9 SC road projects are pricier than expected. How much more will infrastructure bank chip in?

Nine projects around the state that have received money from the South Carolina Transportation Infrastructure Bank are nearly half-a-billion dollars short on cash, according to documents shared with state budget writers.

Large projects, eight of which were approved in 2020 including three exit projects on Interstate 77 in York County, have budget shortfalls. The total original cost of the projects was $991 million. Cumulatively they have $470.7 million budget shortfalls, and the bank has been asked to chip in an additional $185 million towards three of the projects.

The bank has committed more than $488 million to these projects, mostly through grants. Local money also has been planned for the projects to help them move forward.

The nine projects that have overages are half of the bank’s active and planned projects.

These higher costs could put other projects the bank might want to push on the back burner longer. S.C. Department of Transportation officials raised the alarm bells earlier this year and pushed the state infrastructure bank to provide more cash for the projects.

But price inflation wreaked havoc on prices including construction costs.

“Many of the projects approved by the SIB many years ago have not advanced to construction, which is important to note due to the roughly 35-50% cost escalation we have experienced in the road construction business since the pandemic,” then Transportation Secretary Christy Hall wrote in a letter on bank board members in March.

A brewing concern from the SCDOT

When the bank works with local governments on large projects, it signs an intergovernmental agreement, which calls on the local partners to cover cost overruns.

Hall wrote S.C. DOT did not believe local governments would be able to close the gap on the projects, even though it is stipulated in intergovernmental agreements.

“Simply relying on the language in the IGA that the locals are responsible for all overruns is not working and is no longer effective way for SCDOT to manager and deliver SIB projects,” Hall wrote.

SCDOT even asked the infrastructure bank, which receives money through truck and other motor vehicle registration fees among other sources, to contribute more cash towards projects to allow them to move forward.

In response, bank board Chairman John White recommended finding reliable updated cost estimates, finding alternative ways to pay for the overages, possibly delaying the projects or modifying the scope of projects.

The bank has been asked to cover $185 million in shortfalls for three projects:

▪ $90 million toward the U.S. 278 project in Beaufort County,

▪ $60 million toward the Interstate 77 Exit 82 project in York County, and

▪ $35 million toward the Interstate 95 Exit 3 project in Jasper County.

“The easy way out for us at the bank would have been, let’s try to work it out, get the rural program and pay some money and get out of this. We’re a bank, and we have a fiduciary duty, not only to our citizens, but we have a fiduciary duty to you who allow us to serve in this capacity,” White said during a Joint Bond Review Committee meeting.

White last week told the JBRC, comprised of House and Senate budget writers, he didn’t believe it was in the best interest of the bank to spend more money on the projects.

“I didn’t think we had the money. I didn’t think it was in the best interest of the bank,” White said. “I didn’t think it was in the best interest of a rural program that I am trying to kick off that will have some meaning for the people of South Carolina and take care of some of your needs.”

Issues around whether these projects had enough money came about over questions of whether they were shovel ready.

For instance, the I-77 Exit 85 project took three years to reach shovel ready status after an intergovernmental agreement was signed, Hall wrote in another letter to the bank board.

Bank officials do ask project sponsors to provide timetables, when phases will be implemented, status of permits and whether projects have environmental approvals when they apply for bank funding.

Transportation Secretary Justin Powell said the projects that have seen significant cost overruns have been with projects that “weren’t as shovel ready as the applicants said they were.”

Powell said many of the projects are still in the permitting and right of way acquisition process before the money is needed to move forward.

“There is time to solve this issue,” Powell said.

But he said the Jasper County project for Exit 3 on Interstate 95 needs to be solved soon because that project is slated to be done in conjunction with the widening of I-95 north of the South Carolina-Georgia border. That project is slated to go out for bid in February.

Because of recent inflationary pressure, the costs of projects have gone up.

“SCDOT has been through this very issue on many of our own projects and have had to make financial adjustments to our program in order to ensure that we deliver results in the form of active construction work for the people of our great state,” Hall wrote.

But Hall also was critical of the infrastructure bank.

“It is with this in mind that I strongly encourage the SIB to take a hard look at your program in terms of financial viability and develop a better process for handling and planning for cost overruns in cooperation with the local governments,” Hall wrote.

The bank has the ability to cover overages but “within reason,” White said.

The infrastructure bank has the ability to borrow up to $510 million as of an October JBRC meeting.

“We’ve got to be careful with our bonding capacity. We’ve got to be strategic in regards to that,” White said.

White said money is supposed to be allocated after plans, acquisition, engineering, permits and environmental issues are completed.

“We’re supposed to be there to be a catalyst to help people do what they wouldn’t ordinarily otherwise be able to do, and we have requirements that require our applicants to put some money in the game, and then we match that. We’re not in the business of funding construction just on the sake of building roads and building bridges,” White said.

Future desired projects could be delayed

Delays in getting the work done and the higher costs also risk future work the bank and lawmakers want to see done.

In the Rock Hill area, the I-77 exit 85 project , which is under construction, has a $49 million budget shortfall. York County put in an additional $16 million into the project. To cover the rest, three years of cash set aside for the metropolitan planning organization will go to the project.

“So they have basically pushed aside any other priority they have. And that’s, I think the concern we have, is that when it comes back to the planning organization at the end of the day, we have the real danger that other priorities might get displaced in the process,” Powell said.

White added the state infrastructure bank plans to open up a rural program to allow counties with a one-cent sales tax to apply for money for projects and “where we can look at where the money needs to be spent in a strategic manner with our partners, the DOT and otherwise.”

Still legislative budget writers have concerns.

“My concerns is that we seem to have overpromised,” said state Rep. Gilda Cobb-Hunter, D-Orangeburg, who sits on the JBRC and the House Ways and Means Committee. “We’re in over our skis, given available resources, and I’ve gone through this, and I know that I’m just really concerned about what seems to me to be overage, or more projects than money, and so I’m concerned about the projects that are already in the pipeline.”

Cobb-Hunter said she is concerned the project overruns would come at the expense of rural projects in the state. As counties such as Orangeburg and Bamberg counties are trying to attract economic development and have had conversations about adding a new interchange on Interstate 26 to serve the area.

“But at the rate we’re going with the (state infrastructure bank) and the commitments that have already been made, I don’t think any of us around this table and perhaps out ... in the audience, will be around when the opportunity presents itself for us to try to access some funding,” Cobb-Hunter said during a JBRC meeting.

Despite the concerns from the Department of Transportation, Powell said his agency continues to work with the bank.

“We’ve been working very well with Chairman White and CEO (Charles) Cannon on trying to find ways that we can reconcile these these shortfalls and figure a way these projects to go forward,” Powell said.

Infrastructure bank officials have said they are working with the counties and local partners to find a solution to covering the overages.

In some of the areas, such as the Charleston Septima Clark project, the city plans to cover cost overruns, White said.

In Beaufort County, where the U.S. 378 project is $190 million more expensive than the original cost, a penny tax which that is on the ballot in next month would cover $100 million of shortfall, but the bank has been asked to chip in an additional $90 million.

“One of the four bridges there is the original bridge to Hilton Head that was built in the 1950s. It’s approaching 75 years old. It’s starting to have major issues,” Powell said. “It is a threat of being posted soon. And so we need to make a decision one way or another, if I’m going to repair the bridge and take care of that existing one, (or) we’re going to build a new, improved bridge.”

A b ridge deck part of the Exit 82 project on I-77 in York County has yet to begin. That project, originally estimated for $38.2 million now has a $60 million shortfall. York County has inquired about the bank covering the shortfall, documents show.

“The intent was to fix that as part of that project, but we have to have a decision at some point soon,” Powell said.

Greenville County has an $8 million shortfall on the Woodruff Road project, but will use money from the local metropolitan planning organization cover the higher costs. The project is still years from being put out for bid, Powell said.

“We’re going to need to have a commitment that those dollars are available to us in order for us to proceed with the letting,” Powell said. “We’re not going to let the project without the funding in hand for us to proceed. It’s a violation of state law for us to do that.”