The recently revealed purchase of a 39.9 percent share—for $25 million—of the I-77 widening project is casting doubt on Cintra/NCDOT’s estimates ranging from $100 million to $300 million.
The math is pretty basic: If a 39.9 percent share of the contract is worth $25 million, then the fair market value would be $62.65 million.
“Because there is no operational history yet, to calculate the fair market value Clary used Cintra’s revenue and cash flow estimates to come up with a penalty of $295 million”
– Kurt Naas
“This may be pretty close to a flat-out fraudulent analysis of contract cancellation costs,” said Cornelius Commissioner Dave Gilroy. “And, quite candidly, sponsored by the NCDOT.”
John Laing Group, an international investor in big infrastructure projects, finalized its $25 million investment in December, before Cintra/DOT released a supposedly independent analysis of the project’s cost which included the $295 million figure.
For months, opponents of the I-77 toll lanes have been urging the state to cancel the contract. In response, the state has repeatedly said cancellation could cost taxpayers frighteningly large amounts of money.
Pursuant to the toll lane contract, a cancellation for convenience requires compensation for the greater of the senior debt termination amount or the fair market value of the project. The NCDOT estimate, performed by Florida based Clary Consultants, places the senior debt amount at $82 million, so their fair market value estimate of $295 million would apply if the I77 contract was canceled.
But the recent sale of the 39.9 percent portion for $25 million would seem to indicate that Clary’s fair market value was inflated.
“Because there is no operational history yet, to calculate the fair market value Clary used Cintra’s revenue and cash flow estimates to come up with a penalty of $295 million,” said Kurt Naas, founder of the Widen-I77 anti-toll group. “We believe Cintra’s revenue estimates are unreasonably optimistic,” the resident of The Peninsula said.
Naas also questioned why Clary’s NCDOT cash flow penalty estimate included public funds contributed to the project: $94 million in upfront taxpayer contribution, and up to $75 million in tolling subsidies.
Toll lane opponents are urging state and local officials to carefully study the cancellation estimates, since it would amount to Cintra getting paid half the total project costs before it really got started.
