Ready for Cintra in Virginia?

The Virginia Department of Transportation is handing over the keys for Interstate 66 to I-66 Express Mobility Partners, a consortium of Cintra and Ferrovial of Spain, among other firms.  So how is Cintra doing in their other United States ventures?

A few years ago, Cintra’s Indiana Toll Road joint venture with Australian Macquarie Atlas Roads (of Dulles Greenway fame) filed for bankruptcy.

Last year, Cintra’s Texas subsidiary filed for bankruptcy.  This operation runs a toll road between San Antonio and the Austin area.

This month, the Wall Street Journal examines Cintra’s latest business venture in North Carolina: building toll Express Lanes along I-77 into Charlotte.   What could go wrong? 

The problems have gotten so bad that North Carolina officials are considering buying out the public private partnership (P3) contract just to escape and drive away from the agreement.  Try not to let this experience affect your confidence in Virginia’s prowess with P3 contracts.

From the Wall Street Journal:

“When North Carolina brought in a private operator to add toll lanes to a 26-mile stretch of highway north of Charlotte, its goal was to reduce congestion and build a road the state couldn’t otherwise afford.

The hope was that the state’s first public-private partnership for roads would be a model of efficiency and the first of many such projects. But the expansion of Interstate 77 has hit speed bumps, with travel times lengthening and accidents increasing. Now the state is considering paying up to $300 million to get out of the deal and retake control of the roadway.

Commuters and political observers are now saying the state ceded too much control to Cintra, the unit of Spanish infrastructure firm Ferrovial SA that signed the $650 million contract in 2014. They would have liked work to be done a mile or two at a time rather than nearly all at once, creating a 26-mile work zone. They also say the state highway department would have responded better to complaints, like those on Easter weekend when drivers said they were dodging roadway debris.

Lawmakers and business groups are pushing for the project to be scrapped. The 1,000-member Lake Norman Chamber of Commerce argues the toll lanes are unlikely to reduce congestion because of the cost—as much as $20 round trip during rush hour—and the design, as the asphalt isn’t thick enough to accommodate tractor-trailer trucks. Cintra says the tolls haven’t been determined yet.

Many Nascar stars live on Lake Norman north of Charlotte and haul trailers through the congested work zone. “I couldn’t hate highway 77 between exit 30-23 any more,” Danica Patrick said in a message posted to Twitter in December.

“The portajohn was a nice gesture tho,” responded Dale Earnhardt Jr. , attaching a photo of the construction zone.
An official noted that much of the 26-mile project near Charlotte is lined with concrete barriers, which may contribute to driver apprehension.

An official noted that much of the 26-mile project near Charlotte is lined with concrete barriers, which may contribute to driver apprehension. Photo: Valerie Bauerlein/The Wall Street Journal

“I’m a capitalist, free-market guy,” said Jim Puckett, a Republican Mecklenburg County commissioner. “But sometimes there are solutions that only the public sector can handle.”

A state review of the project last year estimated the breakup cost could run from $82 million to $300 million. A bipartisan group of legislators came close to breaking the deal last summer, but balked because it risked taking money away from other transportation projects.

Newly elected Democratic Governor Roy Cooper has ordered an outside review of options to change or break the Cintra contract, under which the company has the right to toll revenues through 2058.

Virginia recently selected Cintra and Meridiam, an independent infrastructure investment firm, to run a $3 billion project to overhaul Interstate 66 in the Northern Virginia suburbs of Washington, D.C.

But some of the public-private toll-road projects have had mixed results. Cintra-led projects in Texas and Indiana have landed in bankruptcy. A Congressional Budget Office report in 2015 found that the privately run toll projects that failed had commonly overestimated toll revenue, and newer projects are seeking more public money through tax dollars and bonds.

Lake Norman resident Noah Lazes said he expects the state will honor the contract. “Public-private partnerships, to a certain degree, are a necessity,” said Mr. Lazes, whose Charlotte-based ARK Group develops public-private projects including a new concert venue in Irving, Texas. “The main thing is you need to make sure it gets built according to your state’s standards.”

Meanwhile, he said, he is nervous every time he drives I-77, where he said he had already incurred $3,000 damage to the tire and rim of his Mercedes S550 when he hit a rut.”