is I-385 northbound through Mauldin in the
mornings weekdays.
But trips on the Connector are too much longer in distance to be an attractive alternative for most motorists.
Studies show the Connector corridor generally has good developmental potential still, although portions are handicapped by lack of utilities like sewer.
New Stantec T&R studyA traffic and revenue study by Stantec published in May this year found toll rates were too low to maximize revenues. Toll rates should be increased 50 to 75%, it recommended.
The Association has since gotten SCDOT permission for three 25c toll increases, the first immediately, a second Jan 1 2012 and a third Jan 2016. 25c toll increases could be implemented every four years thereafter. Ramp tolls would be increased proportionately.
Stantec now project toll revenue of $10.2m by 2016 based on 16.3k daily traffic and $20.3m in 2026 based on traffic of 25k/day.
The Stantec report contains no analysis or suggestion as to why the 1990s study was so wrong.
Indeed they don't even mention the existence of that report.
Maybe the bankruptcy court can exhume it?
Southern Connector website:http://www.southernconnector.com 
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