State revises bypass finance plan

by Adam Bell, The Charlotte Observer

The Monroe Connector project could tap bonds tied to federal gas tax.

The state is revamping its financing plan for the Monroe Connector-Bypass, a move it hopes will save $90 million.

But work on the Charlotte area's first modern toll road remains on hold until a federal judge decides a challenge from environmental groups trying to stop the bypass. A decision is expected in late summer or the fall.

The road would help divert congestion along U.S. 74, a route favored by Mecklenburg and Union County commuters as well as vacationers. U.S. 74 is one of the only state roads that winds from the beach to the mountains.

The new financing plan involves adding GARVEE bonds into the mix, said Mark Foster, the N.C. Department of Transportation's chief financial officer. GARVEE bonds are backed by future federal gas tax revenues.

Total estimated cost for the project now stands at $718 million, Foster said, down from $808 million. The total includes construction, financing and right-of-way purchases.

GARVEE bonds help save money because they require much less cash reserves and allow the state to borrow at a lower interest rate than other types of lower-rated bonds it had considered using, Foster said.

The state originally hoped to use a different financing mechanism, low-interest federal loans in the TIFIA program, along with state appropriation bonds and revenue bonds backed by future toll collections. But there were too many applicants for too few funds for TIFIA, and the state explored other options.

The new financing plan still needs to receive approval from the state Local Government Commission, which is expected to take up the issue Aug. 2.

The state sold about $234 million in bonds last October, and hopes to sell about $379 million more in September. But the legal challenge needs to be resolved first.

The state has halted all work on the bypass, including selling more bonds and formally awarding the $368 million contract to design and build the road, until after the judge makes his ruling.

The environmental groups claim an environmental impact study was biased toward building the road and failed to seriously consider cheaper alternatives, including U.S. 74 upgrades. The bypass would start along U.S. 74 near the Mecklenburg County line and Interstate 485, go briefly east and then roughly parallel U.S. 74 until it reconnects with that highway west of Marshville.

If the ruling comes much beyond September, Foster said, it would put the design-build bid award in jeopardy. Rebidding could cost another $60 million to $65 million, he said.

Even if the project receives the go-ahead from the judge, state officials have said the legal battle has pushed the likely opening date of the road from late 2014 to at least 2015.