"All these unsound no-skin-in-the-game ventures have now crashed."
Connector 2000 Association developer and operator of the Greenville Southern Connector tollroad filed for bankruptcy today in US Bankuptcy Court in nearby Spartanburg, South Carolina. The filing done under chapter 9 of the US Bankruptcy code that handles broke government entities has been expected for some time.
The Association defaulted on debt service in January.
Moves in the state legislature to bail out the lenders went nowhere.
Revenues from the Southern Connector are not sufficient to service the debt, the Connector 2000 Association toiler says in its US Court filing because actual traffic and revenues are "substantially less than projected."
"The debtor is insolvent" their lawyers say bluntly in the Ch 9 filing. $500m was borrowed. Equity was zero of course because the 6320 form allows no equity.
Court papers note Wilbur Smith Associates projected 21k/day in the opening year but fewer than 7.5k showed up. (pro-rated for 10 months we put the number at 8.7k - editor)
Traffic has remained between a third and a half of that forecast by WSA when the association launched the tollroad project in this small South Carolina town in the late 1990s.
Revenue has been even lower and is now under a third of WSA $s.
The highway on the southern/southwestern fringe of the city only made sense as an access and development road. The road is too indirect to provide any time savings for long-distance traffic which has stuck to the free interstates. To provide an alternate to I-85 it needed to cross the Saluda River in its western portion to provide a much straighter shot easterly for traffic from Atlanta. It was designed however as an access road to local commercial developments - most of which never happened.
A semi-belt route, 2x2 lanes and 16 miles, 26km long the Southern Connector tollroad gained interstate designation I-185 - totally unwarranted.
Tolls for 2-axle vehicles are $1.00 cash, 75c transponder and 50c at the ramp plazas which are unattended. Tractor trailers pay $3.00/$2.25 sat the mainline plazas and 50c at the ramps.
Trouble is for most trips through the Greenville area the main drag untolled I-85 remains much more direct and quicker. And even for east-west trips traversing the Greenville area to points south the old I-85/I-385 combination was quicker than transiting I-185. It swings too far out.
The pike failed also because it was conceived as catering to continued development of Greenville as a light industrial and warehousing hub on the Atlanta-Charlotte corridor in the mid-1990s, just when that particular bubble was bursting. Most of the land on either side of the Connector remains undeveloped.
Revenues are running at barely $5.5m/yr and toll transactions 12.5k/day. Tolls are taken at two mainline and two pairs of ramp toll plazas along the road so vehicles on the road are substantially less than the transaction number. The mainline plazas have two lanes of open road electronic tolling and two or three cash lanes alongside each direction - state of the art for the time.
The last annual financial report available is for 2008.
The road opened Feb 27, 2001. First tolls were collected March 13, 2001. It continues in operation using toll revenues to pay for operational expenses. Traffic at 12k or so vehicles/day would barely justify a 2-lane signalized road, let alone a 4-lane expressway.
No equity investment is involved since this was one of a bunch of not-for-profits that were all the rage as "innovative finance" in the 1990s. They got a special tax advantage and were called 6320s after the tax exemption clause that treated them as a kind of charity.
No-skin-in-the-game ventures encouraged by US tax code
All these unsound no-skin-in-the-game ventures have now crashed.
They were championed by a former federal highway administrator Bob Faris, a former VDOT commissioner Jim Atwell and other prominent officials who came to believe their own salesmanship. ARTBA the DC lobby group were cheerleaders.
And they were eagerly embraced by a road development crew - a motley crew of consultants, engineering firms, financiers and construction firms - who made their money in the development, design and construction and had no interest in the viability of the roads as ongoing businesses.The Greenville Southern Connector was ill-conceived as an interstate standard expressway. Designers, engineers, lawyers, consultants and construction companies made their money in the development and construction and left the resulting mess to Connector 2000 Association a phony public-private entity without any real owners. So much for "innovative finance" as touted by ARTBA and other DC lobby groups.
Lehman Bros NY which collapsed in Sept 2008 was the principal promoter of Southern Connector bonds.
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