by James A. Bacon
NORFOLK–The McDonnell administration characterized a public-private partnership agreement for HOT lanes on Interstate 95 as a win-win arrangement that will expand capacity and create new choices for Virginia drivers without dunning taxpayers or motorists who don’t want to pay tolls.
The agreement in principle with Fluor Transurban also protects taxpayers from financial harm if ridership projections fail to meet expectations but shares revenue with the state if revenues exceed a pre-set level. “People have a choice. Nobody’s forcing them to go onto the HOT lanes,” Transportation Secretary Sean T. Connaughton said during Wednesday morning meeting of the Commonwealth Transportation Board. “As tolls rise, it will encourage people to use transit or carpools. This is all about using market forces.”
Hours later, at the Governor’s Transportation Conference, the McDonnell administration highlighted other design-build and public-private partnership projects (P3s), including a major truck-climbing lane on rugged terrain on Interstate 81, the addition of HOT lanes to the Washington Beltway, the Coalfields Expressway and the Interstate 295 interchange in Chesterfield County. In the absence of significant new revenue sources, the administration is turning to P3s to leverage the $4 billion the state will borrow during Gov. McDonnell’s four-year term.
The unapologetic trumpeting of P3s and megaprojects followed the release yesterday of a report by the Virginia Chapter of the Sierra Club, “21st Century Green Transportation: A Vision for Virginia,” that criticized McDonnell’s “frantic road building program” for spending billions of dollars in borrowed money to build “major, unneeded and destructive roadways.” The Sierra Club said the state should prioritize spending on maintenance, establish performance standards to guide the selection of projects, require stronger links between transportation and land use and devote more spending to alternate forms of transportation such as mass transit, van pools, bicycles and pedestrian-friendly infrastructure.
The governor’s office announced the I-95 HOT lane agreement Tuesday morning. The $940 million deal will add, improve or extend 29 miles of HOV lanes from Fairfax County through Stafford County. The HOV (high occupancy vehicle) lands will be converted to HOT (high occupancy toll) lanes, in which people can pay a toll to bypass congested traffic in the general lanes. Carpoolers, buses and motorcycles will be allowed to continue using the HOT lanes with no extra charge.
Virginia Department of Transportation officials expect that trips will run around 11 miles for a $4 charge on average, although the toll will change continually, depending upon demand, and could be considerably higher or lower. There will be no toll gates. Drivers will enter the HOT lanes like they enter HOV lanes, but they will pass under a gantry that will record their activity based on EZPass transponders in their cars. Toll rates will be set to maintain free-flow conditions of 55 miles per hour minimum speed.
As tolls rise, the HOT lanes will encourage to carpool, ride buses or even join the ranks of “slugs” who hitch rides with drivers eager to avail themselves of the free HOV lanes, Connaughton said. To create transportation options, the deal contemplates the investment of $200 million in the expansion of transit bus services and park-and-ride lots.
Chief Deputy Commissioner Charlie Kilpatrick gave a detailed explanation of how the commonwealth’s interests are protected in the agreement with Fluor Transurban. Although the state is granting a 73-year concession upon completion of construction, it will maintain legal ownership and all assets will revert to the state at the end. The state has the right to audit the concessionaire’s books, and it can suspend tolling in emergencies. The agreement outlines the concessionaire’s obligations to maintain operating standards and roadway conditions. And Fluor Transurban assumes the full risk of cost overruns or schedule delays.
By investing $97 million, the state will attract roughly$840 million in private investment, some of it equity and some of it financed by bonds. CTB members asked what protection the state has if revenues fall short of projections and the venture loses money. Revenues would go first to pay operating expenses, he said, and only then be used to meet payments to bond holders. If the entity went bankrupt, private investors would lose their equity.
The agreement also builds in options and protections for Fluor Transurban, such as allowing the enterprise to propose enhancements not contemplated in the original deal. The state has no effective veto over tolls, which are set by market rates. And the private partner has the right to be compensated if the state undertakes a project that is proven to impact the revenue flow from the road, such as making significant improvements to U.S. Route 1, which runs parallel to the Interstate.
The Federal Highway Administration is scheduled to review and approve the project in the spring of 2012. The financing will close that summer. Construction is scheduled to be complete in 2015.
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