Wednesday, November 25, 2009

DOT chief 'surprised' by NC Treasurer's I-485 concerns

N.C. Secretary of Transportation Gene Conti said Wednesday he was puzzled by state Treasurer Janet Cowell's statement Tuesday expressing concern about a design-build-finance program to start work on the remaining portion of I-485 around Charlotte. As reporter Mark Johnson noted, Cowell's office said the lack of a contract specifying terms and conditions of the novel financing and construction plan left the Department of State Treasurer, as spokeswoman Melissa Waller put it, "unable to determine if there are issues or concern."

Conti said in a telephone conversation that it "came as a surprise that she[Cowell] decided to go public" with her reservations. The Perdue administration, he said, had held a number of discussions with the state Department of Justice and Attorney General Roy Cooper's office as well as with Cowell's staff. While the treasurer's staff had a number of questions during those talks, Conti said, Cowell's public stance had surprised him. "I still don't understand exactly" what she meant, he said. Conti said the Perdue administration was "fully committed" to moving forward on the project and also said, "We don't see any obstacles to doing it."


JAT said...

Wow, Jack. It scares me to death than Gene Conti cannot or will not admit there are serious open questions about the 485 plan as it has been presented to the public.

To wit, does the state of North Carolina have the authority to guarantee the debt of private contractors? It would essentially turn the contractors into government sponsored enterprises a la Fannie Mae or Freddie Mac. And we all know how well that turned out.

As I've tried to explain, the state would be taking on final responsibility for $50m. worth of debt, at a minimum. Beyond that the relationships are unclear.

Say Contractor A goes to get a $10m. loan from a bank for the project. Would the bank require anything from the state regarding plans for the state to repay the contractor for the loan? What interest rate would the contractor get from the bank? One could imagine 9 percent if the state remains out of the deal, maybe 6 percent if it becomes party to it. But if it does the latter, doesn’t that loan instantly count against the state’s overall debt burden?

It sounds like the state is trying to use an Amendment One-type, wink-wink dodge -- the debt repayments are not really debt repayments unless we say so. That is just not good enough.

Anonymous said...

This financing has been successfully done in other states before. Why is everyone freaking out about it here? Do you want the road finished or what?

JAT said...

Anon, that is really not the point. True, the state of FLA and others have used the approach, but then again, in FLA the school districts levy property tax. There are differences in govt structure and language that have to be sorted out. Not impossible, mind you, but absolutely the kind of thing you figure out BEFORE having a press conference saying you've come up with a great new way to jumpstart a neglected project.

See, I do not believe that the contractors in this lending environment can get the loans for the project WITHOUT explicit state guarantees of those loans. I'm not even certain that explicit state guarantees went on in other design-build projects around the country.

Maybe we should just direct the NC Lotto to come up with a 485 bingo game and be done with it.

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