CHARLOTTE, NC (WBTV) - A survey of three other toll roads operated by Cintra across the United States should serve as a cautionary tale for transportation leaders and politicians in North Carolina, according to some leaders and experts in states that have a history with the Spanish-owned firm.
Cintra, the U.S. subsidiary of the Spanish firm Ferrovial S.A., inked a 50-year deal with the North Carolina Department of Transportation last May to build and operate toll lanes along I-77.
Construction on the project began in December amid continued protests and efforts to stop the project in court, the legislature and at the polls.
Residents who live in the northern suburbs of Mecklenburg County and in Iredell County say the toll lanes will hamper the region's growth by adding congestion on the free lanes and forcing commuters to shell out big money to ride in the toll lanes.
Politicians and experts in the states On Your Side Investigates visited for this investigation largely say that prediction is what has played out on the toll roads owned or controlled by Cintra where they live.
A history of financial troubles
Two of the three roads visited by On Your Side Investigates had been sold in 2015 amid financial troubles for the subsidiary companies controlled by Cintra.
In 2005, Cintra and the Australian firm Macquarie Group formed a company that leased the rights to toll the Chicago Skyway—a roughly eight mile road linking major Chicago arteries with the city's southern suburbs—for 99 years.
The lease was sold in November, less than a decade later, as concerns arose that the company would default on its loan payments.
Roughly a year earlier, a company operating the Indiana Toll Road—which was also owned by a Cintra-Macquarie subsidiary—declared bankruptcy. Rights to the 75-year lease to operate the ITR was also sold in 2015.
In Texas, the Cintra-owned subsidiary that operates two section of State Highway 130 has also been in danger of defaulting on its loans, the Texas Tribune has reported. As a result, its credit rating has been reduced to junk status, media reports show.
Indiana politicians say their story is a cautionary tale
In Indiana, members of the state's legislature say what happened to Hoosier State drivers should be a cautionary tales to other states considering doing business with Cintra or any private company.
The concept of allowing a private company to operate public infrastructure is known as a public-private partnership, or P3.
Indiana State Representative Patrick Bauer said he would advise state leaders to look elsewhere instead of turning to P3s as a solution.
"I just think the whole thing ends up being a bad deal because it costs the citizens of your state more," Bauer said.
Bauer was House Minority Leader when he and his Democrat colleagues led the opposition against the plan proposed by then-Governor Mitch Daniels, a Republican, to sell the tolling rights to a private company.
"I think it's a bust. But it gave us the majority the next year," Bauer joked.
Bauer's colleague, State Representative David Niezgodski, drives the Indiana Toll Road to commute from his northern Indiana district to the state's capitol in Indianapolis. He said conditions along the road have deteriorated in the years since upkeep has been left to a private company.
In hindsight, Niezgodski said, the deal could have been handled differently.
"There probably could have been a great many more things we could have done effectively," he said. "Seeing the way it's been operated and taken care of in this manner right now, that part, others should be well aware of that."
Higher tolls mean fewer drivers
At a busy gas station in a town just a few miles from the ITR, you don't have to look very far to find drivers with an opinion about the toll road.
"I don't do that way anymore," one driver said. "I'll just deal with the back roads. It's a lot more worth it."
Another driver was more direct in his criticism of the privately-operated road and its higher tolls.
"It's outrageous. What is it? Four dollars, five dollars, just to cross over state lines, that's ridiculous!" the man said. "Avoid it. Avoid it at all costs."
The toll rate for cars paying cash to drive the entire length of the Indiana Toll Road skyrocketed from $4.65 to $9.40 after the road was privatized, according to the Alliance for Toll-Free Interstates.
Rep. Bauer, who opposed the tolls, said he predicts the cost of the tolls will only continue to rise as the private company strives to make a profit.
"They're in it for the money, the profit!" Bauer exclaimed. "Why would you give a service away so that people would have to pay more to give a private company profit?"
Bauer said he thinks what happened in his state should be a cautionary tale for other states, including leaders in North Carolina.
"I think it's morally wrong for a public servant to be charging citizens for a service the state should be giving," Bauer said.
Experts say roads are financed on outdated projections
A January 2016 report issued by the Public Interest Research Group and the Frontier Group listed the I-77 Express Lanes among 12 'highway boondoggles'.
"The 50-year contract between NCDOT and Mobility Partners (the subsidiary formed by Cintra to build and operate the lanes) hamstrings public planning efforts by requiring the state to compensate Mobility Partners for any project revenue losses that might result from other transportation improvements in the region," the report reads. "Projects that could divert traffic away from the toll lanes, such as adding additional free road lanes or expanding transit service, would trigger the state's penalty payments."
Abe Scarr, with the Chicago-based Illinois Public Interest Research Group, said companies like Cintra and federal transportation regulators are still using outdated modeling when analyzing the traffic projections used to finance P3 road projects.
"For decades, on a year-to-year basis, the overall amount of driving that Americans were doing was increasing," Scarr explained. "It was safe to plan on building roads and infrastructure based on the assumption that traffic would continue to increase. That trend has ended."
"The Federal Department of Transportation and many state departments of transportation are kind of ignoring the facts of the last decade and still presuming that traffic will continue to increase at the same rate it did for many years," Scarr said.
When ridership falls below projections, private companies increase tolls to make up for the revenue shortfall, PIRG found.
That's what Scarr said has happened on the Chicago Skyway.
"We've seen consistent toll increase of about $.50 year," Scarr said. "So we're going from about $2 a toll at the time to close to $5 now."
Judging by the traffic on the Chicago Skyway at rush hour the morning our crew drove on the road, those higher tolls have meant significantly less traffic.
Traffic was equally light along SH-130 outside of San Antonio, which is also operated by Cintra, during the evening rush hour. At one point, there was only one other car driving north with our crew.
One big difference between the Chicago Skyway contract and the deal between Cintra and NCDOT to build the I-77 toll lanes is a provision in the North Carolina contract that prohibits the state from building any competing infrastructure.
Under the terms of the contract, NCDOT cannot build any competing roads or make improvements to competing roads that could take traffic away from the I-77 HOT lanes without paying a penalty.
That provision was not included in the contract signed a decade ago to operate the Chicago Skyway.
Such a provision could have a wide-reaching impact when you consider what many will do to avoid tolls on I-77 and the congested free lanes.
"That is one of the concerns with toll increases," Scarr said. "It will push traffic into local roads that aren't necessary set up for the increase of traffic, and we certainly have seen some of that over the years."
Scarr and his group, PIRG, have also expressed concern over the long-term nature of the contracts between public governments and Cintra. PIRG recommends contracts be limited to no more than 30 years.
"It's just hard to know what the future will bring. It's hard to know what our transportation priorities will be in the decades to come," Scarr said. "Not only is the public giving up the right to control this incredible important public asset of a roadway, it gives up the right to make other transportation decisions."
Praise, defense from North Carolina leaders
In an email sent in late December, NCDOT's Director of Outreach and Community Affairs for the Charlotte region, Warren Cooksey, sent a two-page email to Councilwoman Vi Lyles, pushing back on talking points repeated by those who oppose the tolls.
At the time of Cooksey's email, Lyles was set to vote on whether or not to continue with the plan to implement tolls around the region as a member of the Charlotte Region Transportation Planning Organization.
"Furthermore, Cintra's overall track record is one of success," Cooksey wrote.
"In fact, of 26 projects in the Cintra portfolio as of the signing of the Comprehensive Agreement in 2014, you most frequently hear about one (the Indiana Toll Road) that went through bankruptcy and one other (SH 130 in Texas) that is in financial difficulty," Cooksey continued. "Meanwhile, both ITR and SH 130 remain open and available."
Cooksey's email did not address the Chicago Skyway.
In a statement responding to this On Your Side Investigation, a spokesman for NCDOT said the following:
The decision to award this contract was based on the financial strength and project delivery capabilities of Cintra U.S. The contract with I-77 Mobility Partners (Cintra) ensures that additional lanes will be opened to traffic on I-77 North to help manage congestion within three years. That contract protects the taxpayers of North Carolina by putting any financial liability on private equity bond holders.
This contract was awarded through the proper bid process required by state law, and went through a thorough due diligence process that included state, federal and independent financial review prior to approval of bond issuance and other project debt.
Sec. Tennyson has said the comprehensive agreement for the I-77 optional tool lanes project was developed through meetings in which representatives from the Attorney General's office were actively involved.
Financial aspects of the contract were reviewed and approved as providing appropriate protection for North Carolina from financial risk by the Local Government Commission (which includes the State Treasurer, State Auditor, Secretary of State and Secretary of Revenue). The USDOT subjected project projections to severe tests for downside risk in their approval process. Rigorous review of projected traffic by ratings agencies, bond issuers and lenders establishes reasonable expectation that the project can be sustained.
Entering this agreement was not an action taken lightly or without awareness of the general experience of projects of this type across the country. All of those with a direct stake in the project have determined it to be a sound risk.
SH-130 in Texas runs between San Antonio and Austin, where Cintra is headquartered in the U.S. On Your Side Investigates offered to make the hour drive on the toll road up to Austin to interview a Cintra representative on camera and tour a tolling facility, but that was denied.
Instead, the company's Vice President of Corporate Affairs, Patrick Rhode, issued the following statement:
Cintra invests in infrastructure projects across North America and around the world. Today, we manage approximately $8 billion worth of projects in the U.S. We believe that our completed U.S. managed lanes projects are alleviating traffic congestion and providing motorists with more options for their daily travels. Further, our projects have generated business for numerous local contractors leading to many new jobs.
In Texas, State Highway 130 allows drivers to bypass one of the most congested corridors in the state. Usage of SH-130 continues to rise each year, with traffic increasing nearly 17 percent in 2015 compared to 2014.
In Illinois, Chicago Skyway Concession Company LLC is a strong asset generating solid and consistent cash flows and a high performance for its owners. The decision to sell was based on the market conditions and the internal business analysis of the equity sponsors. Under Cintra's guidance, the Skyway concession has implemented electronic toll collection and improved the plazas, pavement and bridge structures of the roadway. These measures helped to create more than a 60 percent overall improvement in maximum vehicle throughput.
In Indiana, the financial restructuring of the Indiana Toll Road Concession Company, culminating with its sale last year to another experienced infrastructure company, occurred with no interruption of service to motorists and no financial impacts to the State of Indiana or its taxpayers. The state continues to own a well-maintained, well-run roadway in an important regional transportation hub.