Bacon's Rebellion

Democracy Thrives in Sunlight

Australians May Dump Pocahontas Parkway

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Peter Galuszka
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The Pocahontas Parkway — Transurban’s white kangaroo?

By Peter Galuszka

This just in from Australia! Transurban, the Aussie company that owns public-private partnered Pocahontas Parkway near Richmond, is considering selling the toll road because it has become a White Kangaroo.

If so, this is incredibly bad news for PPP3 advocates everywhere, including various moderates and conservatives such as Gov. Robert F. McDonnell and his transportation chief Sean Connaughton.

The Australian newspaper reports Aug. 7 that Transurban, a master of PPP3 deals, is considering unloading the eastern Henrico property because it has become a financial disaster that has led to a 51 percent slide in its annual profit.

Reports the newspaper: “The Pocahontas Parkway in the southern part of Virginia was constructed in anticipation of new housing developments that never materialized due to the global financial crisis.”

In June, the firm wrote down the value of the parkway to zero and took a $138.1 million charge. The newspaper says that the Virginia project is a “blight” on its other Australian entities.

The Parkway that connects I-95 with I-295 has had a history of problems. During the years of former Gov. Mark Warner its lagging tolls and debt almost cost Virginia its Triple-A bond rating. Warner put together a quick deal to unload the property.

Other than helping get traffic to Richmond International Airport, the multi-lane loan seems lonely. It extends through farmlands and pine forests that had been anticipated subdivisions and shopping malls before the 2007 real estate crisis hit.

The larger issue is that public private partnerships of the Pocahontas type are considered panaceas for states with no money to spend on big, new roads. Popular with both political parties, McDonnell has time and again tried to excite interest in PPP3 deals for his pet projects such as a superhighway to replace US 460 in southeast Virginia and tap expected new port cargo traffic when the Panama Canal expansion is completed.

The Aussies, however, are sounding a loud warning. Call it “Thunder from Down Under.”

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  1. larryg Avatar
    larryg

    This was originally a VDOT toll road that for some odd reason Transurban agreed to take over and it’s not like it was not known at the time they took it over that it was way under projections.

    It’s reported that heads are rolling at transurban as a result.

    http://www.tollroadsnews.com/node/6110

  2. larryg Avatar
    larryg

    Well.. they just broke ground on the I-95 HOT Lanes and some folks are fearing that the HOV3 will be so successful that there won’t be enough remaining capacity to charge tolls that Transurban will not do well.

    Not to worry though. I understand that if they do not meet their bottom line, that Va will pay them 70 cents on the dollar for every car below their guarantee.

    So..see they DID learn from their Pocahontas “experience”!

    There are anti-toll uprisings in both Hampton and NoVa as well as the counties along the I-95 corridor.

    Makes me wonder if we’re actually going to see signs and websites that say “RAISE our GAS Taxes”!

    what do you think? are people going to DEMAND that Va raise the gas tax?

  3. James A. Bacon Avatar
    James A. Bacon

    The situation at the Pocahontas Parkway is indeed bad news for Transurban, as I’ve already reported, but it’s not necessarily bad for the state. Indeed, this worked out the way P3s are supposed to work. The private sector player takes the risks, gets the big reward if it bets right and loses his butt if he bets wrong. This project was highly speculative from the very beginning, thus entirely inappropriate for the state to undertake on its own.

    It’s only bad news for Virginia if Transurban suddenly becomes more risk averse in the projects it takes on and starts demanding more protections and safeguards in its contracts with the commonwealth.

    I would agree with you, though, that this is an object lesson for the U.S. 460 Connector, which is an inherently risky project. The private sector won’t participate without massive state subsidies. Unfortunately, the McDonnell administration has decided to assume the risk itself.

  4. Peter Galuszka Avatar
    Peter Galuszka

    Not sure I get your logic here, Jim.

    The state spends millions planning for the Parkway. It gets built and goes bad. State unloads on the Aussies, who take a beating and want to unload the parkway.

    “Indeed, this is the way P3s are supposed to work out.’

    ???????

  5. TMT Avatar
    TMT

    Roads for economic development generally means “put a road near where some well-connected land speculator has holdings.”

  6. larryg Avatar
    larryg

    I’m not sure that Transurban would have even taken this project from the get go.

    For some reason, they got talked into taking it off of VDOT,s hands even when everyone and their dog knew it had gone bad.

    why would they do that?

  7. Darrell Avatar
    Darrell

    why would they do that?

    Maybe because a lot of their money comes from Australian pension funds?

    BTW, other PPPs are peeing on themselves. Start with the old Indiana Turnpike, and work your way through the various major players pending insolvency. It’s not just roads. The business model is flawed.

  8. larryg Avatar
    larryg

    Are we talking about only the PPP toll roads or toll roads in general?

    Here’s a description of the purpose of HOT Lanes on 495 and I-95:

    1. Increase the people-moving capacity of I-95 as the region grows;

    2. manage traffic in the new lanes by imposing a toll that rises and falls with the level of congestion;

    3. retain the incentive to carpool, the key feature of the HOV lanes;

    4. expand the park-and-ride facilities that feed the carpools;

    5. and get private companies to take on most of the burden for financing construction and operating the lanes.

    is it No. 5 that you think if flawed or some/all of the other 4 also?

  9. TMT Avatar
    TMT

    The problem remains the same whether taxes or tolls fund a road. Virginia is not building the right projects because land speculators have significant control of the CTB process. It seems to be the Pocahontas project was doomed from the start. The road was designed to open up landholdings for real estate development, rather than reduce traffic congestion or improve safety.

    On the other hand, the Beltway Express Lanes are designed to reduce traffic on the Beltway’s general purpose lanes. They do this for several reasons: 1) move some traffic to the Express Lanes from the general purpose lanes; 2) allow commuter buses on the ELs; and 3) encourage car and van pools.

    I see a big difference and expect different financial results.

  10. DJRippert Avatar
    DJRippert

    The long arm of the Imperial Clown Show in Richmond is costing pensioners in Australia their futures?

    Richmond is a plague on a global scale.

    Wait until Transurban gats a load of the Beltway toll roads that are supposed to bring in several dollars per mile during rush hour.

    Sequestration, mate? What’s sequestration?

    I told every Australian I met on my 20+ trips to Australia that they would regret doing business with the state government in Virginia. Guess I’ll have to call them to (politely) say, “I told you so.”.

  11. larryg Avatar
    larryg

    I think the HOT lanes would ultimately prove to be the correct solution.

    You cannot really continue to expand the road network in a place like NoVa.

    Expanding the beltway without also expanding the connecting surface streets is just a recipe for congestion disaster – EVEN IF – you actually had right-of-way available without tearing down existing income-producing properties.

    Ultimately, WHEN you use the transportation network and HOW you use the transportation network will be a choice – with time and money consequences.

    You are not now guaranteed a time-certain trip 24/7 on regional road facilities. It’s a myth.

    I predict HOT lanes are going to become the de-facto standard configuration of ALL urbanized regional road systems and yes…there can be a role in doing that with a company like Transurban.

  12. TMT Avatar
    TMT

    The key factor is it is financially impracticable to construct urban road networks that can handle peak capacity. The incremental costs are simply too high. Also, interstate highways were never intended to be commuter roads. Go back to the Pershing Map.

    It’s necessary to move SOV traffic from the peak periods through pricing peak usage at a premium; incentivizing the use of transit or other shared travel modes (car pool, van pool); teleworking; cordon pricing; etc. I think Larry is correct in that HOT Lanes will be the standard for urban highways that are used for commuter traffic.

    The other big thing that would help transportation is to increase the security of the Internet so that more workers can safely telecommute.

  13. DJRippert Avatar
    DJRippert

    If you keep making it more expensive and more inconvenient for people to get to and from work then fewer people will work.

    Right now, only about 1/2 of wage earners pay income taxes.

    Tolls are just like taxes – they discourage people from working. HOT lanes are the worst. They target the tiny fraction of Americans that are paying all of the income taxes.

    If the geniuses in Richmond ever ran companies all the companies would be bankrupt. The early retirees and voluntary part timers don’t want to pay a gas tax that is is indexed to inflation. So, Richmond penalizes the very few who work, earn an income and pay their full measure of taxes.

    Brilliant.

    Once Virginia is reduced to even fewer taxpayers supporting even more early retirees and voluntary part timers there won’t be any money for police, courts, schools, etc.

    North Carolina and Virginia were very comparable a few decades back. North Carolina elected competent people to the state legislature. Virginia elected half-wits. Give it ten years. Virginia will be the financial equivalent of a third world country and North Carolina will be doing just fine.

  14. Potomac Clubber Avatar
    Potomac Clubber

    I believe that the HOT (Lexus) lanes on I-95 will end up making traffic worse. Especially during the weekend were the traffic on I-95 (Springfield to Fredericksburg) is actually heavier then during weekday rush hour.

    James, I would suggest that next Saturday around noon that you log into Google maps and make sure the traffic layer is checked. Then zoom out until the entire country is visible so you can see all of the road traffic in the US. I can guarantee you all of the roads are green, with the exception of two long red stretches of highway. I-95, Springfield to points south of Fredericksburg and I-64 around Newport News. Virginia may only be third or forth in the country for worst traffic, but we are hands down number 1 as far as the worst traffic on the weekends.

  15. TMT Avatar
    TMT

    “The North Carolina Turnpike Authority was created in 2002 by the General Assembly in response to concerns about rapid growth, heavy congestion and dwindling resources. The Turnpike Authority is authorized to study, plan, develop, construct, operate and maintain up to nine projects. ” http://www.ncdot.gov/turnpike/

    The Turnpike Authority is authorized to study, plan, develop, construct, operate and maintain up to nine projects, including:

    Triangle Expressway
    Triangle Expressway Southeast Extension
    Monroe Bypass
    Mid-Currituck Bridge
    Garden Parkway
    Cape Fear Skyway
    I guess no one will go to work in the Raleigh-Durham, eastern Mecklenburg County, the nothern Outer Banks, Gaston County-western Mecklenburg County, and western Wilmington areas.

  16. larryg Avatar
    larryg

    re: NC – yes, thank you TMT

    For some reason, DJ has a gigantic blind spot to NC and toll roads.

    re: people who have to pay tolls won’t work PLUS “targeting” taxpayers who do work

    what a load of bilious blather!

    With HOT Lanes, he untolled mainline roads are STILL available guy.
    You only pay a toll if you want a faster trip AND you are not willing to carpool, or use bus/van transit.

    TMT got it right when he asked/recognized the financial INfeasibility of trying or believing that it is possible to buy down congestion on regional urban roads by building more free infrastructure.

    There is not a place in the country, Dillon Rule or Clown Show or not that has done this successfully.

    In fact, if you look at the major urban systems in the US – virtually everyone of them is now tolling their regional road infrastructure.

    So where are all those “real” taxpayers going to run to, to get their free roads?

  17. DJRippert Avatar
    DJRippert

    TMT and LarryG:

    Nice try, guys! Of the various project listed by TMT and “fawned over” by LarryG –

    Only one has been built – The Triangle Expressway.

    The rest are simply study projects.

    And – what is the highest toll a car will pay on the Triangle Expressway?

    $0.82 per trip NOT PER MILE

    Meanwhile, construction on the Beltway HOT lanes is nearing completion and the Imperial Clown Show in Richmond can’t summon the courage to make Flour / Transurban disclose the pricing.

    Here is the best they have:

    “Because toll prices are based on demand, it is difficult to predict exactly what the tolls will be at any given time. We expect they will range from as low as 20 cents per mile during less busy times, to approximately a $1.25 per mile in some sections during rush hour. An average trip cost is estimated to be between $5 and $6.”.

    $0.82 per trip vs. $1.25 per mile

    $0.82 per trip vs. $5 – $6 per trip.

    What is it about simple math that confuses both the Imperial Clown show in Richmond and their apologists throughout the state?

    Also, isn’t it funny how people will complain bitterly about higher tolls on the Dulles Toll Rd while ignoring the $10 – $12 per day that it will cost to drive on the Beltway HOT lanes.

    Of course, you can sit in traffic on the “free” Beltway if you don’t want to pay $10 – $12 per day. Of course, you can sit in traffic on any number of highways if you don’t want to pay the tolls on the Dulles Toll Rd.

    Clowneggeddon will happen in Virginia long before Boomergeddon happens in the rest of the US.

    No more gusher of federal money. Dramatic drop off in jobs. Educated people (with jobs who pay taxes) leave for greener pastures. Real estate prices plunge. The tax base erodes.

    Then, the Imperial Clown Show in Richmond will stand around with their apologists throughout the state saying, “I wonder how this happened”? “North Carolina has tolls too”.

  18. larryg Avatar
    larryg

    I think it is FASCINATING that traffic on I-95 is worse on weekends than week-day commuter rush hours.

    On some prime holiday or weekend before school, the traffic gets very heavy, true, but that’s true on a lot of roads.

    If you check the typical rush hour traffic in places like New York, Philly, Charlotte, Atlanta, Houston, Chicago, LA, etc – you’ll find that they are all similar and all due to the same reasons – i.e.people who want to drive solo at rush hour on limited capacity roads for which there are physical AND fiscal limitations to adding capacity.

    We live in a pretend world on this. We just refuse to acknowledge simple realities about why we have traffic where we have traffic and how we’d reduce congestion.

    Even if we had the money – we are at the point where widening roads means tearing down valuable properties that currently produce tax revenues and provide jobs.

    Again, we like to think the Washington Area is the worst. It’s not. It’s one of about 20 urban centers in the US that has similar congestion for similar reasons.

    And DJ’s “concern” that we have tolls then have Federal cutbacks is comical.

    If you really do have cutbacks, won’t it reduce congestion? And if congestion is reduced why would people pay tolls? It’s as if DJ, the businessman does not himself understand supply and demand!

  19. TMT Avatar
    TMT

    North Carolina – the point is the new road capacity will be built as toll roads.

    The Beltway would not have been widened but for HOT Lanes. Environmentalists made it very clear that they would sue under the Clean Air Act if Virginia or Maryland were to build more general purpose lanes on the Beltway. And it’s uncertain whether the feds would have agreed as well.

    Also neighborhood opposition to Beltway expansion might have been successful too – both in Virginia and in Maryland. The immediate neighbors to the Beltway near the American Legion Bridge stopped the expansion of the HOT Lanes from Old Dominion to past Georgetown Pike simply because they did not want a wider Beltway. They would have made chopped meat of any attempt to add general purpose lanes. Similarly, residents of Vienna, Falls Church and McLean raised such complaint about additional traffic noise that Senator Howell and Delegate Scott had a significant sum of money appropriated for sound walls on the Airport Access Road and the Beltway. Friends in other parts of Fairfax County tell similar stories.

    At least in large metro areas, we have passed the time where we can simply build more highway capacity to meet peak commuting period demand. There is community, environmentalist and taxpayer resistance to many of these projects. Like Metrorail fares, there needs to be peak pricing to help manage demand. The age of Til Hazel has ended.

    1. DJRippert Avatar
      DJRippert

      The debate over tolls in NC is far from over. Te bridge to the Outer Banks has been under debate for decades. It is still not built.

      Here is a great article from NC. Note (especially) the “Tolls = Worst Form of Taxation” section.

      http://projects.newsobserver.com/under_the_dome/ellmers_files_bill_to_block_i95_tolls

      Here’s something that never seems to get any airplay around here:

      “Consider, for every $100 raised via tolls, approximately $25 are surrendered to administrative costs – regardless of whether using traditional toll booths or new electronic tolling technology. But for every $100 raised via fuel taxes, roughly $1 is lost to administrative costs. In other words, in order to raise $100 million for road funding, $125 million in tolls must actually be collected due to the $25 million deadweight loss.”.

      Again, nuce try – TMT. You take a few studies and make statements that are misleading, at best.

    2. DJRippert Avatar
      DJRippert

      “At least in large metro areas, we have passed the time where we can simply build more highway capacity to meet peak commuting period demand. There is community, environmentalist and taxpayer resistance to many of these projects.”.

      And in North Carolina – where they don’t have an Imperial Clown Show – there is political opposition to double taxation via tolls …

      “U.S. Rep. Mike McIntyre, a Lumberton Democrat, has also publicly said that he is opposed to tolling in North Carolina. Spokesman Dean Mitchell said by email that McIntyre “has heard from both individuals and businesses who are concerned about the impact that tolling will have on their pocketbooks.”

  20. larryg Avatar
    larryg

    re: administrative costs toll booths = no toll booths = same cost, no diff.

    wow! So – you have no toll collectors to pay but the costs of collecting the toll are the same!

    re: double taxation. Roads cost three ways: initial construction, operation, maintenance.

    roads are _never_ “paid for”. Every new roads imposes additional/added costs for maintenance and operation.

    When you consider:

    1. – increased costs of construction, maintenance and operation
    2. – more fuel efficient cars
    3. – tax not indexed

    the traditional fuel tax is pretty much dead except to pay for maintenance and operation of existing, already-built roads.

    one penny of fuel tax in Va generates about 50 million dollars. It’s similar in NC. Do the math.

    The problem with folks like DJ – is that they have no solution. They don’t like tolls but they refuse to admit that increasing the gas tax is something most of RoVA (via their elected) are not going to go for.

    Both Warner and Kaine and other Democrats are hammered by the Republicans every time they even whisper gas taxes.

    so we can (and probably will) have an increasing anti-toll movement in Va and NC but then what next?

    I would agree with TMT. It don’t really matter what is next in terms of the urbanized areas. There simply is no feasible way to add significant capacity and the future is managed congestion via tolls.

  21. TMT Avatar
    TMT

    People don’t want higher gas taxes or tolls. At least in Virginia, many rural parts of the state don’t need any significant expenditures on transportation. So why would residents and businesses want to pay higher gas taxes? And where we need substantial transportation improvements, many people think the money would be wasted. And that’s not hard to find many examples. For example, the projects listed for construction were the Mark Warner sales tax referendum to have passed did not show any quantifiable benefits to drivers, but rather were all pet projects of land speculators. We’re building a multi-billion Silver Line system that not only won’t fix traffic congestion, but will also create sufficient development to create massive amounts of additional traffic congestion.
    Moreover, many of the potential projects will disrupt neighborhoods or businesses. And those adversely affected will fight the projects. For example, an argument can be made Maple Avenue in Vienna should be widened to six travel lanes. But widening would have a huge impact on the properties of many existing businesses, both large and small. Vienna just won’t except the widening.
    Congestion management is here to stay. And it will include tolls, premium rates for parking in urbanized areas, pressure to telecommute, etc.

  22. larryg Avatar
    larryg

    TMT has got it right. RoVa does not want nor need higher taxes and NoVa and Hampton Roads both have had ample opportunity to step up to pay for their regions needs and both regions have said “no” so far.

    So DJ wants to blame others… everyone but his own region which plays the congestion victim but wants no part of any solutions that involve their taxes or tolls.

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