5 Reasons Why The Outer Beltway May Be A Bad InvestmentJune 29, 2010 53 comments Print Article
If you think the Skyway is a drain on resources, it's nothing compared to the continuously growing deficit a failed road can bring to the table. While local leaders and planners struggle to find an entity willing to take on the risk of constructing the First Coast Outer Beltway, South Carolina's failed Southern Connector suggests that the entire plan may have a foundation built upon sand. Will we learn from their mistakes before it's too late?
Interstate 185 (I-185) is located in the city of Greenville, South Carolina. The northern portion, which ends just shy of the Greenville city limits, was opened in the 1960s and is cosigned with U.S. 29. The southern portion, which connects the I-85/I-185 interchange (exit 42) with the I-385/U.S. 276 interchange (exit 30), was opened as a toll road in 2001 ($1.00 per passenger vehicle). This extension was dubbed the "Southern Connector" and increased I-185 from three to seventeen miles (27 km) in length.http://en.wikipedia.org/wiki/Interstate_185_(South_Carolina)
The Southern Connector was constructed as a public-private partnership between the South Carolina Department of Transportation and Interwest Carolina Transportation Group, LLC, a development team that included a not-for-profit corporation called Connector 2000 Association, Inc. (C2A). Under this agreement, C2A operates the toll road under a fifty year license. They were responsible for financing, designing, constructing, operating and maintaining the road during this period and the toll revenue would be used to pay them for these efforts. To finance the project, C2A sold bonds that were tax-exempt under IRS Rule 63-20, which provides that the bonds sold will be exempt if they finance an activity which is "public in nature."
The highway opened in February 2001, nine months ahead of schedule. By 2007, the Connector 2000 Association was having financial difficulties because ridership on the toll road was not meeting original estimates. In the fall of 2007, they began looking for a concessionaire to take over the operation and financial liability of the toll road. By early 2008, C2A had received a default notice from their bond trustee. In January 2010, the bond trustee missed an interest payment, and the C2A was more than $8 million behind in its payments to SCDOT for the maintenance and license fees under their agreement.
As toll rates have increased, traffic has declined (similar to JTA's Skyway experience) and the highway's deficit has swollen to $173.3 million. On June 24, 2010, GreenvilleOnline.com reported that the Southern Connector toll road filed for bankruptcy after state legislation that would have opened the door to a long-term debt restructuring failed to pass.
Why the tollroad is in bankruptcy now
Wilbur Smith & Associates (the company that did the traffic & revenue or toll viability study for this bankrupt toll road) projected overblown traffic counts where barely a third ever showed up. They also based the success of the road upon PURE speculation that further development would occur around the toll road (yet the market busted). This stuff has very little science and a whole lot of guesswork behind it. There was a court case in the 90s where a Judge challenged the flawed thinking that driving habits remain the same under a tolled versus non-tolled scenario.http://texasturf.org/index.php?option=com_content&task=view&id=881&Itemid=2
This is the big Achilles heel of the toll road advocates. They often think that the same level of traffic (or close to it) will show up whether its tolled or not (thinking if they keep the free routes congested enough or give people no other viable alternatives, they'll just "have to pay" because they have to get to work somehow). But common sense tells us when you have to pay more for something, naturally people try to avoid the new tax even if it means a more circuitous route, moving closer to work, or staying stuck in traffic.
This is why toll road policy is failing. It's basically no different than real estate speculation or day trading, except that, for the most part, it's being done with taxpayer money.
Why forecasts failed
1. The GS Connector simply does not serve major commuter flows within the approx 600k population 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.http://www.tollroadsnews.com/node/4547
2. 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.
3. It doesn't offer time-savings to most of the local traffic.
4. The road was located mainly to serve new development on the southern and southwest fringe of the area, not to relieve congestion. The new development has occurred, but more slowly than the toll road promoters predicted.
5. The Connector route is too circuitous for through traffic and it is badly connected to I-85 at its western end for Atlanta to Columbia traffic.
A Look at the First Coast Outer Beltway
A look at the Outer Beltway plan reveals the same flaws that resulted in the Southern Connector's failure.
1. The Outer Beltway simply does not serve major commuter flows within the Jacksonville metropolitan area. Major commuter flows in the area are north and south due to limited river crossings. The Outer Beltway's most significant benefit would have been the construction of a new river crossing between the Shands and Buckman Bridges. With the current alignment, the additional crossing that could have relieved travel on existing roadways such as Blanding, US 17, I-295, I-95, and San Jose Blvd. has been eliminated.
2. The Outer Beltway swings too far south, southwest, and west to compete for major internal metro area traffic.
3. The Outer Beltway will not offer time-savings to most of the local traffic. Because the route swings too far south for existing area traffic, most residents will save time and money by continuing to use existing "free" (heavily subsidized) roadways.
4. As proposed, the road appears to be located mainly to serve new development instead of relieving existing congestion. In the Southern Connector's case, new development never materialized. When the economy eventually strengthens, several national policy and development patterns indicate the sprawl growth we've encouraged over the last several decades may not return on the level originally predicted.
5. The Outer Beltway's route is too circuitous for through traffic. Like local traffic, through traffic that currently uses I-295 will save time and money by staying on the same route.
A Lesson for Jacksonville
Jacksonville's lesson from the failed Southern Connector's experience can be summed up by this post from the "Voting Under the Influence" blog.
Southern Connector should give the taxpayer pause. For, if such a project encourages private risk takers to invest in it, and if it fails, efforts are made to use public money to try to make those private investors whole, what are the savings to the taxpayer? Further, how many of us, as individuals, who made a bad investment in a company will have the government make us whole? Why should those who invest in a private-public road be guaranteed a profit for their risks with taxpayer money?http://votingundertheinfluence.blogspot.com/2010/02/upstates-southern-connector-is-in.html
Article by Ennis Davis