Sunday, July 16, 2000

"This is just a money-making racket for these road-builders."

Flawed figures leave toll roads running flat

A consulting firm has grossly overestimated traffic projections for five different projects in Florida, leaving the state to deal with the cost overruns.

July 16, 2000

St. Petersburg Times
Copyright 2000

KISSIMMEE -- The most expensive turnpike in Florida is a ribbon of asphalt through a quiet countryside near Orlando. For most of its 12 miles, the few cars that use the Osceola Parkway scoot past grazing cattle, tall pines and stately cypress.

In the middle of nowhere, drivers tap the brakes and fish for their wallets. Time to pay the toll.

At $1.25 per car, the Osceola Parkway was supposed to pay for itself. But five years after the Osceola opened it has attracted such meager traffic that taxpayers must subsidize it. County officials say that by the time all its debts are paid, the $150-million road could wind up costing more than $1-billion.

"I'm no rocket scientist, but somebody really missed on this," Osceola County Commissioner Ken Shipley said. He blames the disaster on a consulting firm that produced wildly optimistic estimates of how much traffic would use the Osceola Parkway.

The Osceola's woes are not the result of an isolated error. Over the past decade the same San Francisco-based consulting firm, URS Greiner Woodward Clyde, has produced erroneous traffic projections for three other toll roads and a toll bridge that have plowed into undeveloped Florida, planting the seeds of urban sprawl.

Flawed traffic projections from URS were used to justify the construction of the Veterans Expressway in Tampa; the Seminole Parkway near Sanford; the Polk Parkway which loops around Lakeland; and the Garcon Point Bridge near Pensacola. In some cases the roads drew only half the cars that URS promised.

URS officials concede they "were basically guessing" on all those projects.

"They're still good projects," URS Vice President Hugh Miller said. "I don't think anyone is questioning the decision to do those projects."

Yet state transportation officials say that if URS' predictions had been more accurate, some of those toll facilities would never have been built.

Because they were built, though, that made it possible for developers to sprinkle the landscape with new subdivisions, apartments, malls and other businesses in areas far from city centers. Charles Pattison of the anti-sprawl group 1,000 Friends of Florida calls the toll roads "an inducement for development."

For instance, the largely rural Osceola Parkway is dotted by a few big developments: Disney's neo-traditional community, Celebration, and its Animal Kingdom park; the Opryland Hotel Florida tourist attraction, now under construction; and an upscale subdivision called Seralago.

Without the toll road "those things wouldn't have been built, period, because you couldn't develop without the road there," said Richard Diez, the parkway's executive director.

Beyond some professional embarrassment, URS has suffered no penalty for being so wrong so often. But now URS' work is under fire again, this time in connection with the $500-million Suncoast Parkway. Slated to open in five months, the 42-mile-long Suncoast has developers in Pasco and Hernando counties eager to replace pastures and swamps with new homes, stores and offices.

In 1992 URS predicted the Suncoast Parkway would be so popular it would make $70-million in 2002 and $119-million in 2010. That persuaded the state to proceed with planning the highway.

But then URS scaled back those projections to the point that, when the Suncoast faced a do-or-die test of its financial feasibility in 1995, it barely passed.

Then URS reduced the Suncoast's numbers even further. The latest forecast, released in February, says Suncoast will bring in $14-million in 2002 and $31-million by 2010. If the same financial feasibility test were given today, parkway would probably flunk.

Yet construction is going full steam ahead.

"I don't think (state officials) care whether these roads pan out," said Lesley Blackner, a lawyer for the Sierra Club, which is trying to stop the Suncoast. "They're just in the business of building them. This is just a money-making racket for these road-builders."

A bridge too empty

As with the Osceola, URS' cracked crystal ball has caused big headaches for the Garcon Point Bridge, nicknamed "Bo's Bridge" because it was a pet project of former House Speaker Bolley "Bo" Johnson. So far about 3,500 cars cross the Panhandle bridge a day, not the 7,500 URS promised.

The bridge's owner, the Santa Rosa Bay Bridge Authority, has been forced to delay paying back millions of dollars it was loaned by the state and has asked the state for an additional $500,000 loan.

URS miscalculated in part because it based its figures on a bridge in the next county that leads to the popular beach resort of Destin. There is no Destin at the end of the Garcon Point Bridge, just a few subdivisions on a barrier island that until recently was under a septic tank moratorium that limited growth.

"We now know that," said Arthur Goldberg, the URS vice president who wrote the estimates for both the Garcon Point Bridge and the Osceola Parkway. "I don't think the Garcon Point Bridge will ever get back to the forecast we made for it in 1996."

Some people challenged URS' projections before the bridge was built, but they were ignored.

"The authority was more interested in getting to the bond market because they knew the money was there, so why worry about the numbers?" asked Joe Mooney, who was ousted as the bridge authority's financial adviser after he disagreed with URS. "The point is not to get a realistic expectation of what's going to occur. The point is to raise capital."

Diez said something similar occurred with URS' projections for the Osceola Parkway: "What they want to do is make (the project) look good -- inflate the revenues, deflate the cost of operations."

Among other flaws, Diez said, URS' projections for the Osceola failed to budget for operating the road. URS' Miller blamed everything on Osceola officials: "I think the county had pretty much made up its mind to do that project and they just needed our numbers for the bond sales."

When URS' projections turned out to be wrong, the Garcon Point Bridge and the Osceola Parkway ran into trouble because they were supposed to stand on their own as moneymakers. The state Department of Transportation, which owns the Polk, Veterans and Seminole expressways, had a fallback. It made up for the shortfalls on those roads by dipping into the pockets of South Florida motorists.

From the 1950s to the 1980s the state's major toll road was the Florida Turnpike, which carried tourists and truckers between Central and South Florida. Enough travelers paid to use what's known as "the Mainline" that the bonds that financed its construction were paid off by the end of the '80s.

The state could have torn down the toll booths. Instead the DOT agency in charge of the Mainline, the Florida Turnpike District, has raised the tolls four times, so that it now costs $16.40 for one car to travel the road's 320-mile length.

Last year the Mainline raked in more than $250-million, enough to cover the shortfalls on the Polk, Seminole and Veterans expressways and still pay $125-million on the Turnpike District's bond debt, which has reached $1.9-billion.

"The main Turnpike is a gold mine," said J.P. Morgan Securities managing director Bob Muller, an expert on toll facility bond issues. If Polk, Seminole and Veterans had been freestanding projects they would be sunk, he said, "but instead they're just a drag on the rest of the Turnpike."

Although state law is supposed to limit how much South Florida motorists pay to support toll roads elsewhere, Turnpike officials say they have no idea how much Mainline money goes to cover the shortfalls on the Polk, Seminole and Veterans. They have already announced that, should Suncoast fail to pay for itself, the rest of the Turnpike would cover that too.

The shortfalls won't last, Turnpike officials said. Eventually, they say, the area around the toll roads will develop and fill them with traffic.
Developers' delight

The stumbling toll projects have something in common besides URS, Muller said.

"Developer interest drives a lot of the toll roads in Florida," he said. "Roads driven mostly by developer interest tend to be the ones with the most problems, because developers tend to be an optimistic lot."

The developers' interest in promoting Florida's toll roads was driven by the state's Growth Management Act. The 1985 law said developers could no longer build subdivisions and businesses and let the roads, sewers and other amenities try to catch up sometime later. Instead, everything is supposed to be in place by the time the new development opens.

Yet in the late 1980s state and federal road money was sputtering, and politicians were reluctant to raise taxes. Without new roads, developers and paving companies, major sources of campaign contributions to both parties, were hurting.

The solution: borrow the money for new roads and pay it back by charging tolls.

But the Legislature worried that special interest groups would push the state to build unneeded roads that would lose money. Lawmakers insisted new toll roads prove they could start paying off their debt within a certain length of time. They decreed that "no bonds shall be issued to fund a Turnpike project" until the road was proven financially feasible "based on the most current information available."

"That was to keep the politics out," said Bill Ham of the Florida Transportation Commission, a DOT watchdog. "It was to make sure that no one project sucked all the money in."

To test the financial feasibility of the new roads, state officials needed traffic predictions. Turnpike officials say there are only three companies in the nation with sufficient expertise and credibility to do this kind of work. The one they picked is the one they have worked with since the 1950s, URS, which had been providing projections for the Mainline that had been on the money.

Despite its experience, URS made some beginner's errors. URS failed to figure that a new toll road would take time to attract customers. URS assumed the roads would draw plenty of traffic immediately.

"Our previous experience with toll road forecasts tended to be with roads built in areas where there was already a pent-up demand" because of congestion on existing highways, Goldberg said.

Yet these new toll roads were being built through areas where there was little development. That was URS' other major error: It assumed that every developer with a project on the drawing board would build those subdivisions, apartments, hotels and offices as soon as the toll road was begun.

Some developers did launch new projects, but many are still sitting on the drawing board. Miller conceded URS was not sufficiently skeptical.

"We listen to a lot of people (about a toll road project), and it's just a matter of what will actually happen," he said. "A lot of it is -- well, I don't want to say they're selling something, but I guess they're selling something."

Although state officials touted URS' scientific approach to forecasting, the truth is different.

"Ten years ago, we were basically guessing," Miller said. "Even two years ago."
Forging ahead

The first two new roads the Turnpike District built were the Seminole and Veterans expressways. Both opened in 1994 and soon exposed URS' mistakes. That forced Turnpike officials to delay a planned toll increase for those roads and alter plans for other projects.

Meanwhile URS came up with a new forecast for the Polk Parkway that cut its numbers in half. The Polk's original forecast had passed the financial feasibility test, but by the time Turnpike officials were ready to sell bonds to build the road, which was backed by powerful political and business interests, the Polk flunked.

Turnpike officials sold the bonds anyway, arguing they "had already made the commitment" to build the road, Ham said. To the state Transportation Commission, that violated the law, but all the commission did was write a letter pointing out the problem. Longtime Turnpike Director James Ely insisted last week that his agency complied with the intent of the law.

Sen. Mario Diaz-Balart, R-Miami, who has repeatedly criticized the Turnpike for making South Florida motorists pay for roads not connected to the Mainline, called the situation "infuriating."

"It's not a matter of whether you can cook the numbers, it's whether or not the numbers justify the thing getting done," he said. "To me that seems like it's not kosher."

URS has made other missteps that required changing the Suncoast projections. Their 1992 forecast came out the same day the Census Bureau released fresh data on commuting patterns that changed their numbers. The 1995 forecast assumed the existence of a toll road through Pinellas County that is unlikely to be built. Yet, as they did with the Polk, Turnpike officials went ahead with the Suncoast's bond sale.

Turnpike officials say they remain happy with URS. Three years ago, after competitive bidding, they renewed the company's $500,000-a-year contract through 2002. When the Turnpike's headquarters moved to Orlando this year, URS consultants moved into the same offices.

By learning from their past mistakes URS officials predict they will do a much better forecasting job in the future.

"It is a difficult thing to do," Miller said, "but we do it very well."

- Staff researchers Caryn Baird, Cathy Wos and Kitty Bennett contributed to this report.

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