The Palmetto Insider

The blog of the South Carolina Policy Council

A Better Alternative to Greenville’s Southern Connector … Profit

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It’s not exactly breaking news that the Connector 2000 Association, the nonprofit operator of the Greenville Southern Connector, filed for bankruptcy today.

An article on the bankruptcy in gives a succinct breakdown of why the project failed:

“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. …

“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.

“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.”

In short, the Southern Connector is another failed example of why government driven economic development – via targeted tax exemptions – does not work. The project was only sustainable because no one – except taxpayers – had real “skin in the game.”

A better model for building roads is to use public-private partnerships to build FOR-PROFIT toll roads. Under this model, the state would save millions by contracting out development and maintenance to private developers. Such developers would be more likely to make sure their investments yielded a sound return – precisely because it would be their money on the line.

To read more about how public-private partnerships can build better roads, at a much reduced cost, in South Carolina, click here.


Written by Jameson Taylor

June 25, 2010 at 2:47 pm

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