US-36: For Whom the Road Tolls

If you live in Boulder, you’ve almost certainly noticed the construction along US-36 — aka the Boulder-Denver Turnpike. The main thing that’s being built here is one new lane in each direction. However, it’s not your average road-widening project.  Usually when additional capacity is added, it’s rapidly consumed by induced demand.  Instead, the two new lanes are going to be special managed lanes. What does that mean?


These new lanes are going to be optimized for mass transit, in this case buses.  It won’t quite be Bus Rapid Transit (BRT), in which the lanes are used exclusively by buses, passengers pay on the platform, and board like you would on a subway or light-rail line.  The US 36 system will be somewhere between that and the express service that we’ve got now.  Even at peak hours, when buses are departing every 3-5 minutes, there will still be a significant amount of spare capacity in the managed lanes.   This capacity will be made available to high occupancy vehicles, and those that are willing to pay a toll.  There may also be a number of permits issued for electric vehicles, though how that would work remains to be determined.  The toll value, the number of passengers required to be considered “high occupancy” and the number of EV permits that might be issued will all be managed to ensure that the buses go at least 50 miles per hour.  The two general purpose travel lanes in each direction will remain free to everyone.

Why not just build more lanes for everyone?

Creating managed lanes will make the bus trip between Boulder and Denver take about 24 minutes — even during the peak morning commute — compared to 52 minutes in the general purpose lanes before project construction began.  If you’re doing a round-trip commute, that’s almost an hour of your life each day, or 250 hours per working year.  Why should we give the bus this advantage?

CanberraTransportPhotoThe buses should get priority because a bus full of people uses much less road per person than a bus worth of cars does.  This is important, because road space is a limited, expensive commodity.  By allocating it preferentially to those who use the road efficiently, you ought to need less road overall to provide a given overall quality of service.

“Fine, but I’d rather just have the free 10 lane superhighway that was originally envisioned 15 years ago under Gov. Bill Owen.”

First of all, that would be crazy expensive.  With three times as many additional lanes (6 vs. 2) I’m gonna go out on a limb and guess it’d be something like 3 times as expensive (i.e. billions).  Second, it probably wouldn’t improve the service in the long run, because additional road capacity tends to fill up very quickly as people realize they can drive further in the same amount of time.

That’s how cuddly little 10 lane freeways like this:


Turn into tentacled monstrosities like I-10 in Houston:

Houston_I-10You’ll notice that this road still has some congestion.  They’re probably gonna need to add a few more lanes! Ha!  At least some of Houston benefits economically from increased demand for oil.

To avoid that fate, if we want to expand capacity on US-36, we need to add a different kind of capacity, that’s specifically managed to efficiently move people without inducing demand.  That’s what the buses in the managed lanes do.  At least initially, the buses alone won’t use all the capacity available in the lane, so we can still let other people use it, as long as there aren’t so many of them that the managed lane starts to grind to a halt too.  We can wield this additional capacity to encourage more efficient use of the limited resource, by allowing carpools for free.  But we can’t allow too many of them, or the managed lanes lose their advantage, so probably we’re going to need 3 people, not 2 per vehicle.  We can also use the capacity to incentivize other transportation changes, like a shift to electric vehicles, up to a point.  Finally, we can use it to generate revenue with tolls for those who want to pay for access, and fund a big chunk of the project with that revenue stream.

For all these reasons, the “preferred alternative” for the corridor has looked very much like what we’re now building for some time, even all the way back in 2009.

So what about the funding?  Why can’t we just build it?

First of all, the state is broke — especially the DOT.  Second of all, we (the people) have said pretty clearly that we are not interested in funding our transportation infrastructure with any kind of tax.  Third, if we want to allow people other than transit, HOVs and EVs to use the managed lanes, we have to have some way to regulate how many of them there are.  The obvious way to do it is with congestion pricing (varying the toll to be higher during peak hours, and lower in the off hours).  So why not use that money to fund the project?  After all, it’s a lot fairer than, say, a dedicated sales tax.

How broke are we?  CDOT estimates that it has about an $800M annual budget shortfall, relative to what would be required to maintain our existing infrastructure, continue to improve “safety” on rural roads, and provide “congestion relief” (see this Denver Post article from fall 2013. I’m using scare quotes because I doubt that I agree with CDOT on what safety and congestion relief look like.)  Their current annual budget is about $1.1B.  So the shortfall is almost as big as the budget!  How can the shortfall be so gigantic?

Partly, it’s because of how we fund infrastructure in the US.  The federal government kicks in the majority of the money for new construction, but leaves all the operations and maintenance (O&M) up to the state and local governments.  Unfortunately, most state and local governments do not ensure that they have sufficient ongoing revenues to fulfill those O&M obligations.  They see free federal money to build stuff, and they build stuff.  Over time, the O&M obligations pile up, first dominating and then outstripping the state and local DOT budgets.  When local governments then decide to fund ongoing O&M of existing infrastructure by building out yet more sprawl with federal funds… well, then we’ve got ourselves an infrastructure Ponzi scheme far grander than anything even Bernie Madoff could have imagined.

In the context of our being broke, and much of the transportation funding we’ve used for the last 60 years being indistinguishable from a pyramid scheme, a coalition of all of Colorado’s counties called MPACT64 spent the last two years looking at possible funding options.  A few of the results, pulled from this presentation (PDF):

  • Coloradans would like to increase the transportation budget.
  • State-wide Coloradans would prefer to invest in things other than road capacity.
  • Colorado doesn’t want to increase the gas tax.
  • Colorado doesn’t want to index the gas tax to inflation.
  • Colorado really doesn’t want a (scalable, fair) vehicle miles traveled (VMT) tax.
  • A (regressive, unfair) transportation sales tax polls too low (58%) to run a campaign.
  • Transportation funding is not as important to people as education funding.

Voter Thoughts on New Transportation Reveneues in ColoradoSo, given that Amendment 66 (which would have funded education) went down in flames by a nearly 2:1 margin last fall, it’s not too surprising that MPACT64 decided in January to shelve plans for a transportation funding ballot initiative in 2014, and given that we can’t tax in Colorado without going to the polls because of TABOR, what options does this leave us with?

The obvious source of funding is tolls.  They don’t require voter approval because they’re very clearly use-fees (which are not covered by TABOR).  The perhaps less obvious strategy is building much leaner, much more economically productive transportation systems, which in some cases might mean downsizing and re-purposing as infrastructure comes up for major maintenance that we can’t actually afford. And that’s fine.  More things like the managed lanes, and better land-use policies can let us have a very high quality transportation system that costs much, much less to build, operate, and maintain than what we’ve got today.  Cities from San Francisco to Seoul have successfully removed expensive, city-damaging freeways and have ended up better places because of it.  In the case of Seoul going from this:

SeoulBeforeto this (plus a BRT line on either side at street level):

SeoulAfterAnd even leaving some of the old freeway infrastructure in place for memory’s sake…

SeoulPillarsBut why does this need to involve a private company?

The state could be the one to build, operate, and maintain the US-36 managed lanes, and can issue bonds (or otherwise take out loans) against the expected future toll revenues.  In fact, the state is taking out loans against future revenues in this project, using the federal government’s TIFIA financing mechanism.  That’s a big chunk of the money that the state is putting into the deal.  The maximum loan term under TIFIA is 35 years, and there’s a limited loan-to-value ratio.  So this only gets you so much money.

The private money on the other hand is equity — ownership.  Not ownership of the physical highway, but ownership of part of the right to collect toll revenues for the next 50 years.  Equity stakes demand higher returns, but also take on more risks — if the deal goes south, the equity gets wiped out first.  The basic structure of this partnership has been known since last spring at least (see the Daily Camera from April 10th, 2013).

In the case of the US-36 deal, the tolls collected go to the following things, in this order of seniority:

  1. Maintaining and operating the highway.
  2. Paying off TIFIA and other project debts.
  3. Returning equity to the private partner (paying off their initial stake, or principal)
  4. Earning the private partner their return on equity (their profit, up to a set maximum).
  5. Any additional revenues get split between CDOT and the private partner, for re-investment in the US-36 corridor.

So the Public Private Partnership (P3) is a way to get additional investment in the project up front from people who are willing to take on more risk than the government, in exchange for the possibility of higher returns.  If for some reason the tolls end up not covering returning enough money to the private partner, and they go belly up, the state gets the road back, along with the right to collect the tolls and the responsibility to maintain it.  And this isn’t just a hypothetical… in Orange County there are several tolled freeways that were teetering on the edge of bankruptcy in the fall.

With or without the P3, toll-financing is nice because it is pretty clearly not a Ponzi scheme.  There’s an ongoing revenue stream that can be used to pay off the costs of the project, which should be sufficient (based on the modeling anyway) to do so.

The revenue structure above is also nice because it limits the incentives for the private partner to want to increase the tolls (though pricing has to be approved by CDOT’s HPTE anyway) — since above their expected return on equity, additional revenues start flowing to CDOT instead of just to the equity holders.  This isn’t so different from the semi-guaranteed fixed return on capital that we offer to many regulated monopolies.  This business model is probably past its use-by date in the electric utility industry.  In the case of capital intensive road infrastructure it can make sense, as long as we’re not building the unlimited capacity that’s required to deal with induced demand, which we aren’t with the US-36 project.  Instead, the business is being rewarded for having a highly functional managed lane — fast buses,  tolls high enough to pay their return, and whatever additional capacity is available allocated to HOVs and potentially EVs.

US-36 paid off its original construction with tolls in 15 years. Why is this going to take 50?

I gotta say, I’m a little bit shaky on why the term of the deal is so long.  Mostly, it seems strange to me because the net present value (NPV) of the cashflows from 40 or 50 years out are basically worthless today, especially if you use equity-like returns (~10%) as the discount rate.  So it seems unlikely that doing a 50 year deal rather than a 30 year deal would result in having much more capital available up-front for investment in the project, at least on the basis of future cashflows.  It might be that the longer payback time offers some protection against volatility in toll revenues?  Reportedly there were three bidders for the contract, so it was probably at least somewhat competitive, and it seems likely that the HPTE would have preferred a shorter payback time if at all possible, so they probably didn’t have that option, or the compensation the bidders were asking for in exchange for a shorter term were deemed unreasonable.

Why is the deal so damned secretive and last minute?

First of all, it’s not last minute.  The broad outlines of the policies it implements have been known at least since last spring.  Secondly, it’s not particularly secretive.  God knows my inbox has been pestered endlessly with US36 Commuting Solutions newsletters and invitations to public forums in places that (ironically) aren’t particularly easy get to by transit.  It’s especially not secretive since CDOT posted an 80 page outline of the contract.  Admittedly, that summary should have been posted as soon as the outline of the contract was finalized.

A lot of the financial details and the negotiations around them have to remain secret for deals like this to go forward, because the entities engaged in the negotiations are competing with each other — both here, and potentially on other projects.  If they have to make everything public from the get go, then that competition breaks down, and they won’t participate.  If we want the private money, then we have to accept some financial opacity until the deal is done.  If we don’t want the private money, that’s fine — but then we have to be willing to either fund our own infrastructure systems, or content to watch them crumble.  Personally, I could be okay with any of these options done right.

Getting this kind of project done right is key — any of these financing mechanisms can work well, or be a total catastrophe if done poorly.  As far as I can tell, based on what I’ve read and the people I’ve talked to who have been involved in the project for years, the financial incentives and policies built into the current US-36 project are good for cost-effective, sustainable transportation.  It’s taken a decade to get here, but for once things seem to have worked out pretty well.  It would be depressing to see the deal get nuked at the last minute, and even more depressing to see the misinformation floating around today stand in the way of other good deals like this one getting done around the state — regardless of how we decide to finance them.

But, Glenn Vaad!  ALEC! Insert Liberal Outrage Keyword Here!

I’ll just quote Will Toor, who has been involved in all this pretty much from day one:

I would like to respond to a number of the concerns being raised about US 36, from the perspective of someone who both was involved as a local government representative when US 36 improvements were being planned, and now works on transportation policy from the environmental nonprofit world. There seems to be some confusion about what the history is.

The claims that are being made that try to tie Glenn Vaad and ALEC to the creation of the High Performance Transportation Enterprise (the branch of CDOT that can do tolling and public private partnerships) and the approval of a public private contract for US 36 are just incorrect.  The truth is, the HPTE was created in 2009, as part of SB 09-108, the FASTER legislation. It was sponsored in the House by Joe Rice, and in the Senate by Dan Gibbs – both progressive Democrats, and was signed by Bill Ritter. It was a bitter partisan battle, and was strongly opposed by Republican legislators, including Representative Vaad.  The bill was supported by Environment Colorado and the Colorado Environmental Coalition. Whether you like the policy or not, it is just incorrect to try to tie this to Rep Vaad and ALEC.

Background Reading:

[Update 2014-02-14 CDOT released the whole 600 page US-36 contract.]

Relevant Press Coverage:

Published by

Zane Selvans

A former space explorer, now marooned on a beautiful, dying world.

62 thoughts on “US-36: For Whom the Road Tolls”

  1. Zane – great summary. A few comments that might be helpful:

    “Why so long?” Well, I don’t know for sure but I suspect that is what Plenary wanted to ensure it would recover its costs. After all, Plenary is bearing most of the risk of this project. Consider that a similar project in Northern Virginia is an 80 year contract. The US 36 contract is long, but not obscenely long.

    “Why last minute?” Actually, this project has been YEARS in the planning and there was an extensive public process on the project. As is pretty typical of transportation projects, the public only starts paying attention when the contracts are signed and shovels are hitting dirt.

    “Why so secretive?” CDOT is on its own learning curve in terms of public communication with these types of projects, and has room for improvement for sure. But contract drafting and negotiations have never been public participation events. You have no negotiating leverage if you have the public weighing in on every step of the way. And state legislatures have not been in the business of participating in this process either.

    Thanks for the opportunity to weigh in!

    1. I know that other projects like this also end up with very long terms, but I still don’t understand the why of it. What’s the financial imperative? The roads don’t actually last that long as physical infrastructure, and cashflows more than a couple of decades out might as well not exist in terms of their net present value.

      1. In most of these projects, the private concessionaire puts up a big sum for construction – hundreds of millions of dollars – and needs the assurance that it will get paid back through tolls. It is only willing to put up that much if it has a long-term contract. If you want a shorter contract, you have them put up less money. And to answer your TABOR question below, the Tenth Circuit still hasn’t ruled (to my knowledge) on the constitutional challenge brought to TABOR.

        1. Of course the private partner needs to get paid back — but usually the way that calculation works is you take all the future expected cash flows, and discount them to the present with your cost of capital as the discount rate to determine how much money you can offer up front. The thing that’s confusing me here is that at an equity like cost of capital (10%), a dollar that’s collected 30 years from now is only worth about $0.04 in present value. This means that the dollars expected to be collected in years 30-50 don’t contribute much to the net present value of the cash flows, so the benefit (in terms of capital available now) of adding additional years further out diminishes pretty dramatically. This makes me think that there’s some other reasoning behind the long deal — that it’s mitigating some kind of risk I’m not aware of? Or, I don’t know.

  2. I appreciate the summary, which basically comes down to this sentence:

    “If we don’t want the private money, that’s fine — but then we have to be willing to either fund our own infrastructure systems, or content to watch them crumble. Personally, I could be okay with any of these options done right.”

    Finding work-arounds to TABOR, rather than facing the strangulation head-on, is a mistake.

    1. I think that’s the “build lean and watch it crumble” strategy, and I think I could definitely be convinced it’s a good one. TABOR screws up so many things… but I wonder how bad things would have to get before the citizens of Colorado would repeal it. Or maybe we’ll get lucky and SCOTUS will overturn it. What ever happened with that lawsuit?

  3. Hi Zane, Thank you for the brilliant and user friendly (even for someone who is not a transportation geek) summary. The Camera should run this in full, I think it would go a long way in smoothing feathers as it gives a real thoughtful explanation, not sound bites. Well done.
    Ann Whitehill, Boulder

  4. Thanks for taking the time on this write up. It was very clear and accessible, even for someone like me. I think I understand why the project is important to you. I’m still curious why the “If we don’t want the private money, that’s fine — but then we have to be willing to either fund our own infrastructure systems, or content to watch them crumble” option is less attractive to you than this one. Another way to put this is, not why have you put your time and reputation behind this project and chosen to defend it, but why, on a personal level, do you feel compelled to?

    I think it was really valuable that you, in an instance or two, explain that you’re not entirely sure on a particular thing (like the 50 year time frame).

    And finally, it was a joke and it was a funny joke, but if privatization is one of those liberal outrage keywords you referred to, I think it’s a mistake to not take that seriously. Do you think voters’ unwillingness to spend collective dollars is entirely unrelated to projects like neoliberal road development? I don’t. The same people that want to privatize everything (ALEC and….) have also mobilized the sort of libertarian sentiments among voters that make private funding the only option (it’s brilliant). And even strategically, I think you’re trying to appeal to exactly the people that have been convinced that this is a dirty ALEC project, and “not even responding this” comes off more as not thinking that would be concerning (if it were true).

    I’m still (trying to) make sense of this and not at all sure where I stand. But, nonetheless this was an excellent and informative piece, as usual. Thanks.

  5. I don’t feel compelled to defend this project because of the financing mechanism behind it. I agree with you that the P3 is probably the least desirable of the funding options. Unfortunately, like I laid out, the other funding options seem to have pretty thin chances of passing right now.

    I’m much more supportive of this project because of the policies that it implements — the congestion pricing, the transit priority, the notion that you should have to *pay* if you’re going to use a public resource inefficiently for your own convenience at the expense of others, the large-scale admission that induced demand makes building our way out of traffic congestion impossible, including the creation of an ongoing funding mechanism to cover ongoing expenses (i.e. the de-Ponzification of infrastructure financing), the support for compact, walkable neighborhoods at the end of the bus line in Boulder.

    So, it’s the right kind of highway (if there is such a thing), funded with what might be the wrong kind of money. Right now, I feel like it’s more important to have a good example of the physical infrastructure and policies working well, than of the right kind of financing (so long as the financing works at all!). I’m also not confident that if we did have a good public financing mechanism — say we passed the VMT tax — that we would also have the stomach to do the tolling/congestion pricing/transit priority. I hope I’m wrong about that. And I hope that we can get some more roads in Colorado that look a lot more like the new US36 than I-10 in Houston.

    Runaway neoliberal privatization of everything in the face of a purposefully starved government is clearly a risk worth taking seriously! Unfortunately in this case I really feel like that reasonable fear has been manipulated, under the assumption that most people aren’t going to go read the 80 page contract summary, or even the Daily Camera articles that have been published on the project over the last 5 years, and will instead just do a keyword-based assessment. In this particular case, I think we actually drove a hard bargain with the private money, and got a lot of what we wanted out of the project. Will we have the guts to do that every time? I wish.

  6. What this op-ed, and every other editorial and article about this project ignores, is the fact that the VAST majority of traffic on 36 is not traveling from Denver to Boulder. Show me a study that shows even 15% traveling between the two endpoints. There isn’t one.

    You can wish all day long that people in Westminster who work in Boulder will drive to a park and ride, park, stand in bad weather for 15 minutes, then pay $5 to get to Table Mesa, get on ANOTHER bus, and go to their final destination. IT ISN’T GOING TO HAPPEN. This type of driving is what causes issues on 36. This project will do nothing to solve that. It is a giveaway to Plenary, and a giveaway to the small percentage who commute end to end.

    1. Have you been on the BX/BMX during commute hours? It’s packed. Reducing the headways to 5 minutes, and giving the bus a speed advantage over the free general purpose lanes will only increase demand.

      The alternative, of just building more free roads, which are rapidly filled to capacity by induced demand from suburbs that have no choice but to drive, is untenable. Part of the point of creating this kind of infrastructure is that in the long run, we can change our development patterns, so that it’s easy to just walk or bike to the bus, take a one-seat ride, and get off within walking distance of your destination. Additionally, sharing the infrastructure with toll paying drivers means they at least have an option besides sitting in traffic, which isn’t the case now, and won’t be if we just build more free lanes.

      1. Yes, having a guaranteed speed for buses between Denver and Boulder will increase demand for buses – BETWEEN DENVER AND BOULDER. As I pointed out, the vast majority of the traffic on 36 is not going to either of those endpoints.

        Ten years from now, when the toll is $14 each way and the two free lanes are even more hopelessly congested, people still will be driving. They’ll be hopelessly congesting 287, Baseline, Arapahoe Valmont, Lookout, Highway 52, 96th, 75th, Wadsworth, Simms, Indiana and Highway 93. A few fast buses between Denver and Boulder won’t come close to fixing the mobility problems in the areas in between, which is where the majority of the traffic originates from.

        Still waiting for a study showing that even 15% of the traffic on 36 goes from Boulder to Denver.

        1. Yeah, we need fast mass transit that connects other endpoints, no doubt, and the arterial BRT is pretty much just that:

          We also need more places with land use patterns that can actually be served by mass transit.

          The alternative of just building more suburban lane miles everywhere has been tried, to the tune of trillions of dollars in the US. It’s financially disastrous, results in a lot of congestion, and a lot of land-intensive, exurban/suburban communities where the only way to go anywhere to do anything is to drive.

          1. “Does TABOR prevent bonding by an Enterprise?” Here is my understanding: “a government-owned business authorized to issue its own revenue bonds AND receiving under 10% of annual revenue in grants from all Colorado state and local governments combined.” Nicholl v. E-470 Pub. Highway Auth., 896 P.2d 859, 867 (Colo. 1995). In Nicholl v. E-470, the E-470 highway authority tried to claim it was an “enterprise” exempt from TABOR. For various reasons too detailed for a blog comment, the Supreme Court said it didn’t qualify. So, the lesson is, just because the “E” in HPTE stands for “enterprise” does not mean that it is an enterprise for purposes of TABOR. Whether it is or not, I don’t know. The other question – did the feds require a private partner for the TIFIA loan — I don’t know off hand, but there may be some info out ther.

          2. We need rainbows and unicorns, too, but wishing for them isn’t going to make them happen.

            The Denver/Boulder suburbs are classic sprawl, and all the buses in the world aren’t going to fix that. Ironically, a big part of the reason the NW suburbs are so bad is becasue of Boulder’s “enlightened” land use policies, which pretend to be environmentally sound, but which in reality simply promote sprawl outside the moat of open space.

            Take the hypothetical engineer who moves to the Boulder area. She is going to be working at 55th and Valmont, but she can’t afford the $400,000 minimum to buy a house in Boulder, so she goes out until she can afford one. Somewhere, for example, like the area just east of Standley Lake.

            In an urban planner’s wet dream, she is going to walk or ride her bike to 100th and Wadsworth, cross Wadsworth on foot or bike, which is a death wish, then stand at a bus stop until a bus arrives to take her northbound to the park and ride at the 1st Bank Center. Then she is going to cross the bridge to the north side, and stand and wait for a bus to take her (in the shiny new bus lane) to Table Mesa. There, she will wait yet again for another bus to take her to work. Are you kidding me? What she is actually going to do is get in her car, take Simms to 128 to McCaslin to South Boulder Road to Cherryvale to Arapahoe to 55th, like any sane person would. That is a 25 minute, 15 mile drive, as opposed to a 1 hour 38 minute bus ride!

          3. Cost-effective freeways that don’t just get filled up with traffic are also in the realm of rainbows and unicorns. You don’t have to fix the entire region to give people options. You need to create some places that are well connected to each other without driving, and great to live in. Then people can choose what they want to prioritize. Obviously the entire metro area isn’t going to be fixed any time soon, but why not start fixing it now? Sprawl is dead. Long live sprawl!

  7. Zane,

    This is a great summary. My understanding is that the private entity here is not putting up all of the money for this project, but a portion. Could you post (or send) the budget for this road upgrade project, broken down by the budget contribution per entity? From a hallway conversation with Will Toor it seemed like the actual need for the private partner for THIS project was smaller than I would have expected. But I would like to see the numbers before I draw a conclusion.

    A final comment: while the project contract has been under negotiation for a very long time, timely summaries and the max possible transparency would have reduced the perception of back-room dealing a lot.

    1. Plenary is only putting up $30 Million of their own money. The rest of the $170 Million they are bringing to the table for Phase 2 is bond money that is guaranteed by the taxpayers.

      The $170 Million is about 2/3 of the cost of Phase 2. So for a $30 Million investment, Plenary gets 100% of all toll revenue from Denver to Boulder for the next 50 years! Yes, they even get the toll revenue on the current I-25 HOV lane, which by itself generates over $2 Million per year already.

      This is the most incredible government giveaway in US history.

    2. Based on this CDOT presentation.

      Phase 1:

      • RTD (sales tax): $124M
      • CDOT: $77.7M
      • Plenary Debt+Equity (inc. TIFIA): $54M
      • DRCOG: $46.6M
      • HPTE (inc. TIGER Grant): $10M
      • Local Govt.: $5.6M

      Phase 2:

      • Plenary Debt+Equity (inc. TIFIA): $120M
      • RTD (sales tax): $18.5M
      • CDOT: $15M
      • DRCOG: $15M
      • Local Govt.: $11M
      • HPTE (inc. TIGER Grant): $10M

      The above doesn’t break down the Plenary financing between debt and equity, but based on this information from Fitch on the offering, it looks like all $54M from Phase 1 was TIFIA debt, and $60M of the Phase 2 is TIFIA debt, leaving about a $60M equity stake for Plenary.

      1. From:

        “How much of its own money, as opposed to borrowed money, does the private contractor bring to the table? When asked that question in Boulder, Cheroutes said that it’s proprietary information, but indicated it’s around 20 percent, or about the same as a mortgage. “It’s close to that,” he said.”

        Plenary is not bringing $60 Million in equity to the table. From your own Fitch link, Plenary is assuming $20M+$60M+54M+21M= $165M in loans, but $144M of that is guaranteed by the state. Plenary’s risk is minimal in this deal.


        1. Wiat, it is right in the Fitch link:

          “The concessionaire, Plenary Roads Denver, LLC, is wholly equity-owned by Plenary Group (Canada) Ltd. and was established specifically for the project. Plenary Roads will receive an equity contribution from Plenary Group estimated at $20.8 million at financial close and also execute the subordinated loan agreement with North Leaf Capital of an equal amount.”

          So, Plenary Roads Denver is bringing $20 Million of their own money, and a $20 Million private loan. Period.

          1. Looks like you’re right, $20.8M in equity from the Plenary Group, though from a risk point of view, I think the North Leaf subordinate loan is in a similar position as the equity stake (i.e. it gets wiped out before any of the guaranteed loans take a hit).

            I don’t think that the fact that it’s mostly a debt-financed deal actually indicates it’s a “giveaway” to the private partner. They’re taking on the responsibility of collecting the tolls, and paying off all the debts (and the O&M) — a large proportion of the deal is really just money that passes through them, on the way to paying off the other financing.

            I think the right numbers to look at to see how good a deal it is for them (or us) are probably their return on equity, and some assessment of the risk that equity is taking on. And that cost has to be weighed against the alternatives for transportation in the corridor — what would we build without this option?

        2. I respectfully disagree that there is “minimal” risk if a loan is guaranteed. There often is an indemnity of the borrower to the guarantor, so the borrower is still on the hook. Also, consider the effect of having the private party bring all equity to the table – if a concessionaire is doing that, it is assuming even more risk, and will demand compensation for that risk.

  8. Thanks, Zane. I’ve looked over the presentation. What are the details of the TIFIA financing? What does TIFIA stand for (I’ve got Tax Increment Financing – missing the ‘IA’)? How does the TIF offset the risks to Plenary? Who is on the hook for paying off the TIF? Are there actual bonds issued for the TIF?

    What are your thoughts on having Goldman Sachs be the financial advisor? Any potential risks there, outside of the clear ideological ones?

    Thanks again.

    1. Sam – TIFIA is something altogether different – see – from the website – “The Transportation Infrastructure Finance and Innovation Act (TIFIA) program provides Federal credit assistance in the form of direct loans, loan guarantees, and standby lines of credit to finance surface transportation projects of national and regional significance. TIFIA credit assistance provides improved access to capital markets, flexible repayment terms, and potentially more favorable interest rates than can be found in private capital markets for similar instruments. TIFIA can help advance qualified, large-scale projects that otherwise might be delayed or deferred because of size, complexity, or uncertainty over the timing of revenues.”

  9. Here is my takeaway so far:

    $510M project (Phases 1 and 2)

    $174M involvement by PRD:

    $20M equity
    $20M private loan
    $20M private activity bonds (issued by HPTE)
    $54M Phase 1 TIFIA loan assumed
    $60M Phase 2 TIFIA loan generated

    So PRD puts up $20M, levers another $154M (with a lot of state help), and gets 50 years of cash flows, including I-25 toll lanes. We privatize the maintenance (including snow removal!), operations, and upkeep.

    My fundamental question is couldn’t the state have done most of the levering itself? Does TABOR prevent bonding by an Enterprise? Could we have gotten better ratings than BBB- via the state, thus lower financing costs? The state (via HPTE) generated the first TIFIA loan, why was PRD needed for that piece at all?

    These are honest questions. It is unclear to me how much the private partnership is adding to this, given the very small (4%) equity stake the private party is bringing to the table. I wonder if the PPP formulation is based in an ideological perspective, rather than a true governance/financing need.

    All that said, I am pleased with the configuration of lane choices, and most of the balance of the project. It is merely the financing and privatization and term length that I am questioning.

    Thanks for the write-up!

  10. Generally agreed, but two minor corrections:

    1) I grew up in Berkeley, and lived in the SF Bay Area for more than 40 years. The picture of the “nice little highway” you use is of I-880 “westbound” (actually going south at that point) between University Avenue and Emeryville. This is actually one of the worst commutes in the country, with much worse traffic at commute hours than shown in the picture, primarily because the city of Berkeley refused to allow CalTrans to expand the freeway due to hatred of cars and love of mass transit. The HOV lane is a relatively recent thing (within the past 10 years, as I recall), does not support tolls, and requires 3 or more riders (as do the carpool lanes on the SF Bay Bridge). The Frontage Road (to the right in the picture) used to have 2 southbound lanes for cars, as well as parking for recreational use of the bay (e.g., fishing), but the parking & one lane got replaced with the bike lane now seen in the picture. Result: Less capacity, worse commute.

    2) Eliminating the Embarcadero & Central freeways in SF didn’t make the city better, it made the traffic worse and caused more accidents, especially of pedestrians & bicyclists getting hit by cars. This got so bad that the original plan to tear down the central freeway entirely got abandoned, with what was left of it kept in place to keep the problem from getting even worse. As it is, street traffic in SF on the major arteries and near freeway exits at commute hours is stop-and-go as a norm.

    1. I was totally joking about the “cuddly little 10 lane freeway”. It looks huge and congested. It’s a fabulously expensive fantasy that you can build your way out of congestion with more lane-miles… I-10 in Houston certainly has more “capacity” and it’s still a disaster (as is the 405 in LA, and any number of other mega-freeways we could point to). On the Embarcadero, I’ll just have to disagree. I’ve spent time there, and it’s an awesome public space. As far as I could tell, there wasn’t any traffic. But then, I wasn’t driving. There’s a conflict between making good cities that work for people, and places that work for cars, and I’d much rather be in a people place.

      1. Well, expanding the San Mateo bridge from 4 to 6 lanes worked. It used to be horrible, not anymore. Expanding capacity worked there. Elsewhere, there’s just so much more pent-up demand that’s unmet that when capacity finally does get expanded it gets used up immediately. The LA and SF areas have more people in each of them than in the entire state of CO, so there’s tons of unmet demand for driving.

        If by “people,” you mean rich white single people, then yes, San Francisco “works for people.” People with children can’t take their children places or do their shopping without cars. And, of course, cars usually have people in them when they’re moving.

        Again, what’s really funny is that your picture of I-880 looks extremely uncongested & fast-moving to anyone who’s familiar with it at normal commute hours, but you’re using it as an example of a badly-congested freeway. Way too much space between cars, way too few brake lights.

        1. I picked that image of I-880 because it was 4 general purpose lanes in each direction, plus a carpool lane, which was the original plan mooted for US36.

          I don’t think you’re hearing what I’m saying here about induced demand. If you build capacity — especially unpriced capacity — more “demand” materializes to fill it. That same demand can be fulfilled in other ways, most efficiently by building places that aren’t car dependent, so other modes that aren’t so space intensive or costly per person work well. The San Mateo/Hayward bridge may work well now, but it too will fill up, as development and commute patterns adjust to take advantage of that capacity.

          San Francisco’s affordability problems are huge, but that’s a different problem than whether or not it’s easy/pleasant to drive vs. bike vs. walk vs. use transit in the city.

  11. “Induced demand” is just a euphemism for “More people get to drive where they want.” I don’t regard that as a bad thing.

    “Places that aren’t car-dependent” and “aren’t so space intensive” are just euphemisms for “high-density housing that no one really wants,” usually coupled with mass transit that is way under-utilized, thus making it less efficient than the cars people actually want to drive.

    San Francisco’s “affordability problems,” as you put it, are direct results of the sort of residential and transportation policies you advocate. However, this goes beyond the scope of expanding 36 by adding toll/HOV roads, which is a good thing.

  12. Zane,

    I would appreciate it if you would address two points:

    1. You correctly point out that TABOR does not require voter approval to institute tolls. US 36 was constructed and orignally funded as a toll road. Was any thought given to reinstituting tolls on the highway during the period (starting in the early to mid-90s) when it became obvious the demands on the highway would require its expansion/reconfiguration and/or the construction of rail alternatives? Have any models been run in that regard — say hypothesizing a $1.00 toll each way starting in 2000?

    2. Have you or others considered the potential impact of Art. XI, Sec. 2 of the Colorado Constitution, which prohibits the state from making “any donation or grant to, or in aid of” any corporation or company? For example, it is my understanding that under the Plenary contract, the state is effectively assuring Plenary’s returns by employing its enforcement mechanisms (at no cost to Plenary) to assist toll collection (e.g., disallowance of vehicle registration, and in other ways. For example, the Plenary contract provides that any public transportation infrastructure that reduces the US 36 tolls (the standard being unclear on my initial review) will result in a requirement that the state reimburse Plenary for the shortfall. Has anyone considered whether this represents a contribution to a private entity from the state treasury triggered by the state’s exercise of its sovereign function in violation of Art. XI, Sec. 2? Has anyone looked at the impact this will have on commuter rail?

    Thanks for your time and response.

    1. I don’t think anyone looked at instituting tolls early on. I suspect it would have been politically… challenging.

      My understanding (mostly from talking to Will Toor and Matt Appelbaum) is that the non-compete clauses are extremely limited, and that they do not require compensation for other public transportation in the corridor (like rail) or for self-driving cars, or any of the other common examples that are being brought up. They only apply to other infrastructure that’s actually in the US-36 right-of-way, which is extremely limited.

      Also, most of the “compensation events” that people have brought up just aren’t nefarious in the first place. If we want to allow EV’s into the managed lanes for free, that will result in a real decrease in toll revenue. The project is being paid for with toll revenue. If it was publicly owned and operated, by CDOT, we’d also need to make up for that loss in revenue somehow — it would either suck money out of CDOT’s already shriveled budget elsewhere, or it would have to be made up for with increased toll rates. And maybe that’s what we want to do — I could see a reduced toll rate for EV’s being a good early-adopter incentive, but it’s not a scalable transportation policy.

  13. A long update from Boulder Mayor Matt Appelbaum that came through over the Council Hotline… relevant to this discussion:

    • A substantial amount of the concern, unhappiness, and even anger seems to stem from the fact that there will be a tolled lane on US36. As noted by Will, this is precisely what we have fought for, it is precisely what is required by the EIS, it has been subject to numerous public forums over the many years, and it is the only effective way to improve mobility in the corridor. Some opponents appear to believe that all of the lanes will be tolled, which is of course not true. Others simply oppose HOT lanes as “Lexus lanes”; I share some of that concern, but the key is to ensure that everyone is served as equitably as possible, which is accomplished by ensuring priority for transit.
    • Concern and anger also arise because this is BRT and we were promised rail. First, US36 BRT was just as much a part of FasTracks as was rail. Second, as described in more detail below when I get to the BRT/rail debate, BRT serves the corridor vastly more effectively and efficiently than rail.
    • Anger of course also stems from the fact that our corridor has been – no way to be polite about this – screwed in terms of equity in transportation improvements. There are many reasons/excuses for this, pretty much all of them ranging from bad to worse, and we most certainly have a right to be angry. But we must get this BRT project completed, and then we must move on and find ways to construct and operate additional projects that improve mobility.
    • So, if we can get past the issues of having a managed lane – which is what we’ve always wanted – and getting BRT – which we’ve also always wanted – with no rail for the foreseeable future – which is the simple reality of the situation…we’re left with the one part of this debate that certainly needs to be addressed: the financial deal made by CDOT/HPTE in order to construct and operate the managed lane.
    • Perhaps most importantly, the concept of using a PPP (public-private partnership) is neither new nor was it a secret. See this Daily Camera article from April, 2013.
    • CDOT states that without a PPP this project could not be built because there would not be enough money to do so, and other financing mechanisms would either not be possible or would create too much risk for the state. It is almost certainly the case that a CDOT-funded project with no PPP would be better in the long run for the corridor and the state. The MPACT effort was an attempt to find ways to raise more transportation revenues, but that has, at least for now, failed. Without additional funding, it seems very likely that more PPP or other creative financing mechanisms will be essential for transportation projects.
    • I’d also note that RTD is financing several of its rail lines via PPPs. It is rather interesting that this has raised little if any concern. True, the deals are different in their lengths and don’t involve the issues of tolling or non-competes, but I’d just note that these RTD deals also had no public (or, apparently, even much RTD Board) transparency, and whether or not they are good financial arrangements is quite unclear; as you’ll see below, they clearly incur back-ended costs that suck up all FasTracks revenues for several decades.
    • From the corridor’s perspective, once a PPP seemed non-negotiable, the key issues were keeping any “excess” revenues in the corridor, dealing with HOV rules, and the potential of non-compete clauses (described in the contract as “compensation events”). Perhaps we should have gone to our legislative delegation and asked them to help us find additional CDOT funding, and perhaps we should have insisted the process be more open. Note that CDOT provided several updates to the legislature about the PPP, and that CDOT funding decisions are determined by the state transportation commission.
    • Regarding revenues, we fought to have CDOT provide as much upfront money as possible so that “excess” revenues from tolls would get to the corridor sooner. We didn’t win that battle, with CDOT putting a priority on providing the least amount of upfront cash that it could. As Sen. Jones has noted, CDOT did fund other projects during this time period, so this was an issue of setting priorities for them. Whether the legislature should now step in, and whether they can actually change anything, is something they need to determine – although it’s unlikely there is any significant pot of money available.
    • Regarding those “excess” revenues, we insisted that the money stay in the corridor (required by FASTER) and that they be used for TDM purposes. And I’ll take some credit for insisting that it be made clear that existing CDOT funding for maintenance of the existing lanes continues, so that CDOT cannot take more money out of the corridor and put more burden on the toll revenues. But any “excess” revenue is a very long way off.
    • Regarding tolls: this is a related issue that has also come under fire since the agreement allows for a maximum toll that is very high (something like $28 roundtrip). But the actual toll will be much lower, will be set to assure a free-flowing managed lane, and must be approved by CDOT. I don’t claim to have read all of the rules relating to this issue. Clearly there could be a difference between setting tolls at a level to allow for the most vehicles versus setting tolls to make the most money, and CDOT needs to ensure equity here.
    • Regarding the financial deal in general: this was a competitive bid. I have no reason to believe that HPTE didn’t do the best they could during negotiations. Perhaps a third party should review such deals, but clearly that is not the role of the corridor jurisdictions. Regardless, CDOT continues to own the road and there are many safeguards in the contract to protect the public interest.
    • Regarding HOV lanes: there was a somewhat contentious discussion of HOV 2+ vs. HOV 3+. Initially, it seemed that the managed lanes would remain HOV 2+ until they needed to be made HOV 3+ in order to ensure “free-flow” bus speeds. Then we were told that the modeling indicated that HOV 3+ would be needed within a few years regardless, and since CDOT could get a better deal by switching to HOV 3+ sooner rather than later, they would do so. At least this will be done statewide, so it will be equitable, but clearly this is a very sore point with some. Boulder’s official position is to support HOV, since in theory it helps with equity issues in Lexus lanes and also encourages people to carpool. My personal concern is that pretty much all the evidence indicates that a very, very small fraction of traffic in HOV 2+ lanes are actually getting a car off the road. With tolls in place, the benefit for using the managed lane for free, assuming travel in peak periods for commuting, could easily be $3000 – $4000+/year, and that huge private benefit, one would think, should be reserved for things that provide significant community/regional benefit.
    • Regarding electric vehicles and other new technology: these are indeed limited in the agreement. However – and at the risk of being as politically incorrect as I usually am – I’d reiterate the concern noted above about whether such vehicles should really be given such huge monetary benefits by allowing them to use the toll lanes for free. Perhaps a discount would be in order, in which case the “compensation” would probably be minimal and could be made up for with slight increases in toll rates. In any event, as such vehicles become more common, allowing them in the HOV lane for free will certainly lead to unacceptable congestion in that lane.
    • I think it is also important to note that these “compensation events” would still essentially occur even if this weren’t a PPP. Assume that CDOT funded this project, but – as would almost certainly be the case – toll revenues were used to repay the bonds and also for operating expenses. Reducing toll revenues, by whatever means and for whatever purpose, would still result in a (perhaps somewhat lesser) expense to CDOT, and thus would reduce flexibility. And, of course, Boulder too engages in PPPs, albeit somewhat smaller ones, and thus gives up flexibility in return for public benefit that would otherwise be unattainable.
    • Regarding non-compete clauses: this has always been one of my biggest concerns. When I asked about it I was assured that any such clause would have minimal effect. So, is that the case? I think so, because of the very careful way it is worded, requiring that a limited-access lane be constructed within the airspace of the soon-to-exist US36 in order for a “compensation event” to occur. There may be cases of such events nonetheless, but examples that are often raised – such as additional transit service, or self-driving cars, or changes to the I-25 managed lanes – don’t qualify.
    • All that said, it would be much, much better if CDOT did not give up control and flexibility over the operation of the highway, especially for 50 years. This includes the right to waive or reduce tolls, create any sort of “competing” facility, deal with changes in technology, etc.
    • So, how could this have been improved and how can future deals be better handled? Here are some thoughts, several of which I noted in my testimony before the legislative committee last Thursday:
      • More transparency, public process, availability of at least key portions of the contracts, etc.
      • Legislative oversight, but in a practical manner that helps ensure that these sorts of arrangements provide public benefit but without politicizing, and thus killing, the process. This could most appropriately include guidance and a set of basic requirements.
      • Limitations on the length of the contract.
      • Limitations on “compensation events,” requiring them to be very narrowly defined. The non-compete in this contract actually seems to be a pretty good example of this, although it could be better and we need to ensure that future contracts are at least as carefully constructed.
      • Limitations on the length of any sort of non-compete, whether it be explicit or implicit, to, say 15 or at most 20 years. This should apply to all transportation projects, not just HPTE, importantly including even “private” roads that lock governmental entities into very long-term contractual agreements that affect the entire region.
      • These types of requirements would likely increase the cost of the contract to some extent, but that seems more than worth it in order to protect future flexibility.
    • As a related issue, we must ensure that other projects are treated similarly:
      • All – no exceptions – “significant” roadway capacity projects must be implemented via managed lanes. That is the stated intent of the current CDOT director (who has been excellent to work with), but of course this could change. And even now there is a desire to not toll a large widening of south I-25 because, well, you know, folks in the southern metro area just don’t pay tolls! To the contrary, a couple of the existing T-REX lanes should be tolled.
      • All – no exceptions – managed lanes must provide access to everyone as equitably as possible. That means that priority must be given to transit and/or, as appropriate, special classes of vehicles, such as “true” carpools. The C-470 contingent is already clamoring for a toll-only lane so that the 1%-ers in Douglas County can avoid the riff-raff in the congested lanes.
    • Should the current contract be delayed and modified? I think not at this point, unless there really is some particularly troubling component that has not yet come to light. I would support a narrow reconsideration that might, for example, further refine/limit the compensation events – particularly by limiting their timespans – but only if this could be done very quickly. However, rejecting this contract because of a desire to not use a PPP, or to fundamentally revise it, will most certainly result in a very long delay of many years, except in the extremely unlikely event that CDOT can find the immediate revenues to fund the construction and operations.
    • Finally, a rather snarky political comment is necessary, since I received a sleazy robo-call attacking Sen. Heath for his support of FASTER and using this US36 project as an example of a horrible result of that bill. Now, let’s remember that the R’s generally are very supportive of PPPs or, even better, private enterprise doing public work for a profit (such as privately built roads, for example). And that the R’s opposed FASTER because they oppose all tax proposals, whatever the purposes – which conveniently then allows them to castigate government for being ineffective. Sadly, the conspiracy theorists on the left have given the hypocrites on the right some cover here, with the US36 managed lanes as the pawn. The absolute worst outcome would be for this to blow up politically with the result that the project is delayed for years, screwing us even more than before.

    In summary: We have many people who love rail and are very angry, but being angry at how completely ineffective rail would be isn’t particularly useful. We have many people who don’t want a toll lane — even though that is exactly what we have wanted for over a decade. We seem to have many people who think the entire road will be tolled. We have many who have wonderful conspiracy theories about the PPP. This was neither a perfect process nor a perfect outcome, and we definitely need to learn from it. Now it’s time to build the road.

  14. Induced traffic is a concept that has become a concern over the last 20 years. It is the phenomenon that underlies the insight that regions cannot build their way out of congestion. The overwhelming experience from building additional lanes is that the opposite is true: when you build additional highway capacity, not only will capacity on those new lanes be filled, but the additional vehicles will jam existing roads and highways as well.

    With the perspective of history, we can now see that this has always been true, even though the federal government, states and regions expanded roads and bridges rapidly from 1936 into the mid 1990’s. The enormous expansion of capacity did not relieve congestion of the system. Vehicle counts soared as did traffic jams.

    Robert Caro’s biography of Robert Moses, The Power Broker, has a great description of the phenomenon of induced traffic (without calling it such) that followed the construction of highway and bridge projects in New York during the 1930’s and 1940’s. See pp. 514-520. Robert Moses was, among other things, the master builder of the freeways, parkways and bridges of New York from the 1930’s through the 1960’s. Among others of his achievements:

    The Grand Central Parkway
    The Interborough Parkway
    The Laurelton Parkway Extension
    The Triborough Bridge (and the founding of the New York Port of Authority)
    The Hutchinson River Parkway Extension
    The Bronx Whitestone Bridge
    The Long Island Expressway
    The Northern Parkway
    The Verrazano Bridge
    The Throgs Neck Bridge
    The Marine Bridge
    The Henry Hudson Parkway Bridge
    The Cross Bay Bridge
    The Bronx Whitestone Bridge
    …and many other highway projects

    Planners and designers from all over the US and all over the world came to New York to learn from what Robert Moses was doing.

    And yet none of the projects mentioned relieved the traffic congestion as designed. Instead, with the construction of each project, additional vehicles not counted before jammed the highways and other bridges after completion. So more capacity was built.

    The Triborough Bridge, “the most gigantic and modern traffic-sorting and conveying machine in the world” at the time it opened in 1936, Caro, at 518, was designed to relieve congestion on the already existing four bridges into Manhattan over the East River. Initially, traffic on those other bridges dropped by 15%, but over the next couple of years, the Triborough became jammed and so did the other four bridges. The construction, one sees with hindsight, did not alleviate congestion, but rather “opened the sluice gates much wider than they had ever been before.” Id.

    So next, Moses built the Bronx-Whitestone Bridge to relieve the congestion on the Triborough. The B-W opened in 1939. During its first full year of operation, it handled 6.3MM vehicles, and the traffic count on the Triborough dropped by 123,000. With the construction of a single new bridge, in other words, 6MM new trips were generated between Long Island and Manhattan.

    The pages I have referenced are a good read. And they show the extent to which cars jam additional lanes, the embodiment of induced traffic. With new lane capacity, people neither drive less nor do they drive the same amount. They actually drive further, driving congestion with it.

    1. Only w/ government is “too many customers, who want to use your product too much” not considered a good problem to have.

      1. Not so. No one wants too many customers for a product where the price of the product does not include all the costs. Where price does not include all the costs, every customer represents a further loss, and so the providers of the product will seek a more economic solution.

  15. Though it’s manifested in a lot of different ways, I think there’s a common thread to much of the angst over this project and its funding, and that thread is the dawning realization that the good old days of plentiful road capacity and plentiful funding streams are coming to an end. Limited budgets, public-private partnerships, internalization of costs, and an emphasis on transportation modes that are more efficient (in terms of both energy and money) than single-occupant vehicles are the new normal. But that’s a big change from the paradigm many of us grew up with, and we need to appreciate how disconcerting it is to many people. So public entities, especially, need to do their utmost to educate and prepare folks for this. I’m sure CDOT is wishing right now they could take a do-over on their education process.

  16. What I gather from your response is this:

    1. No one looked at reinstituing tolls. As one who lived here when US 36 was built, and who traveled the Boulder-Denver Turnpike countless times when the tolls were collected, I can say there was never any significant objection from the public. I doubt there would have been any significant public resistance in the mid-90s or subsequently. Of course, I do not includereal estate developers and others who free ride on public infrastructure. They would probably have complained. So if by “politically challenging” you refer to the capacity of our current spineless leadership to stand in favor of public interests when they conflict with the desires of business elites, I wholeheartedly agree.

    2. I am not clear on what you are saying with respect to my second question. However, it appears to be that the transaction is structured such that decreases in toll revenue caused by the state’s decisions (if any) to promote other transportation alternatives based on infrastructure in the corridor or vehicles used in the corridor (remember, we are talking 50 years) will require state compensation. This sounds like a state guaranteed return to a private entity in violation of Art. XI, Sec. 2 — do you disagree?

  17. Tim,

    There is a difference between total cost and cost to provide. Total cost includes externalities; cost to provide does not. A typical example is cigarettes, which impose enormous externalities in the form of health costs borne by persons other than the user, loss of productivity, loss of income to family members, etc. — none/very few of which is/are included in the cost of a packet of cigarettes. One problem with a market based economic system is that it rewards the externalization of cost in the form of environmental contamination. Climate change is the mother of all market failures. I believe this is what Macon was referring to.

    1. Negative externalties are usually just trumped up exagerrations used as arguments against things the speaker has already decided he dislikes for other reasons.

    2. A huge proportion of our transportation system is loss leaders. Even without including externalized costs (which are huge), highway projects generally can’t pay for themselves. Gas taxes and vehicle registration fees aren’t enough, and suburban/exurban development patterns have high capital costs, high O&M costs, and low economic productivity per unit public infrastructure provided, meaning you have to slush money into the system from elsewhere if you want to keep them running. Gas taxes and vehicle registration fees aren’t enough to cover the O&M commitments we’ve taken on. This socialization of the infrastructure costs leads to artificially high demand, and thus pressure to expand the system… kinda forever. Or at least, until you run out of funding options.

  18. Again, this entire project is aimed at the very small percentage of US-36 users who commute from Boulder to Denver. For anyone not commuting directly from either downtown Boulder or Table Mesa, to downtown Denver, this project is a total loser in all respects. All the warm and fuzzy blather about the quasi-BRT lane in this project is laughable, because people are simply not going pay more and accept a doubling or tripling of their commute time just to be able to say they rode a stupid bus.

    Here are my predictions about how this will play out: ten years into the deal, when tolls collected are a fraction of what was projected, ridership of the buses is a fraction of what was projected, and the local arterials are completely gridlocked, Plenary will bail on the project and leave CDOT holding the bag. Property values outside the moat will begin to reflect the difficulty in getting around, businesses in the area will be howling, and all of the affected towns, Louisville, Lafayette, Superior, Broomfield, and Westminster, will demand that the toll lanes be made free, because reserving an entire lane in each direction for a few dozen buses and some rich people willing to pay (at that point) over $20 each way, will not be justified.

  19. Just a suggestion for the HOT lane that allows an electric vehicle on the road.

    They already do something like this on I-25 with a sticker you can get for a hybrid.
    Why not modify that sticker to include the transponder in the sticker?

    Otherwise you could really just issue the stickers as you already do, require a transponder for the E-470/Northwest Parkway corridor and you are automatically hit when you drive through, but in the billing the Tolling Authority shows your vehicle as a hybrid and no money is deducted for your account.

    1. I think allowing a quota of EVs in the HOT lane is a great idea to drive early adoption, and we can do it on US36. This would require the state making up for the lost toll revenue, but that’s not nefarious. The road is being financed by tolls. Regardless of whether it were a public or private entity collecting those tolls, if we want to give someone access to the lanes for free, that revenue has to be made up for somehow to keep the project financially whole. The question is where do we find that funding?

      1. This road is *NOT* and I repeat *NOT* being financed by tolls. The majority of the $500 Million cost of this update project is either direct taxpayer funding, or bonds payed back with taxes. The existing road was 100% financed by taxpayer dollars other than the very small toll that was retired in the ’60’s.

        Furthermore, even after the establishment of the absolutely stupid BRT lane, 2/3 of all costs of US-36 will continue to be shouldered by the taxpayers.

  20. The voter information, leaves out a critical element. In those polls were voters made aware of the consequence of not increasing taxes and for what purpose. When voters are publicly informed in a meaningful and consistent manner on the topic, only then can you say community outreach occurred and only then do polls begin to paint the real picture. Perhaps the media can do it’s part and when, I turn on the 10 pm news each night, instead of seeing 5 to 6 reports of criminal activity and endless hours of Broncos coverage, I as a member of the public can hear reporting on public policy matters.

    Even Toor testified at the legislative hearing last week that he was not included in discussions on how the matter would be funded (ie. P3) and I’m not just talking about contract terms. Senator Jones has indicated that if the legislature’s input was sought or allowed the funding could have come together, just as it was done for Phase I of the project.

    The plan is executable without a P3 and it is misleading to say so otherwise.

    1. I couldn’t agree more on the uselessness of the popular news in keeping the public informed about policy and governance stuff. The “Progressive 15” NE Colorado counties coalition has a PowerPoint with some more info on the polling.

      Unfortunately, I suspect that Senator Jones’ comments about being able to find the public money are probably overly optimistic. The projected toll revenues from Phase I (the part of US-36 closer to Denver) were significantly higher than for Phase II (the part near Boulder), meaning the bonding capacity based on those revenues was smaller. CDOT didn’t have the money in their budget until 2035, so getting it built sooner without an additional funding stream would have meant taking money from transportation projects somewhere else in the state. Which I’d be fine with since I live in the US-36 corridor. But you could see how other parts of the state might not be so into that. Getting the legislature involved would allow shifting money around between state agencies — into CDOT from… where? Or maybe we should have gotten more FasTracks money for this project? Should we have taken money away from one of the light rail lines in Denver instead? But then they would be forced into the same situation, of scrounging around and maybe ending up doing a P3 themselves. Oh, wait, that’s right — the light rail lines are already being financed with a P3 arrangement, so why isn’t everyone up in arms about that?

      1. People are not up in arms about the P3 arrangement on light rail because the light rail is not essential transport, nor is it a takeover of the ONLY main transportation route between two major cities, as is the US-36 project.

      2. We didn’t have to take funding from light rail to fund Phase 2 of the US-36 project. All we had to do was eliminate the absolutely stupidly overpriced BRT stations that people don’t want anyway, according to RTD’s own survey: “While 86 percent of respondents said they preferred the over-the-road coach, 10 percent
        preferred the low-
        floor model and four percent had no preference.”

        If the idiots at RTD had thought to do a survey BEFORE demanding that BRT stations accommodating low-floor buses be built, the money saved could have been put toward Phase 2, and this controversy would be moot.

  21. Really glad we’ve all had to suffer thru the US36 construction for no new lanes. It seems impossible that this can be true but alas is. What gets me most is the amount of the tolls, like 470, these will be some of the highest tolls in the country. Lordy help us if they go thru with a private I70 deal into the mountains. What are they going to charge $20 to drive up to summit county? Then another $10 thru the tunnel. Something needs to be done about this. It’s probably a done deal already, wish there was some way to derail these types of arrangements.

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