Sunday, February 22, 2015

The Portsmouth Boondoggle?

The Dayton Daily News had a front page story today about the deteriorating highway system and the shortage of funds in the highway trust fund.  It was a pretty typical story of the type, but then I saw this piece which caught me off guard:
The state is now experimenting with alternative funding ideas, including using private equity as a component in some projects. For example, the Portsmouth Bypass should begin construction this summer. It’s to be a 16-mile, four-lane limited access highway from U.S. 23 north of Lucasville to U.S. 52 near Sciotoville.
At $429 million, it’s the largest project in the history of the Ohio Department of Transportation and the state’s first public-private highway partnership. ODOT said it includes various forms of private financing such as the issuance of Private Activity Bonds, funds through the U.S. Department of Transportation under the Transportation Infrastructure Finance and Innovation Act loan program and private equity.
The state has a contract to make payments to the Portsmouth Gateway Group, the organization financing the project over the length of the contract, which is about 35 years. The group will be responsible for operations, maintenance and rehabilitation work. ODOT will handle ice and snow removal.
Now, I've been out of the civil engineering field for over 5 years, so it probably isn't a surprise that I haven't heard about this project.  However, I am stunned that the largest project in the history of ODOT is a highway bypass around a small town (pop. 20,000, although it did once have a steel mill and an NFL team) in the middle of the can't-be-extremely-busy Columbus to Huntington, West Virginia corridor.  I figured I'd look for some more information about the highway, like the location.  I was able to find this map:

I also came across this story in the Columbus Dispatch (with my comments in italics):
The $429 million Portsmouth Bypass will snake around the city, linking Rts. 23 and 52 via a 16-mile, four-lane limited-access highway.
The project has been discussed for decades, and it might have remained an idea if not for rules adopted by the state in 2011 (Maybe because it didn't make any sense to spend that kind of money in the middle of nowhere).....
It’s ODOT’s first public-private partnership: a new mechanism that allows the private sector to build and pay for public transportation projects while the state repays them over time.
In this case, ODOT will pay for the project over the life of a 35-year contract with the Portsmouth Gateway Group, a consortium of contractors that also includes maintenance of the highway.
“It’s kind of like when you buy your house (with a mortgage),” said Melissa Ayers, ODOT spokeswoman. “You get the road up front.” (and pay a shit-ton of interest over the life of the loan)
How much the project will cost taxpayers over the life of the contract, though, is still unclear. ODOT awarded the contract, but it hasn’t finalized the financial details, Ayers said. That should happen in the coming months. (What the fuck?!  They are going ahead with the project before they finalize how much the state is going to have to pay?  That isn't going to work out well for taxpayers)
ODOT will use a combination of federal funds that in past years have been earmarked for Appalachian highways and other construction money to make payments over time. In the past, the state has received about $20 million a year for Appalachian highways.
The first year’s payment will be $25 million, but that amount could change year to year based on inflation and other factors that are being negotiated (So the state will be paying more than what is set aside for Appalachian highways each year for this thing?).
The beginnings of the partnership can be traced to the 2011 state transportation budget, which included provisions to allow the state to finance projects through the public sector and combine the design and construction phases.
ODOT had planned to use a public-private partnership in Cleveland for a bridge project, but funds raised from bonds against future Ohio Turnpike toll revenue now will pay for those plans. The Portsmouth Bypass will be the first project in the state to use the concept and could be a model for others, officials said....
Building the bypass will allow drivers to avoid about 26 miles of Rts. 23 and 52 and a slew of stoplights through Portsmouth. That could save about 16 minutes of driving time.(that's it? So this shortens the trip by 10 miles, avoids "a slew" of stoplights, and only saves 16 minutes?)
That should reduce the number of semi trucks driving through the city and open the area near the Greater Portsmouth Regional Airport for economic development (Ha, fat chance.  There's copious land available up and down the state's interstate highways and somebody is going to locate down there?).
But some fear that it could hurt businesses in Portsmouth that no longer have the benefit of drivers who stop to buy gas or food in the city, said Jason Kester, executive director of the Southern Ohio Port Authority.
Similar concerns were raised before ODOT built rural bypasses around Lancaster in 2005 and Nelsonville in 2013. Lancaster’s Memorial Drive, a commercial strip through Lancaster, though, has seen new businesses arrive since the bypass opened (Notice nothing is said about Nelsonville.  Lancaster has been growing as an outer suburb of Columbus, and there was going to be commercial development there anyway).
Economic development in southern Ohio is difficult because many sites don’t have adequate access to basic utilities because of the hilly terrain. The bypass, though, will open part of Scioto County “that isn’t topography challenged,” he said (But all of southeastern Ohio is geographically challenged.  There's nothing around, and no good ways to get to any city of any size.  They are smoking crack if they expect any economic development because of this bypass, other than roadside services like fast food, gas stations and maybe the relocation of the region's Walmart).
Johnson said the city has worked with ODOT to erect signs telling drivers that they still can drive through Portsmouth to see its murals — a tourism destination in the city. He doesn’t believe, though, that it will hurt businesses.
“The truckers don’t stop here in the first place. This is a bypass for them,” he said. “From my standpoint, this provides incredible opportunity for the county, which can only benefit the city of Portsmouth.”
Actually, this provides incredible opportunity for Portsmouth Gateway Group, which is going to rake in a shit-ton of taxpayer money with a nice guaranteed annual return. This isn't a toll project where the private entity ends up with less-than-planned-for revenue because the projected traffic doesn't materialize.  Based on this analysis, the state doesn't pay as much over the first ten years, but then pays much more over the remaining 25 years or so.  However, the proposed savings by building the project as a PPP instead of a standard project are based on annual construction cost increases of greater than 3.5% per year.  In the current environment of disinflation bordering on deflation, I'm not sure how likely it will be to see those kind of price increases. 

That also doesn't take into account whether this is the best use of that $429 million.  Apparently, this is seen as part of the eventual (maybe) I-73/I-74 corridor.  Considering that the state isn't sure how it is going to pay for the Brent Spence Bridge replacement, and the existing highway network through more populous areas is in major need of attention, this seems like a waste of good money.  Throw on top of it the fact that the state is depending on a private entity to front the money for construction, and is kicking the can down the road on actually paying for it, I anticipate nothing but trouble coming from it.  Hopefully, I'm wrong, but I expect to hear future politicians pointing at this project as one of the reasons they can't afford to complete more necessary work.


  1. Here's an article from yesterday's American Statesman about how Texas has kicked highway financing down the road. I35 traffic here in Austin is at gridlock so the state has built toll roads all over the place to ease the burden. But the tolls are so high, drivers, notably long-haul truckers, won't use them. Typical Texas mentality.

  2. Thanks for the link. We can't afford the infrastructure we've got, and yet the massive migration to the Sun Belt cause those states to build even more infrastructure. That won't end well.