Wednesday, July 17, 2019

Mobile River Bridge Plan is Fatally Flawed: Reason 15

I submitted an independent review of the Supplemental Draft Environmental Impact Statement (SDEIS) to the Alabama Department of Transportation (ALDOT) on July 10, 2019. As of this writing, ALDOT has not acknowledged receipt of my report, containing 19 specific issues with the project's decision document. The SDEIS is the most important document pertaining to the project. The bridge and bayway replacement cannot go forward without it.

The document is fatally flawed.

Since ALDOT has neither publicly nor even privately acknowledged that they are aware of these 19 specific problems with their decision document, I am sharing them with you, one at a time.

Note: Comments 12-19 are all about the Traffic & Revenue Study, which is the key to how the toll structure was developed. This is Economics 205 level stuff.

Comment 15: Chapters 8-11 use arbitrary and different inflation rates for both system costs and revenues. This artificially distorts the effect of inflation and produces a meaningless comparison of revenues, costs and financial feasibility.

Basis: Expected future cash flows should NEVER be expressed in inflated values. Only constant (real) dollars are meaningful because any rate of growth used to inflate the values would also be used to discount them in a present value calculation. This is a basic concept in economic and financial analysis and the fact that it was abandoned in this study is deeply troubling.

Worse, a different rate of growth is used to inflate toll revenues in Chapter 9 than either the value of time or vehicle operating cost in Chapter 8. Worse still, a different and undisclosed rate is used to inflate future operations and maintenance costs in Chapter 11.

Having at least two and as many of three different inflation rates makes any comparison of cash flows meaningless. It is especially troubling to have toll revenues with a growth rate higher than the growth rate of toll system costs. This could lead to suspicion that the analysis is rigged to favor implementing the project. This appearance must be avoided.

Without resolution, this issue could halt finalization of the SDEIS.


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