Toll Road Kill?

Contract for South Mountain tollway may depend on company's dumping of its president

Phoenix-based Interwest Management, Inc., the firm hoping to land a $360 million contract to build and operate the South Mountain Toll Road, may be forced to shed its president, Richard Lloyd Carr, if it hopes to do business with the state.

Carr, whose most recent public-private improvement is a $32 million sewage treatment system in Apache Junction that filed for bankruptcy early this year ("Carr Wrecks," April 10), did not return a phone call seeking comment.

But state transportation officials, who have considerable power in dictating the terms of any agreement, are sending strong signals that they expect Carr to be dropped.

"We expect that that's going to be the decision," says Bill Hayden, who heads the state Department of Transportation's privatization department.

Hayden says he will meet with officials from Interwest and from its parent company, Omaha-based engineering/architectural giant DLR, within the week to discuss the status of what he called a "revised Interwest."

Hints of discord emerged last month in Public Works Financing, an industry newsletter that tracks privatization. According to the article, titled "DLR Sours on Interwest Partnerships," one of the principal partners in DLR was having second thoughts about doing further business with Carr's firm.

"We've never been quitters," James Roubal, DLR's managing partner, is quoted as saying, "but sometimes you've got to change direction. If public-private partnerships is not the place to be, we'll go somewhere else."

Roubal may have been inspired to "go somewhere else" by the imbroglio in Apache Junction, which has reportedly saddled DLR with more than $40,000 in monthly legal bills.

The chief plaintiff is Allstate, which purchased all of the district's revenue-secured bonds. Allstate alleges that Interwest and its partners, all of whom were picked by Carr, committed securities fraud by grossly inflating district revenue projections.

After learning of the Public Works Financing article, Hayden says, he contacted Roubal to find out whether DLR was in fact yanking its support from Interwest.

"He [Roubal] has assured me that his comments were mischaracterized," Hayden says.

Roubal isn't the only DLR/Interwest official claiming the Public Works Financing article was off the mark.

Grant Holland, another Interwest executive who was intimately involved in the Apache Junction deal, is quoted in the same article as saying he expected ADOT to have approved detailed contract negotiations by the end of May and to sign a contract "three or four months later" that would allow Interwest to build and operate the South Mountain Toll Road.

All of which was news to state transportation officials last week.
"We have not set a date," says ADOT spokesman William Rawson. "Frankly, I don't know where this 'end of May' he's talking about comes from."

Holland says he doesn't remember telling Bill Reinhardt, Public Works Financing's publisher, that he expected things to get rolling by the end of May.

Asked whether he was misquoted in the article, Holland says, "No. I am saying that I don't believe I said that." So what did he say?

"I quite frankly don't know," Holland says.
Reinhardt stands behind his story.
"I don't want to get into some kind of pissing match over it," Reinhardt says. "The story's right: They said what they said."

He adds: "Call ADOT. Interwest is having to explain to them in official terms what their status with DLR is."

Hayden says he will report his findings to ADOT chief Larry Bonine, who ultimately will decide whether to give Interwest the nod. Calls to Bonine were not returned.

The sewer imbroglio in Apache Junction was the latest chapter in Interwest's dubious string of "public-private" partnerships.

Over the past several years, Carr has scrambled to land development deals with municipalities throughout Arizona and across the nation.

In addition to Apache Junction, Carr also tried to set up a sewage system in Quartzsite. Officials there nixed the deal after accusing Carr of trying to line his pockets at the town's expense.

Carr also pitched a privatized prison in Douglas several years ago, but city leaders balked after the Cochise County jail he helped build in nearby Bisbee was found to have construction defects. The walls lacked rebar, and several prisoners escaped by simply scraping mortar from between the blocks.

Currently, Interwest is pursuing a contract for a $160 million toll road near Greenville, South Carolina. The deal could go through if the state's supreme court affirms a lower-court decision denying local governments veto power over projects with statewide or regional implications.

 
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