Audit Finds No Improprieties In I-77 Toll Lane Contract

Jun 19, 2018

A state auditor's report out Tuesday has found nothing improper about the North Carolina Department of Transportation's nearly $650 million contract with a private company to build toll lanes on I-77, or in the way the contract was awarded. 

Meanwhile, a bill to provide funding for canceling or altering the contract appears dead.

State Auditor Beth Wood
Credit Office of the State Auditor

Auditor Beth Wood says an outside consultant on the audit determined that the contract with I-77 Mobility Partners has significant protections for the state and limits its financial liability in case the contractor defaults.

I-77 Mobility Partners is a unit of Spanish construction giant Cintra. The company is building two toll lanes from I-277 in uptown Charlotte to Exit 28 in Cornelius, and one toll lane from Cornelius to Exit 36 in Mooresville. Cintra lined up most of the financing for the project and agreed to operate the toll lanes for 50 years. The company has said it expects to open the lanes by year's end.

The year-long audit was performed at the request of state Sen. Jeff Tarte (R-Cornelius) to answer more than two dozen detailed questions from lawmakers and their constituents.

"We basically found that while the questions were good, and on the surface it appeared that there was something wrong, that we were not able to substantiate anything that was questioned about the process," Wood said.

LAWMAKER: STILL A BAD DEAL

Tarte said the report addresses the legislature's questions.

"She basically said all things are appropriate," Tarte said.

But he still thinks the state got a bad deal.

"I guess the takeaway is, you can't be faulted for having terrible attorneys and agreeing to stupid conditions and terms," Tarte said. "This contract is completely one-sided to Cintra's advantage. We've been taken to the cleaners on this deal."

Key questions included whether the NCDOT followed state and federal laws in seeking contractors and developing proposals. Among the findings:

  • None of the four contractors who expressed interest in the project was given an unfair advantage.
  • The state did not, as some allege, pay any of the contractors to bid.
  • No state employees or contractors had conflicts of interest or benefited financially from the project.
  • The contract was reviewed in depth and approved by the Local Government Commission in 2014 - not rubber-stamped as critics have charged.
  • The contractor's debt principal payments on bonds begin in 2025, and on federal loans in 2023 - not in 2033, as some have alleged.
  • Cintra properly disclosed its financial and legal issues.  

DEFAULT PROVISION DETAILED

The audit also sheds new light on potential costs and other details in the contract. Among other things, it projects that the state's maximum financial liability if the toll contractor defaults would be $231 million.

Wood said that would happen if the contractor defaulted in 2023, when the work is complete, the toll lanes are operating, and the project debt is at its highest. 

But, Wood pointed out, NCDOT then would have "a $648 million asset, because the project is completed and traffic is running on the road."

Without a default, the state expects to spend up to $90 million to help build the toll lanes - at least under the current agreement. 

Wood said the audit cost $266,000. Of that $181,000 went to an independent expert, Clary Consulting, which specializes in public-private partnerships like the I-77 project. The other $85,000 was spent on staff time to perform the audit.

NCDOT EYES CHANGES; LEGISLATION FAILS 

The I-77 toll lanes have been unpopular in the Lake Norman area, where critics say it would have a negative effect on the local economy.   

The audit report is out just as the NCDOT considers whether it can cancel or change the contract.  Transportation James Trogdon held a series of meetings this spring with a local advisory committee of government and business leaders. Most members of that group backed a compromise that would convert one toll lane to a free lane, and turn over management of the toll lanes to NCDOT.  

Trogdon has said he hopes to meet again with the committee in July as he makes a final decision on whether to make any changes.  

Meanwhile, lawmakers have been considering ways to pay for a possible buyout. House and Senate leaders last week were unable to agree on how to do that. Tarte said Tuesday the legislation appears dead.  

"The whole issue is everybody's taking care of their own districts, and their own sets of projects," Tarte said. "Even within our DOT division, you can't get everyone to agree that I-77 is the most important road project in the state.

RELATED LINKS

Read the N.C. Auditor's report on the I-77 contract review, at NCAuditor.net.