DOT secretary: Bill to cancel I-77 contract would cost $800 million

NCDOT: $800M to cancel I-77 contract
Earth Moving Construction
Earth Moving Construction

CHARLOTTE, NC (WBTV) - North Carolina Secretary of Transportation Nick Tennyson has put the total cost of the bill that would cancel the I-77 toll lane contract at $800 million. Tennyson used the figure in a letter to state lawmakers sent on June 9, 2016.

The letter is addressed to the chairs of the Senate Transportation Committee, which is currently considering action on HB954, that would cancel the state's contract with the Spanish company Cintra to build toll lanes along I-77.

In the three page letter, Tennyson takes issue with many of the provisions outlined in the legislation, which was passed by the House of Representatives in early June.

"It is my understanding that HB954, Terminate Agreement for Tolling of 1-77, has been referred to the Senate Transportation Committee," Tennyson opens the letter. "The Department has a number of concerns regarding the bill which we request you take into consideration."

Among the issues pointed out in the letter is the fact that NCDOT does not believe Cintra has defaulted on the contract.

"More specifically, HB954 directs the North Carolina Department of Transportation to terminate the I-77 Comprehensive Agreement "CA" pursuant to Section 17.1.1.7, which is termination," Tennyson wrote.

Later in his letter, Tennyson broke down the costs associated with HB954 and said the price tag came to $800 million. Included in the breakdown is a $300 million fee estimate to break the contract, which is the upper end of a report released by State Auditor Beth Wood in late 2015.

Wood's office hired a private company, whose owner has ties to Cintra, to estimate the payout that would be required in the event the contract was broken. The private company estimated NCDOT would have to pay between $88 million and $300 million.

"Based on these projections and the State Auditor's report, additional funding is likely required to meet the costs associated with canceling the CA. The Auditor's report determined a Fair Market Value of $302M and demobilization costs of $4.7M as of October 31, 2015. Should this project continue as a non P3 STI Transition project, approximately $500M will be needed to cover the construction cost. In sum, it is projected to cost approximately $800 M to cancel the CA and complete the project. To replace the developer funding ($100M PABS, $189M TIFIA, $250 Cintra Equity), it would have unknown effects to the Department and other projects throughout the state. As it currently stands, this project is projected to be completed in 2018 at a cost of $94M to the state."

A spokeswoman for NCDOT did not provide additional details when On Your Side Investigates asked how the secretary came to the $500 million construction figure.

"NCDOT estimates it would cost $500M to complete the I-77 Express Lanes project without a private developer," NCDOT spokeswoman Jordan-Ashley Walker said. "This is based on road and bridge construction for the unique physical and geographical qualities of the I-77 corridor, as well as the optional toll lane infrastructure needed for the project to operate."

NCDOT has not responded to a follow-up request from On Your Side Investigates to provide a detailed breakdown of the $500 million figure.

Without an explanation from NCDOT, it is not clear how it would cost $500 million to complete construction on the project, which has been under construction since December.

An aerial view from Sky3 on Monday showed crews had started laying asphalt on a stretch of the construction area.

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