SC Squeezes 27 Years Into Seven

Wed October 27, 2004 - Southeast Edition
Gwenyth Laird Pernie

South Carolina, with its moderate temperatures, spectacular beaches and beautiful mountain terrain, has a population of more than four million people. It is the 15th fastest growing state with the fourth largest state highway system in the United States. Retirees and tourists, along with established residents, are increasingly discovering the many advantages to residing and vacationing in South Carolina –– and transportation needs have become critical to the economic welfare of the state.

To accommodate South Carolina’s growth and economic development, the South Carolina Department of Transportation (SCDOT) took an innovative approach to improving the more than 42,000 miles of road and interstate by setting a goal to accomplish 27 years of road and bridge work in seven years.

According to Clem Watson, assistant to the state administrator for engineering and design, access to three funding mechanisms allowed the state to accelerate road and bridge work in South Carolina.

“The establishment of the State Infrastructure Bank, the TEA-21 Transportation Bill in 1998, which increased federal funding to the DOT from $300 million to $500 million, and the ability of the Metropolitan Planning Organization and the Council of Governments to enter into bonding agreements all contributed to the state moving forward on nearly 200 projects, some of which had been on hold since the late 1960s,” said Watson.

This ambitious undertaking abandoned conventional ways of doing business and kick started innovative financing plans and public-private partnerships; thereby, launching an unprecedented $5 billion worth of road and bridge construction, he said.

To complete the 200 projects in seven years, SCDOT entered into a public-private partnership with two construction and resource management firms (CRMs) ––┬áthe first public-private partnership of this magnitude in the United States. The state chose Fluor Daniel to handle the western region of the state and Parsons Brinckerhoff/LPA Group to handle the eastern region of the state. Both CRMs act as extensions of SCDOT and both report to SCDOT on the projects they have been assigned to manage. The firms serve as assistants to SCDOT program managers. By partnering with the CRMs, SCDOT avoided hiring an estimated 500 employees.

“The official start date for the 27 in seven projects was the signing date for the agreements with the CRMs –– July 1999,” Watson said.

To accelerate urban and rural area projects, SCDOT partnered with eight metropolitan planning organizations (MPOs) and eight Council of Governments (COGs). The partnerships are beneficial in that they allow future federal highway funds to be leveraged through the issuing of state bonds to build current highway systems improvements.

The key part of this financing program was the issuing of State Highway Bonds, which supplement current federal funds during the construction period. A portion of each MPOs future federal funds allotments will be used to pay back the bonds.

Each MPO and COG program is structured around specific construction projects, which are managed as one large program to help increase efficiency. The projects’ costs, inflation, future interest rates, availability of federal funds, and project item schedules are managed throughout the construction phase to balance the sources of funding with the uses of funding. So, the dollar amount of bonds that can be issued for each program depends on interest rates and the timing of the bonds issued. Putting several smaller projects under a large umbrella program makes for increased efficiency and lower costs.

After years of discussion, the issuing of State Highway Bonds helped move forward the Cross Island Parkway on Hilton Head Island. By issuing bonds, the state obtained a lower interest rate and saved significant project costs. Additionally, instead of using state employees for toll collections, SCDOT entered a contract with Affiliated Computer Services Inc., to operate all aspects of toll collections. Once the bonds are retired, the toll collections will end.

In 1997, the State Infrastructure Bank (SIB) was created by the S.C. General Assembly to assist in financing major road and bridge projects.

Funding for the SIB comes primarily from user fees. Thus far, the SIB has approved financing and begun developing nearly $3 billion in projects. A good example of a SIB funded road is S.C. Highway 22 (a design-build project), which gives motorists a convenient route to Myrtle Beach. It was completed in May of 2001.

Utilization of public/private partnership to fund the 16-mile Southern Connector (also a toll road) in southern Greenville County permitted this long overdue project to move forward. A local not-for-profit corporation, the Connector 2000 Association, was set up to finance and operate the Southern Connector. This arrangement allowed Connector 2000 to issue about $200 million in toll revenue bonds.

The state of South Carolina has no liability for the bonds. After the road was built, it became part of the SCDOT system. This project was completed in February of 2001, nine months ahead of schedule, and was the first public-private transportation project in the United States to be financed using a not-for-profit corporation. Bonds will be paid back through toll road collections.

“This is perhaps the most prominent public/private partnership so far,” Watson said. “Without the Connector 2000 Association this project may still be on the shelf.”

To alleviate some of the worst congestion problems throughout the state, SCDOT targeted interstate widening and interchange improvements that could be done in a short time without the need to acquire right of way. All of these projects should be compete within three to five years. The interstate widening projects are funded with State Highway Bonds and federal funds.

According to Watson, 85 percent of the original 200 projects established in 1999, when the 27 in seven project began, were either under construction or completed by June 2004.