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House | June 1, 2016 | Chamber | House Appropriations

Full MP3 Audio File

[BLANK_AUDIO] Committee will come to order. Members will take their seats. [BLANK_AUDIO] All extraneous conversations to be taken outside. We're pleased to have with us, [BLANK_AUDIO] pages today. They're visiting today with us, Carlos Asserio, Thomas Owens and Will Clerk. I believe they are here. Appreciate Pages being here. We are also being served with the committee today by sergeant-at-arms Marvin Lee, Regi Sales, Terry McKraw, David Laitin, Yong Bay, Ray Cook, Jonas Cherry, Barry Moore, Bill Bass, Rex Froster, Bill Reilly and Mark Cone. The one bill that we have before us, and there is a technical amendment that is being drafted that will be dealt with as soon as we have copies of that. The bill that we have in front of the committee is House Bill 954 and representative Jeter you are recognized to present your bill. >> Thank you Mr Chairman and members of the committee. House Bill 954 terminates the tolling agreement for For I-77 that was authorized by House Bill 1077 in 2012. It was in entered into a contract which was signed. The close of the contract was in 2014, the financial closures in 2015. This bill does in essence four main Things. Section one directs DOT to terminate the contract for cause pursuant to section 17.1.1.7. Section two basically directs that the state reserve funds in an escrow account in the event that we are unable to cancel for cause and have to cancel convenience, so that any monetary losses would be borne by the region and not your district. Section three specifies the highway projects that we're talking about and then section four gets into releasing the state funds to basically reduce the projects listed in state three should this go as I hope and pray it will. There is a technical amendment that isn't out yet but it's When we get there Mr. Chairman, you will let me know. Other than that, I don't know how much y'all want me to talk. >> [LAUGH] >> And with that Mr. Chairman, I'll be happy to answer any questions. >> Representative Jeter, we normally do not have speakers in appropriations unless we're doing a public hearing. However there has been a request by the secretary of transportation, Secretary Tenison to address the committee for time not to exceed four minutes and what I would like to do is to allow Secretary Tenison to make his remarks and we'll move to questions of Representative Jeter from members of the committee. Secretary Tenison, you are recognized. >> Thank you, Mr. Chairman. I am Nick Tenison. I am the Secretary of Transportation for NCDOT. The comment that I made this morning in House Transportation basically is a message that I would like to make sure that I'm able to deliver to this large group which is that what we have here is a situation where we have a contract that was entered into pursuant to the direction of the planning area for the region the large region that contains this court orders well as those others, and that that contract was developed to respond to the priorities of the region and deliver a project that is extraordinary, and it's extraordinary in several senses that were, one sense is that its 26 Miles long. It is not. The usual situation has NCDOT too often is compelled to do are the

series of five mile improvements so that you've got orange barrels on your route/g for 20 years, this is a 26 mile project that will be complete by the end of 2018 and there will be extra capacity more capacity in a corridor that definitely needs it by the end of 2018. We have that corridor being built and all the lanes in that corridor told and untold and none of the lanes that are currently there will have a toll on them, all the lanes will be refurbished, all the lanes will have as if they were new pavement and for the life of this concession the maintenance of that 26 mile corridor will be handled. It will be handled as a part of the cost of operating that corridor, part of the toll facility. If If we choose, if you choose to direct us to cancel this contract then there are no known for certain events that follow. No one has it under their unilateral control not NCDOT, not any actor in this group has it under that group's unilateral control to compel events to conform. We have to go back through and if we do a different project, if we do a general purpose lanes project without doing the project that was described, first of all if that happens it's no longer the project that was exempted from STI and it was a transition project. Secondly there would be approval processes that would have to be gone through with the local planning organisation and with the federal highway administration and it is not a process over which we have control in terms of time but it would not be immediate. So what we have here is a case where we are trading a 26 mile project which we are getting done for about 20% of the hard cost that was estimated in terms of state funding, and we're trading that for a situation of uncertainty. Speaking of uncertainty, this morning we were presented with an amendment to the bill that made some stipulations about the funding that would be reserved from the list of projects described. After having reviewed that bill, we are not as confident about the amount of money that's in there, if you exempt all the projects or follow the filters and screens that are in the bill or in the amendment. I can't specify a number but it's substantially less than what we had thought this morning at the earlier meeting and that will be a part of a report that we're furnishing as soon as we can on legislative fiscal. So again it is the conclusion that I've reached that we've got a choice between having people actually have a additional capacity and a corridor that is desperately needed on a date certain or relatively certain the end of 2018 or going back to try to figure out how we are going to solve it next time,thank you very much Mr. Chairman, I appreciate it I'll be here, thank you. >> Thank you Mr. Secretary let's move ahead at this point and take up the one technical amendment that is being offered by Representative Tine/g, the amendment has been passed out Representative Tine/g you are recognized to present the amendment. >> Thank you Mr. Chairman so this morning there was an amendment put on the bill that listed these, let's see, eight projects And they removed to and the problem was the line on 31 that says if into the extent they are related to the I77 hotlines comprehensive agreement project that actually keeps five that are listed that are intended to be suspended takes them out so this just clarifies that the intention is to have the projects listed in the bill to be suspended and staff helped us to clarify that. >> You've heard the explanation the amendment any questions of the amendment sponsor, seeing no hands all those in favor of the amendment signify of a saying aye Aye >> Opposed No the ayes have it the amendment is adopted, Representative McNeil. Thank you Representative Jude you and I have talked about this bill and you know my concerns have been how this affects the rest of the state. Projects and region projects. I think you work for trying to mitigate that somewhat but in your

opening statements you made reference to the money lost would affect the region and not your district. And when Mr. Tennyson spoke he also made the references to the region. Now what I want is some clarification as to what you mean by region because when you're talking about regional part of money Oldenburg is in division 10, Randell is division 8 which is part of the region, 10 and 8 so and that also division 8 Division eight includes more Montgomery, Hawk, Scotland , and several other counties and their course division 10 has Stanly and Union and several others. So my question is this, when you talk about affecting on the region what exactly do you mean by that? >> Thank you Representative Representative McNeal, I think Secretary Tennyson and I use the same phrase correctly but differently. He was talking like you were the regional from a NPO/NCDOT calculation. I was talking about the region of John Bradford and I live in. If you look on page one of the bill line 30, effect on specified Mecklenburg projects. That's where these project listings, that's where it is designed to come from, not anywhere else. Not in region, 10 not in region eight, in Mecklenburg Thank you. I just wanted that clarification when you said region exactly what you meant. Thank you. >> Yes sir. >> Representative Iler. >> Thank you Mr. Chair. I was in attendance at the Transportation meeting this morning and I was I was aware of the changes in the projects. Since then I've become aware that some of the projects that may have referred to seven and eight, which were added this morning. Some of the projects, I believe the figure of $70 to $77 million worth goes to a contingent on a bonus allocation from the contract, as I understand and that might be the only ones but at least those two. And I'm led to believe that since they've contingent on funding by bonus allocation of the contract that if those projects are suspended or the contract is cancelled that money is no longer there is that true? Can I get I guess I'll refer to either the sponsor or the secretary of the [INAUDIBLE] >> Representative Iler, I think I can answer that question. Technically I believe for these projects out of the eight maybe three are specifically tied to I-77. The tolling contract items seven and eight are for two To bridges that are part of the bonus allocation that is allocated in the DOT funds. For two bridges one at Hambright and one at Lakeview whose sole purpose is the ingress and egress into the toll roads, they serve no purpose to the general purpose lanes. The argument being that once again if we're trying to make sure that the money that we're allocating to pay any penalty that comes from money allocated to North Mecklenburg. Those two projects wouldn't need to be built. So going into your point, they wouldn't fall under section 4 of the bill about being reinstated because you wouldn't build a bridge in ingress to a toll road that doesn't exist Follow up >> The gentleman is recognized. >> So in other words the statement that the contract is cancelled that money is not even there, that's not correct? >> The state has allocated or plans to allocate $317 million First the comment made to me about 120 to 140 million, if that was real money of that 77, is those two bridges. So we believe that's real money that is allocated as part of this project, that can be used to offset any cancellation fees and not affect any other project in any other area outside of North Mecklenburg. Thank you. >> Representative Michaux. >> Mr. Chairman, a couple of questions. What is you say the comprehensive agreement and pursuant to section 17.1.1.7 of that agreement, what does that section specify in terms of this contract? >> Thank you, Representative Michaux. Section 17.1.1.7 follows up from section 13.1.5.2 that says As developer shall be in breach under this agreement upon the occurrence of any one or more of the following events or conditions. Under that list, 17.1.1.7 specifically states,

any representation or warranty in the CA documents made by the developer or any certificate, schedule report or instrument or other document delivered on or behalf of developer to NCDOT pursuant to the CA documents is false are materially misleading or materially inaccurate when may or miss any required material information was made, what that means and I'll get there I'm a trucker not a lawyer so you have to bear with me for a second Representative Mishaw, in essence they were required to list all the items, one of those items was potential or active litigation, we believe there are six examples where they have not done so. >> The gentleman is recognized Then why are you setting the side funds damages? >> For your comfort, I fully believe we can cancel this for cause and win, however trying to be respectful to the body and to the state as a whole I didn't wanna role the dice and have [INAUDIBLE] be on the hook for my legal expertise and so therefore we put this caveat in there to have this escrow money so if weren't successful on my learning legal opinion, this money still comes from the people you've asked for not [INAUDIBLE] >> Of course course Mr. Chairman, Durham will take it out of Mecklenburg's hide anyway so sorry >> If you like this whole road we'll give it to you >> [CROSSTALK] >> Okay, okay gentlemen, gentlemen, gentlemen. Representative Hardister>> Thank Mr. Chair this is a question for staff. Do we have any idea idea what the aggregate cost is for the projects listed in section three? >> Staff will identify and respond to the gentleman's question. >> Amlin/g Cameron with the fiscal research division. Yes I do have that estimate. I will make one disclaimer, the number three project that states five projects to wine and NC 73 one of those projects is located in Cabarets county the title of that section limits this to projects in Mecklenburg County. The remaining projects, based on the amount the DUT has programmed using both state or federal funds, totals to $256 million. Without the restrictions on Mecklenburg County, including that Cabarets project, the total would grow to 343 million. >> Representative Torbett is recognized. >> Thank you Mr. Chairperson. A series of questions please. Representative Jeter, do you know the full cost of this project if it were to go forward? >> The full cost of the contract? >> Of the toll road. Of the road going to be built. >> I believe it's $656 million. >> Thank you. Follow up. >> The gentleman's recognized. >> Thank you. Do you have the total of what the state dollars allocated to the project would be? >> My understanding is 317 million on top of that. >> On top of that. Okay, can I ask the secretary a question, Mr. Chairman? >> Gentleman it's recognized. >> Thank you. Ms. Secretary do you authenticate those Those numbers for me please? >> No sir I can't. The $640 million for the contract is exclusive of the bonus amounts. The bonus projects are earned with the existence of total supported debt. The question earlier about whether that money would still be there is a function of whether the success of the project had toll supported debt. >> Mr. Chairman follow up please. >> Recognized. >> I'm looking for the cost to build the road whether what the whole road is and what was the states portion of money to go towards that build. >> In the original contract for the entire facility as a toll facility is approximately $640 million of which the state has $95 million initial investment plus Plus a contingent liability for $75 million if the project requires not for return on equity or return of equity but requires for debt

service and maintenance. Additional funding because of under performance over the life of the project with no more than $12 million and in an year. Let me restate not for any equity return or any subsidy to the project of that nature. >> Thank you. Follow up to Representative Jeter. >> Gentleman is recognized. >> Thank you. One of the issues I'm seeing from today, we've had this conversation is that the numbers just don't seem to [INAUDIBLE] between whose [INAUDIBLE]. I'm hearing the states cause is 92 to 95 million and that's what I'm hearing on a $600 million project. And that's pretty good investment. >> If I could- >> Please. >> Mr. Chairman He's correct, there's a $94 to $95 million number that that secretary Tennyson just cited. He then cited a second number which is different, of $75 million in what for lack of a better term I'll call toll sweep/g. It's from the first five to six years in the contract, that state if the revenue numbers aren't met by the contractor, we're just gonna kick in an extra 12 and a half million a year, that's up to 75 million. I will tell you the bonding agent who analysed it said, that in a minimum 49 million of that 75 million will have to be paid for to the state. The third piece which has not been brought up is a bonus allocation funds, which are part of this project which equal $148 million in projects. When you add 148, 77, and 94 you get to 317. >> Thank you very much, follow up Mr. Chairman. So - >> One final follow up [INAUDIBLE]. >> Can it be a really long follow up Mr. Chairman? >> [LAUGH] >> No sir. Sir- >> With segments in it. >> The gentleman is recognized for a small follow up. >> Okay. [INAUDIBLE] would it be factual to say that the current lanes now provide free access to the public. The toll road the would be built will also provide Provide the same number of lanes for the public. The toll road if it were built would provide two additional lanes that would be towed, but the people riding free today would have the option of riding free tomorrow. So that it is a choice to access the toll road. And overall it sounds like we're getting a road that's Upwards of 600 million for half the cost it would take the state to build a light road. >> I would say that I am not arguing the managed lane concept statewide. I'm arguing this specific contract. So to your question would there be three lanes and then additional user charge lays, I will agree with you on that point. I would also say it was mentioned that the state wasn't gonna have to pay maintenance on these roads for 50 years, he's right, my community is and $10 billion in total revenue collected over 50 years coming out of my economy and not being re-invested, that's the equivalent of American Airlines leaving Shirley and if that happened, it'd be the quickest bill through here in history. It's $10 billion. So we talk about the state's not paying for it. The taxpayers are paying for it through tolls and keep in mind that at the international Tolling Convention in Prague last year, their slide clearly states that for managed lanes to be Effective you must have operational deficiency in the general purpose lane. They stated at their international convention in Prague that the only way managed lanes work is if the general purpose lanes fail. So I will concede that those that can afford the tolls will be able to get there very quickly. The problem is in my community, that's not many people and most of my community is gonna be stuck in the same two general purpose lanes if we ever want to build another general purpose lane, we will have to pay for the privilege to do so. We don't have anymore room across the lake without building a bridge because they've taken all our money into causeway and they have the air rights so we can't build a above. 50 years, and I'm not saying managed lanes are a bad concept for the state I'm saying they are a bad concept for this part of the state. >> Let's move ahead. I think we have one more representative that was seeking to speak and then I wanna recognize Representative Avila for a motion.

Representative Faircloth >> Thank you Mr. Chairman and representative you might have answered my question with your last information you gave there. Earlier this morning, we were discussing this and you mentioned the cost of several billion dollars to your constituents or the folks in that area area there and I couldn't wrap my mind around exactly where that cost was and I think you're saying now. I'll ask you, are you saying that that's the cost of the tolls that your constituents would be paying to travel on the toll lanes? >> Let me me As I'm trying to be 100% honest and forthright in my answers. I can't honestly sit here and tell you it's 100% of my constituents cuz there is certainly through travel but what I am saying is, that 10 billion is the estimated revenue in tolls collected during the 50 year lifespan of this contract. Do I think the I and the vast majority of which will come from my constituents but yeah may I know I'm getting off track here but West Virginia coming by somebody come through they are going to pay tolls that money is collected the truth of the matter is that's not a constituent but the vast majority of people are going to be North Carolinian's driving up and down this road paying for tolls, it's estimated that ten billion dollars over 50 years and other than repaying the roads there is no additional benefit to the community. >> Follow up, follow up. >> The gentleman is recognized, so the to be clear the $10 billion is that the figure you use Yes sir. >> Is that the cost that you've calculated just for your constituents? >> No that is the cost that is estimated in the toll revenue as per the project over a 50 year lifespan, it is not limited to just my constituents. >> Do you have an estimate of what percentage of that would be your constituent. >> I I honestly do not. I can get that information for you but I don't want to mislead you and tell you I have a guess. >> Thank you. >> We have two other hands. If we can make it relatively quick. Members, Representative Pittman. >> Thank you, Mr. Chairman. I'd just like to observe from what I've been hearing, we're talking about $10 billion in tolls leaving that community to go overseas to a company which I believe has been shown to be highly questionable, a questionable reputation. And there's a lot of talk going around about the loss of funding because of what it would cost us to cancel the project And that's regrettable. I hate to see that happen. But at the same time, I believe a lot of our people in this state want us to stop throwing good money after bad on a bad deal that we should not have made in the first place and we should stop this thing from going forward and learn from our mistake and not do this again. Thank you. Representative Bumgardner. >> Thank you, Mr. Chairman. I had a question for Representative Jeter. Where did the estimate of 10 billion come from? >> It came from the figures that we went through on the research on the I-77 materials. >> Follow up. >> The gentleman's recognized. You said we, who specifically do you mean? >> It's countless people. It's John Bradford. It's Senator Jeff Tart. It's these people in the back of the room from Michelle [UNKNOWN] to Stacy Philips to Danny Philips to Lake Norman Chamber of Commerce To the Town of Huntersville to the town of Cornelius. It wasn't just one person looking in the book. >> Thank you for that. I'm just asking. >> I understand. >> Okay the gentleman have another question? Representative Bradford is recognized. >> Thank you, Mr. Chairman. Good afternoon everyone. Just a couple of things. There's not doubt this is a complex matter. It's a complex contract. I don't think you can get anyone to agree on a variety of numbers cuz it's everyone's perspectives. Let me share with you some real facts We hear a lot about this being a 26 mile project, that's $650 plus million. For those of you that were in Transportation this morning, this is a little bit of a repeat of what I'd said, then but I do wanna share with this committee. The reality is the Lake Norman, North Mecklenburg region, the congestion Is a 13 miles issue, 13 miles North 13 miles South, that is a parking lot on I77 daily, this is a 26 mile project, this would be like

you having a five passenger vehicle and have a growing family and you go to the car dealership and say I need a a vehicle of eight, I may say well let's give you special financing but we are going to sell you a bus, you don't need a bus, you just need an eight passenger car, you don't need a 50 passenger bus. This is a project that really over half addresses a none solution if you are in our community when you clear the south Huntsville exit, the traffic starts to move very very well so I respectfully submit to all of you that this project from the start addressed 13 miles of really a none issue, to build the 13 miles that our corridor needs is approximately 200 million We're talking about a corridor of tax paying citizens just like all of you, just like all of your constituents back home, that just want their interstate widened because we've outgrown it. We believe we deserve the process to get general purpose lanes no different than those that live along 95, I-85, 40, but we have to deal with this managed lanes project because of a larger NPO issue where our town get one vote because we're part of a larger body, where quite frankly our votes don't mean much. Cuz we're outnumbered in the NPO. And if you're the City of Charlotte, no disrespect to them, but they're looking up,they're gonna vote for this project because the reality is the 13 miles they're getting they don't really need but it's a nice windfall for them. So I guess you can't really hardly blame them for voting for it. But we're jumping up and down screaming we don't want this. So in the end, it's a bad contract. It's a bad deal for our region and I respectfully submit that you vote today The way that if you were faced to go back to your districts and went to your NPO and were asked would you support a man who's lying? What would your answer be? And if you would say yes and you could look your constituents in the eyes, then you should probably vote against this. But if you would look them in the eyes and say no way, you should support us in our plight to get this cancelled. I appreciate you listening. >> Representative Avila's recognized. >> Thank you, Mr. Chairman. Before I make a motion, could I ask Representative Jeter a question? >> The lady's recognized. >> In the news around this issue, there's been reference to several similar projects in the country which have failed. Could you tell me is there any estimation if that same end happened here in North Carolina what it might cause the state. >> It depends on the problem you get into it just gets speculated cuz it depends upon whether or not they declared bankruptcy or if they default, there is two different outcomes under that scenario If they default, the state could be on hook for everything if you don't find another buyer. And if they declare bankruptcy you could get it for pennies on the dollar. I will tell you that the track record of this company is not good and as we read in the paper yesterday under Monroe Bypass Projecting toll revenues is maybe not a strong suit of ours. >> Thank you. If I may make a motion Mr. Chairman? >> Members recognized for a motion. >> I move that we roll the amendment into a committee substitute and report the committee substitute without prejudice. >> You have heard the motion to roll the amendment into a new proposed committee substitute for House Bill 954 and that the bill be reported to the floor without prejudice. Further discussion, further debate? Seeing none, all those in favor of the motion, please signify by saying aye. >> Aye. >> Opposed no. No. >> The ayes appear to have it. The ayes have it and the motion is agreed to. The committee is adjourned. Thank you.