DOT: Cintra has spent $107M so far

Fresh on the heels of an infuriating trip by mayors gone rogue comes more disturbing evidence of an agency gone rogue. On June 7th, the day before Mayors Woods and Travis snuck off to Raleigh, the Fiscal Research Division released their report on the fiscal impact of HB954.

FRD is roughly analogous to the Congressional Budget Office; they are tasked with developing non-partisan, objective analyses of the fiscal impact of proposed legislation. By law, they take the inputs provided by the legislature or appropriate government agency as correct and make no judgment as to reasonableness.

Therein lies the problem, because guess who provided the input? NCDOT.

The FRD report quantified contract cancellation costs. There are two scenarios for cancellation: termination for convenience, and termination for default.  You may recall earlier this year NCDOT hired a tolling company founded by the former head of Florida’s tolling division to calculate the cost for terminating for convenience. They took Cintra’s revenue estimates and came up with a number of around $300M. That estimate was done even before a single cent had been spent on construction, meaning Cintra captured $300M in value just for signing the contract.

It’s an absurd conclusion, of course, but it pales in absurdity compared to the input they provided for the default termination estimate. Under a default scenario, DOT must pay 80% of the outstanding debt. The debt comes from two sources: private activity bonds (PABs) and federal loans from a program called TIFIA. Per the FRD report:

DOT stated that all of the $100 million from PABs has been used and approximately $7 million to $10 million of the TIFIA loan has been used as of June 2, 2016.

So, the report concludes, termination for default would cost $88million (80% of $107M).

Apparently clearing and grubbing of about ten miles of trees in the median has cost $107M. We’re not construction estimators, but that number strikes us completely ridiculous. Sure, there are some design and engineering costs included in that number, but by way of comparison, the entire I-85/I485 interchange cost $92.2M. The 5.7 mile completion of the I-485 outerbelt, comprising six concrete lanes and two new interchanges, cost $132M.

Taking out some trees cost more than constructing an entire interstate interchange?

Remember, previously DOT Chair Ned Curran and others said, quite publicly and loudly, that the private developer bears all the financial risk if the project fails. Now, when the actual calculation is made, they pull out a pretty big number.

This is the same agency that wrote an I-77 widening project back into the non-compete clause and didn’t tell CRTPO until after the contract was signed.
This is the same agency that ignored contractual safeguards and extended the financial close three times at taxpayer expense.
This is the same agency that set the revenue sharing thresholds so high that revenue sharing will never take place… just so they could achieve financial close.

For years now we’ve avoided accusations of corruption. But with the mayors’ visit and these latest shenanigans, there is no other plausible explanation.

As it turns out, government corruption regarding toll lanes has already happened in the U.S:

Former Illinois Governor Rod Blagojevich is currently serving federal prison time for attempting to sell a U.S. Senate seat. What was not so widely reported was the same indictment also included charges of corruption regarding the Illinois Toll Road. The scam worked like this:

Contractors were required to hire “consultants” to whom they would pay a “finder’s fee” if they were put on the official state “approved bidder’s” list.  The consultant was really a stooge for the governor, of course, and would transfer a good portion of the fee to a private account while keeping a cut for himself.  The transaction would be noted on the contractor’s books as an innocuous consultant fee. No PAC or super PAC contributions, no public record.

In Blago’s case, he wanted $500K from a concrete contractor. Fortunately, the contractor had a conscience and cooperated with authorities.

H954v3, financial analysis, 6_7_16


12 Responses to DOT: Cintra has spent $107M so far

  1. Jay Privette says:

    So, let me see if I have this correct. Just for signing the contract and no work done we would have to pay Cintra $300 million to cancel the contract. Now that Cintra has actually had shovels in the ground (they spent our money first) we owe them $132 million. I SMELL CORRUPTION OR INCOMPETENCE, PROBABLY BOTH. McCrory was right about the NCDOT

  2. Darryl Bost says:

    Those two sorry excuses for Mayors, sneaking down to Raleigh, to circumvent the overwhelming will of their constituents, should be thrown or drummed out of office. Power corrupts! Apparently, even a little local power, corrupts absolutely.

  3. Al Fortunato says:

    If Cintra breached the contract by not getting the required permits from LKN maritime (contractual requirement) then we shouldn’t have to pay any penalty to cancel the contract. This is corruption of government officials at its finest.

  4. Mike says:

    The Cornelius mayor is a gutless sell out rat..

  5. Tammy says:

    I don’t understand why we, the state of North Carolina can’t make them pay to fix what they have done. In any other contract you need to make the damaged party whole. So we should be even at this point and they can pack their stuff and go. Smh.

  6. Don Campbell says:

    I smell corruption all the way to the governor.

  7. Kenneth Painter says:

    I am in the land development business and know the cost of land clearing.It cost $5,800.00 per acre. Clear grub, grind and haul off the debris. That is what the sub contractor charged on jobs I have graded and is the same one used on that particular job.

    • Dan Simone says:

      I think you are getting ripped off by your subcontractor then. I recently had 12 acres of trees cleared from my property for 15,000.00. That included dozing the stumps and full trees into piles and grading work. The trees were ground up and carted off for pulp wood. I find it hard to believe a large scale operation couldn’t do it for the same or less.

  8. lucinda m heavlin says:

    This bill 954 needs to be voted into law and signed by the Governor McCrory before July 1, 2016.
    You need to contact your Senators and especially Senator Pro Temp. Phil Berger and the ll MEMBERS of the Senate Transportation committee. Tell each one of them that as a North Carolina taxpayer, you want the I-77 Toll RD. contract terminated “NOW.” This contract with I-77 Mobility Partners/Cintra is detrimental to North Carolina as is a 50 YEAR “DEPRESSION.” The Senate Transportation committee needs to push through HB954 as soon as possible and before July 1st. At this time the HB Bill is in the senate Transportation committee, but has not been placed in the SENATE SCHEDULE/CALENDAR TO BE DISCUSSED AND ALOWED TO BE VOTED ON.
    Thank you, Concerned Voter.

  9. Charlie says:

    By most estimates we should have third lane from 485 to exit 28 for $107MM – not just a patch of dirt.

  10. Al Fortunato says:

    interesting how Tennyson states in his letter that he is not aware of any contract defaults by CINTRA when it is fact that CINTRA began the construction without getting all the proper permits from LKN maritime which is required by the contract terms. He’s obviously getting some personal benefit out of this contract for himself and/or his family. this is getting more ridiculous as these guys are getting exposed now

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