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[quote user="Phoebe Vet"] For a good idea how much the governments fund highway construction, consider Charlotte.  I-77 north of Charlotte needs to be widened.  The state decided to have a Spanish company build one new lane in each direction for 26 miles at their own expense.  The state is throwing in $88 million and is going to give them the existing HOV lane, making 2 lanes in each direction toll lanes with the tolls being collected and kept by the contractor for 50 years.  This is from the Charlotte Observer: "The lanes would be the first privately operated toll lanes in North Carolina. The NCDOT documents predict that Mooresville-to-Charlotte tolls will jump to at least $20 one way by 2035, according to the group. “The numbers just don’t make sense. I don’t see how it’s a viable option,” Huntersville Commissioner Danny Phillips said. “Very few people use HOV (high-occupancy vehicle) lanes now, and they’re free. What makes people think they will pay a toll that high to use them?” On top of that huge giveaway, the State has promised to make up any shortfall in the revenues. read more here: http://www.charlotteobserver.com/2014/06/23/4997844/study-predicts-9-to-11-tolls-on.html#storylink=cpy [/quote] I am at a loss to understand what this has to do with finding the monies to fund dedicated passenger rail infrastructure in the United States. Having said that, there are two points that stand out in a quick read of the Charlotte Observer articles. The HOV lane was built under a standards waiver granted by the Federal Highway Administration. It does not meet interstate highway standards, and the state is being required to bring  it to standard irrespective of who pays for it.  It appears the state is transferring the current value of the HOV lanes to the builder as a way to bring it in line with Interstate Highway standards.  Cintra expects to collect $13 billion in tolls over the 50 year contract period. The present value of the tolls is difficult to calculate because we don't know Cintra's average weighted cost of capital. However, if we use the average 30 year North Carolina municipal bond rate, which was 4.357 per cent on Friday, as per Fidelity Investments Bond Quotes, and is a conservative approach, the present value of the tolls is $1,477,563,876.    Cintra's estimated cost for the project is $567,000,000, before time lag accretion.  If the project comes in at cost, Cintra would have an profit before expenses of $910,563,876. Out of this amount Cintra has to pay all of the expenses associated with operating the highway. One would need access to Cintra's cost projections to know what these expenses are projected to be. More importantly, this information would be required to calculate the company's return on equity and return on investment for the project. What appears to be a state give away may be far from it. State officials have said that the state needs the investment of a private company because it couldn’t otherwise afford the project. The state expects to contribute $88 million toward the $655 million project, with Cintra paying the rest. In return, Cintra will receive toll revenues for 50 years. This is the major reason why Texas is turning more and more to toll roads. The culprit, in part at least, is the Texas state legislator's refusal to increase the fuel taxes to cover the cost of the new roads needed by the state.  I suspect the same situation may be present in N.C. Outsourcing a highway project to a private contractor frequently has positive ramifications for the state's balance sheet. It depends to a large extent on how much debt the state is carrying. Some times shifting addition debt to an off balance sheet provider generates a better return for the taxpayers than if they paid for the project.
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