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House | June 1, 2016 | Chamber | House Session Transportation

Full MP3 Audio File

[SOUND] Good morning we are gonna call our transportation policy meeting to order this morning. If you're willing to grab a sit It's good to see all of you, today our sergeant at arms are Young Bay, Jim Moran, Martha Gettison/g, Will Cracker and Bill Bass. And we also have paging force today, Reggie Jonson, Darren Stephens, Gretchen Bulls, Santoro Grigigor and Ben Thank you for being with us today. We have a PCS on hospital. North 54? >>Mm hm >> North 54 and we need a motion to bring the PCS before us. >> Thank you Mr. Chair. All in favor say aye Aye. >> Likewise opposed? It is before us. Representative Jeter for presentation. >> Thank you, Mr. Chairman. I'm joined by my co-primary sponsors, Representative Brawley and [INAUDIBLE] Hager. What did I say, Brawley? I apologize Representative Bradford that was obviously not afford any sleep I apologize. Hospital bill 954, I don't know if you all have heard or gotten any email about this bill. In essence this is a bill that instructs the North Carolina Department of Transportation to terminate the agreement for the p3 project on I-77 that is currently been authorized under, originally under House Bill 1077 from the 2012 session. Contract was negotiated and signed in 2014 and 15 contractual flows and financial flows, this bill basically does four major things, it instructs in the council for cause under section of the contract it then specifies listing of projects that will be used as a back stop should the cancel for cause not being successful. As a way to procreate an extra account so no other part of the state would be harmed should we not be successful in cancelling for cause and it be ruled that we are cancelling for convenience, a position that I disagree with. Before we get into the Bill in depth, I do think it'll be helpful if we have an amendment that will clarify some language that I think'll make it easier for everyone to understand With the Chair's permission I'd like to move the amendment for us. >> Yes sir. >> I believe everybody but me has the amendment. I'm gonna let Representative Bradford handle the amendment discussion. If that's okay with you Mr. Chair. >> Yes sir. That's fine. >> Okay. Thank you Mr. Chairman Thank you Representative Jeter. So the first thing is the matter of clarity. Rather than say cancel throughout the project, what we're really doing is because we are putting the funds in escrow type reserve account, the better terminology is actually suspend. So you'll see that we are replacing language of cancelling throughout the Bill with the word suspend. >> [INAUDIBLE] >> Yes. The projects listed not in the contract. We're also, if you look, on the actual bill there's a list of projects and they are numbered one through eight of this Amendment would actually strike number seven Number 7 and eight in the original bill and replace it with [INAUDIBLE] road improvements and Lakeview road improvements, which are two improvements which are access points to the tolling lane, the managed lanes. This amendment just swaps a little bit of the order of the bill. Pretty straight forward amendment would have appreciate your support on it. >> Mr chair I move [INAUDIBLE] the amendment. >> Any discussion on the amendment? The discussion all in favor say I >> I >> opposed likewise, the amendment passes Mr. Chair of the commission. >> Return to the bill. >> So with the amendment what we in [INAUDIBLE] have done now is change, we still canceling the contract or instructing DOT to cancel the contract. What we're not canceling are the eight projects listed in the bill what we're basically doing is saying that we're suspending

those projects for the resolution of any fees that will have to paid be cancelled, one of the biggest questions we've got is how you would pay for this and how would it affect my area, my district, and I think those are fair and reasonble questions, so in essence what we've done is created a list of projects whose revenue we create an extra account whose projects are in the array area in and around the project, so low on effect [INAUDIBLE] county it won't affect Rowan County, it won't affect [UNKNOWN] County. And we believe that that is the right path. The other thing that this amendment does other than the clarifying language is it changes the last two projects that were listed as [UNKNOWN] in Davidson and it specifically lists Lakeview and [UNKNOWN] road improvements which was $77 million in funds that were part of the project to be used in for ingress and egress into the toll roads that did not serve the general purpose lanes on 77 and then the last piece of the amendment changed the basically the waiting period from 15 years to 10 years which is basically one STI cycle, the premise being that if we were asking for this cancellation we then didn't want the projects that were being removed or being suspended should they not have funding to be able to jump in front of other projects Projects that might be funding right away. We thought it was only fair to make sure that we give a one year STI of ten year but it's one STI cycle relief to make sure that we didn't affect other projects in the state. I can go on in detail about the contract and why I think it's flawed, I think most Most of us have heard those conversions and so with that I'll be happy to answer any question Mr. Chair. >> At this time I'd like to ask secretary Tennyson to come to the mic and in the mark. Identify himself even like to share some comments as well from department of transportation. [BLANK_AUDIO] [INAUDIBLE] [BLANK_AUDIO] Thank you I'm Nick Tennyson, I'm secretary of transportation and I appreciate the opportunity to appear before the committee today. the main message that I need to give to you is if the contract is cancelled we go from a condition where we actually know what the future holds for this court order, we have a project project underway that will in an extraordinary short period of time paved 26 miles, build 26 miles of road, recondition 26 miles of existing road and deliver additional capacity to a court order that desperately needs it, we go from a condition where we will actually have Have traffic on this road by the end of 2018 where we will not have the usual condition of having a 20 mile project main ten,12, 15 years of orange barrels we will be done with it by 2018 for 26 miles, we will spend about 20% of the cost the actual construction cost of the project we go from a condition where we know those things to a condition where we cannot confidently say we know anything about the next step that begins with the proposal before you to sight a specific Violation of the contract agreement of four which at the request of the citizen in the area the NCDOT inspector general has already rendered an opinion that said there have been no errors or omissions in the documents that were submitted during the procurement process That would rise to the level of being able to be cancelled so we would move again from a condition of knowing what we've got to having a situation where there is no unilateral control on the part of any of the actors on how this project can be delivered or how relief can be delivered this corridor and further more the list of Projects that an illustrator is being suspended bring into sharp relief the level of sacrifice that we are talking about here should the outcome that was and again not in NCDOT request or initiation or involvement but was identified as the potential Cause to cancel the project issued in January by the state auditors office to an independent consultant,

this captures what could be the cost and no by the way if that cost is paid then there is no money to do this projects or Money has to be made out from throughout this system throughout the state to fill the hole and I have to tell you that that's the major part of this that I hope that you'll consider that we move from a condition where we know what we will have and we will have traffic on the road in just a little over two years, to a condition we will then be trying to identify what the next path forward is. Nobody can give you anything but hypotheticals including me for what happens should the contract be cancelled for any reason. So I Here the comment that there a wide range of contract flaws. There have been a wide range of things that have been alleged, I'm not gonna recite all those either but it's a little hard to respond to them if there not laid out before you. So I wanna invite your inquiry at some other time [BLANK_AUDIO] but the main message is in this local area which is to say the region because this is a part of a regional transportation planning effort, not just concentrated on the particular corridor through which project passes but in this local area region decisions were reached, studies were made, alternatives were considered and over time, this choice was made for us to execute it to the best of our ability and we'll continue to do so and if we do not continue to execute it, if we don't have this contract then I can't tell you for certain any of the possible opportunities. Thank you Mr. chairman I'm obviously available for any inquiry that you have, the chairman of the board of transportation is also present in case anybody wanted direct inquiries to him. >> Thank you Mrs. secretary Representative [INAUDIBLE] >> I appreciate secretary [INAUDIBLE] comments and I've had a long standing agreement to disagree on this issue and I appreciate this comments as presentation. >> Representative [INAUDIBLE] >> Thank you Mr chair just to have a few brief questions, the first one, this document that has been passed out to us, mobility partners, visitors where that came from who passed it out? >> I have no idea, I haven't seen it, I would assume if it's passed out it was done a member and has a stamp on it. >> There is no stamp on it. [BLANK_AUDIO] Okay. Follow-up Mr.Chair. >> Yes sir. >> And this may be for staff, so such reports of the bill directs the state funds in a reserved account be used to pay any damages or other monetary penalties. Do we have any estimation of what that costs might be? >> Stand. >> Thank you Mr. Chairman, that would have to be directed to the fiscal staff and unfortunately they could not be here today because of the senate appropriations meeting but we will get that information to you as soon as we can. >> Represent Eugene. >> representative Parsons, I will attempt to answer that question. The contract allows for calls for Cancellation for cause or cancellation for convenience. Cancellation convenience is the greater of two things, dept spent or net present value or the market value of the contract. Recently [INAUDIBLE] Partners sold 39.9% of the contract. The sold 10% for 25 million another 10% for 25 million and 20% actually 19.9%, for somewhere around 40 to 42 million. Based on those numbers if you cancel for convenience And the definition is market value, then the most it could be would be 250 million. I would once again cite that the projects that we have listed, Forex see the value of 250 million dollars. >> Thank you Representative Gudger Mr. Chair one final follow up. >> Yes Senator. >> And this is for staff of [INAUDIBLE] Section two of the bill, the projects listed under section two what's the total cost of those projects? >> We don't have that information. Our staff had to be with the Senate today Secretary Tenison may be able to allude to that. Secretary Tenison? >> We estimate the state funds amount that was made up in the original list as we understood it to be about $250 million.

However it's important to note that the market value doesn't necessarily represent the cash component of any deal. And so I'm not sure where the calculation comes from but that's not my understanding of what the ultimate cost would be. >> Follow up. Okay, Representative Moore. >> [BLANK_AUDIO] Thank you Mr.Chair. John or Representative Harris already asked one my questions about these particular document and some other things but what I concentrate most is on, and this is a brief statement [UNKNOWN] county and the very region of that [UNKNOWN] quarter has Has grown exponentially over the last twenty years since I've lived in Charlotte. If this project will stop, I understand that we have some punitive fines that we have to pay. Can anybody estimate to me what the economic impact of as it relates to economic development opportunities in the region would be if we stopped this project, and also what's the solution if we stop this project and we still have congestion, we still have traffic issues. What's the solution or what's the alternative pass what we have now as secretary said we have some uncertainty if we stop this project what's the plan going forward? >> Representative More I appreciate your question I would say this over the fifty year aspect of this contract there was an estimated $10 million to be collected out of my local community. That's the equivalent of American Airlines leaving Charlotte. That's the economic cost if we don't cancel the project, keep in mind this doesn't move truck traffic, it does not assist the local traffic and by the Tolling Association, Managed lanes association and their statement at the international convention last year, they specifically state the only way that to managed lanes are successful is if the general purpose lanes fail. So I would argue the economic impact is exponentially greater What we are asking, moving forward is to simply be treated as any other project would be for an STI project. This project was one of the last projects for STI. All we're asking is for us to be getting the same consideration special treatment, no jumping the line, no nothing, we wanna be scored in SGI just like any other part of this state would be we ask for no more no less. >> Representative [INAUDIBLE]. >> Thank you Mr. chairman, thank you representative [INAUDIBLE] we just wanna add a few other remarks, it's a not worthy for those of you that use that court order, I have to imagine many of you have or do every time you come to it from [INAUDIBLE], the congestion and just to frame it I live at exit 28 which is ground zero if you will, the congestion is really a 13 mile issue, 13 miles this particular contract, this P3 was constructed to be 26 miles of which we've argued from day one there's 13 additional miles that really are not necessary in fact you can take a field trip and experience it yourself because every single morning or every single afternoon when you were going into Charlotte or coming back to the North from Charlotte, it's pretty smooth sailing until it goes from the four lanes out there to the two lanes in the bottle mix, the real issue is 13 miles North bound or South bound, it's not 26 miles, I respectfully submit to all of you that this project Address is part of a none problem, the late Norman Region has never, never had any road improvement through the region on interstate, there is no way to get from exit 28 to 36 without having to either cut through the town of Davidson which has a very quaint downtown Which is impossible with the college or get on the interstate, for those of us that live there and represent that area I77 represents a local [UNKNOWN] and I promise you if you come by you will see you will be stuck in traffic and it's getting worse ad worse everyday, you used to be able to be there before two o'clock, now it's two o'clock and it continues to get worse So I just want to tell you Representative Moore that I believe that general purpose lines on those 13 miles would go a long way to solve a congestion, experts to tell you in 20 years it will be different but I think that's the case on any section and interstate,

what we shouldn't do is go straight from nothing to manage lines, we should go from the general purpose lines to More general purpose lines and then convert to manage lines that seems like a more of a natural progression than going straight for the [INAUDIBLE] thank you. >> Secretary Tillson would you like to respond? >> If you don't mind and I appreciate that opportunity I have lived in the triangle area for a long enough to have seen I 40 wide and several times and fill back up The local region made the decision to try to preserve region made the decision to try to preserve mobility by building this project with a manage lane and building it at a scope where it accounts for not only current congestion but what we all know will be future congestion And further more all of the opposition sites a total amount that goes from end to end for the project we happen to agree with representative Bradford that right now today people will not choose to go all the way in to end cuz they do not have to and that's the point of this project you may enter or exit as you feel like you need to. So for those areas that are not currently congested there won't be a lot of people who will feel the need to be in those lanes. >> Mr Chairman. >> Yes sir. >> I'd like to clarify one point that has been stated twice, I think erroneously sir. The late Norman Regent never asked for this contract. The Late Norman Regent asked for a manage lane option. What the criticism is of the contract. What we have repeatedly said is that this was a manage lane run by NCDOT as the other three that are planned for Mecklenburg county are intended to be. We wouldn't be here today. So it's unfair to say that the Lake [INAUDIBLE] asked for this contract. We did not. And at no point have we stood up and said we are opposed to the concept of managed lanes. We're opposed to what we believe is an inherently flawed contract. There are material Clearly different things. > Representative Moore, do you have a follow up.>> I did, Mr. Chair. Listening to Representative Jeter testimony, what I'm understanding is you're not opposed to managed lanes. still be okay with this project if DOT was managing the lands? >> Absolutely. >> Okay. >> Representative Blackwell. >> Pass. >> Pass. Representative Adams. >> Thank you Mr Chairman. I have a question for the secretary. >> Yes sir. >> Ms. Secretary I've heard a term used called a corridor cap and I'm looking forward if we did cancel this agreement and the project is reexamined for prioritization, what effect does a corridor cap have on the future project here? And how much of a delay might we experience in addressing this situation with regard to the corridor cap? >> This is where we enter into that hypothetical world that I cautioned you about. So the corridor cap exists as a part of the STI law to ensure that we don't have a couple of large projects take up all of the money at the statewide level. It is a statewide level provision. So for example, on the southern side of Charlotte I77 is a billion dollar plus project. If there were no corridor cap and If that project scored higher than other projects along I 77 we would spend the first billion dollars on the southern end of the corridor and not spend any money at the state wide level on any other part of I77 and either [INAUDIBLE] or Airedale counties, that's the way the cat functions If we go to a general purpose lane or if we do anything that changes the scope of this project [INAUDIBLE] is no longer transition project, then we will enter into a world where we have to get environmental review of the project we have to then get the public agree on what scope we really wanna build We have to then identify that project in a way that we can come up with the cost, then reiterate into the scoring program and if it scores well enough two years from now it will then be added to the succeeding program for the ten year construction program that we put out, follow up Representative Abigail follow up. >> May I answer that question Mr chair? >> Yes. >> The [INAUDIBLE] only affects state dollars it does not affect regional or district moneys so while the [INAUDIBLE] we come into

play with state dollars State dollars if there was a project that was a general purpose [INAUDIBLE] that was funded out of the regional or district money it would not fall under the [INAUDIBLE] issue but in fairness it wouldn't be competing with other projects state wide. >> Follow up, Ms Secretary in your estimation based on Representative Jitters reply would those funds be sufficient to address a needed project in the 77 corridor in absence of the federal funds. >> Okay and I know this is really Federal funds could be spent what representative Peter pointed out as I did immediately before his comment was at state wide level funding 40% of the funding could not be used over the [INAUDIBLE] regional funding which would include once you get into [INAUDIBLE] county there's a different funding region involved, the funding region for this area is both Mecklenburg County and then goes far east as the Sand hills/g basically the funding region. So projects in those regions would compete. Would it be sufficient, there certainly project that could be defined, but among the other things that are included in this contract is maintenance for 50 years in this corridor. And so while you calculate the cost and benefit it is not just the fact that you get the extra lane, it's not just the fact that you get the whole corridor pavement structure refurbish, it is if you've got it for that period you have the maintenance cost of this cover that doesn't have come out of the highway fund. So again you could identify a project, it would have to go through first of all agreement with the metropolitan planning Area and that's the region to which I refer is the area that is the total area. Go through that process. We identified public comment, environmental review. It could be done but it would result in, as I said, a moving Bottleneck as you get additional segments over the coming decades. >> Representative Stone. >> [COUGH] Thank you Mr. Chair. Let me make sure. I'm the new guy. Exactly sir. I certainly have Concerns about the contract and there's been obviously a lot of debate about this over the past year, several years and I've watched this very closely because what's happening on that section 77 is coming next down to my district in down time we will have tools down there. Next different types of tools in a different scenario because it's not essentially design built operate finance model the same way by an outside group. I guess my question for Representative Jirter and possibly even for Chairman Karn/g if he's got numbers on this or estimates is I worry about the what if scenario No, because while my inclination is to support the bill and cancel the contract. My concern is that we stand $200, $300, $400 million to a company that a lot of people didn't like to in business with. And then We still don't have a road and we still have to build a road but we are out of pocket several $100 million. So I guess my question is that what a scenario, is there a back stop we cancel this contract that there is a cap on how much we could be out of pocket going forward. >> Represent Jeter. >> I appreciate the question representative Starnes, the reaction Reality is and I agree with secretary Tennyson to some degree it's all speculation. I could tell you what I think the cancellation for convenience cause would be, they could tell you what it is. And the truth of the matter is it's a finding effect for report. If we gonna really put the cards on the table, I would say to your First question, your spending $200 million or $150 or $50 or whatever the number is. And I still respect we disagree that we can't cancel the [INAUDIBLE]. I understand their position, I also don't believe it's in the general assembly best Interest if we would be sued to lay out all our cards here in committee meeting. That do you really spend another $600 million to save $200 million on a project that will take $10 billion out our local community. If i told you I was gonna take $10 billion out of valentine over

the next 50 Years, my guess is you would have a different approach. >> Representative Goodman. >> Pass. >> Okay. Representative Bumgardner >> Thank you Mr. Chairman, I'm going to ask secretary Tennyson a question about if we cancel this Contract what effect is that gonna have on our ability to sell bonds on a project like this going forward? >> My opinion is that it would be a part of the consideration that would be made by people that are evaluating bonds And furthermore P3 projects. I'm not here to offer expert testimony on that issue though so I can't really give you a specific definitive answer but it's stands to reason to me that if we have somebody who is looking at the possibility of doing anything in terms of investment and A track record on which we are running this execution of a contract which we later cancel, I think it would have to be a consideration. >> Follow up? >> Follow up.>> Well that was not the point I wanted to make. Would the state be able to execute any P3 contracts in your opinion going forward? >>and so I can imagine a response to that would include something but again it's a highly competitive market and we're seeking to attract investment that is not unlimited and So I think it would be a negative impact. >> Can I ask one more. Well, if we cancel this contract of course it's gonna go to court, it's gonna be litigated, it's gonna be years, but if we wind up giving This company, 2 or 300 million dollars and first of all, they're not gonna be spending that much money to get that much of a return. Isn't that gonna have a devastating effect on The whole transportation system of the State of North Carolina. I'm trying to get a project done in my district just like everybody else, and that's a lot of money taken out of our transportation budget that's gonna have a painful effect for years to come. >> With your permission can I let the board chair Speak perhaps to the investment quality and again we at NCP here/g swore to make sure we deliver transportation services, we'll do everything we can to avoid any devastating impact or any impact at all, but the chairman wanted to have a comment if you don't mind. >> Thank you Mr. Chairman, raise the committee Representative Bumgardner thanks so much for the question, I can just tell you that in my position, I had the opportunity to occasionally meet with folks who would present themselves as P3 providers that would express interest in multiple projects across the state, and this project has had a chilling effect on there interest in doing business with the state of North Carolina .Great Concerns about our ability to a good word is signing our contracts and going forth. And if I could just follow on to your earlier question about the cost and the detrimental effect to the tax payers of the state. Is somewhat confused because the nature of question is built for me Simply cancel the contract and Representative Jeter talked about just fulfilling the state would then step in and fulfill this managed lanes project. So if we look at the math of that, if we use $250 million understanding that may be debatable, 250 million maybe a penalty, we would take $250 million of taxpayers' money money and pay off the cancellation of contract that would not result in any road, any benefit from any transportation system. We would then have to fulfill the cash requirements that they were going to fulfill, and that's about $250 million. So at the end of the day we would have spent $500 million all the people's money and have the exact same project, with the exact same polling system and bear in mind there's been controversy about how the tolls are set. They are set by all of us. We wither get in that lane because we're trying to avoid traffic or we're not. So it's really not gonna matter whether the state is a operator or a private party cuz we set the toll rates by our actions. Thank you. >> Thank you sir. Representative Hager. >> Thank you Mr Chairman. Let me just talk a little about contracts. It was several years ago I agree, but it was back under secretary lines [UNKNOWN] administration of the department of revenue that

he pulled He pulled a contract that cost the state $80 million cuz he didn't feel like the contract could deliver on IT. I don't think we've suffered any contractual issue since then. We seem to be getting every contract as going on to he ninth largest state in the country. But just to remind you we do have some history in this area, we do have some precedent set. >> Rep Bradford Thank you, Mr. Chairman. I wanna address Representative Bumgardner's question and thank you, Chairman [UNKNOWN]. I think the premise that if this project, which is a P3, does not happen means that other P3s will cease to exist, while that's not exactly the words that are said, I think that's That's the impression that perhaps we might be hearing today and I just wanna submit to you that market forces work. If there's another P3 project down the road that makes sense and if investors want to invest in it, they will. Because that's what investors do. They calculate risk, they invest their money based on the facts and while they may look at this project and say well, what are the lessons learned there, well that's probably noble and I would suggest that they do that. But the notion that P3s would cease to exist in the state for anything is I think flawed. If we believe that to be the case, that does not give merit to make the Lake Norman region take a poison pill for the sacrifice so that P3s work. That is not why we're here folks. >> Chairman Torbett. >> For a motion. I move that we pass without prejudice for the PCS unfavorable to the original bill Second. >> Second. >> All in favor say aye. >> Aye. >> All opposed likewise. >> No. >> The ayes have it. The House Bill is reported without prejudice for the referral to appropriations. Thank you all for being here today. [BLANK_AUDIO] [BLANK_AUDIO]