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Perdue offers I-485 financing plan, but many questions need to be answered first

Earlier today, Governor Perdue announced her plan to complete the Interstate 485 loop in the next five years. The plan is something called a design-build-finance plan, and it has yet to be used within North Carolina. However, there are a number of hurdles and loopholes within the plan

The term 'design-build' is familiar within North Carolina transportation projects. Design-build projects are where the builder also designs the overall project- often while the project is ongoing. One of North Carolina's first design-build projects was the Interstate 85 widening between miles 40-48.

'Design-build-finance' is where the contractor pays for some or all of the construction and then gets reimbursed by the state within a specified period of time. This method has been used elsewhere in the country including an Interstate 69 reconstruction project in Michigan.

The projected cost to complete the remaining five miles of I-485 is now roughly $340 million.

Under this plan, construction for I-485 will start next year and be completed by 2015. Plus, the governor's office emphasizes that money will not come from or delay other projects.

Sounds too good to be true right? The contractor pays for some of the construction, gets paid back by the state, no other projects get delayed.

Well, I need that Lee Corso photo again...because "Not so fast, my friend!"

First, the financing method. The contractor would pay $50 million of the $340 million to construct the highway. Well, first you have to find a construction firm that has $50 million in cash to finance the highway. And with troubles NCDOT has had with various construction companies over the past decade, that's not a guarantee.

Adam Froehlig, in a post to a national transportation forum, notes that this approach was tried for Minnesota's Crosstown Commons project but no construction firm placed a bid.

The $50 million that the construction company puts down for the highway would be paid back by the state over a 10 year period. Questions come from that too. What will the interest rate be...will the money owed to the construction company, somewhere between $5-6 million a year, impact financing other projects? With the state and the DOT in the red, will the state be able to pay it back over that period?

If the contractor is only paying $50 million or 14.7% of the costs, where is the other money coming from? The Governor's office says that no other project will be delayed. Well, according to the Charlotte Observer, the DOT's chief financial officer, Mark L. Foster, admits that the DOT is 'prioritizing' projects statewide, including I-485. If this is the case, then aren't other projects going to be delayed? Plus, when the missing five miles cost only $220 to construct - the state said they had no money to complete it. Now, they need to come up with $290 million - that's $70 million more than the original estimated cost - and suddenly NCDOT has the money.

The highway that most likely will be delayed is Interstate 295 in Fayetteville, which has the whipping boy for every other city in the state who has seen delays in their planned freeway loops.

Personally, I'd like to see where this $290 million will come from. Will the controversial equity formula be repealed? Will they try to sneak in tolls? Something just doesn't add up here.

There are other hurdles for the highway - specifically environmental concerns. Charlotte has had a growing ozone (ground level) issue and has been under the careful eye of the US Environmental Protection Agency. In fact, highway funding for Charlotte has been threatened to be cutoff if the metro area didn't improve air quality. Groups like the Southern Environmental Law Center will be certain to keep a close eye on this process.

Now what if this works?

Well, as the economy improves, more construction companies will be able to assist in financing similar projects. This could possibly speed up delayed projects and also eliminate future projects becoming toll roads.

So there could be a new opportunity for the future of North Carolina highways. However, this is a big test, and a lot of interested parties will be keeping their eye on how the final five miles of Interstate 485 eventually gets built. There is a lot riding on this project - not only politically for Governor Perdue - but on how other highway projects in North Carolina are built short and long term. It will be an interesting few months and years to see how this all unfolds.

Story Links:
I-485 plan: Tap builder cash ---Charlotte Observer
Gov. says work to finish I-485 will start in 2010 ---WBTV-TV
Governor says I-485 will be completed in five years ---WCNC-TV
Perdue unveils plan to complete Interstate 485 ---News14Carolina

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