U.S. 460 Project as Economic Development Powerhouse

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by James A. Bacon

The McDonnell administration’s thinking behind the $1.6 billion reconstruction of U.S. 460 between Suffolk and Petersburg has come into clearer focus with the publication of an economic study by Chmura Economics & Analytics. The I-85 Connector, as the administration has dubbed the project, will have an annual estimated economic impact of $7.3 billion by 2020 and support 14,120 jobs in the U.S. 460 corridor and 11,255 jobs in Hampton Roads, concludes Chmura.

Over and above jobs created by construction and service businesses clustered around interchanges, the four-lane, Interstate-grade highway has three major strategic goals: (1) to accommodate the expected growth of the Port of Virginia upon completion of the Panama Canal widening project; (2) to extend the market reach of the Port of Virginia to North Carolina and beyond; and (3) to serve at least two industrial “mega sites.”

“The new highway will not only reduce citizen travel times, but it will help create much-needed jobs and economic development in some of Virginia’s communities that have been hardest hit by the economic recession, stated Gov. Bob McDonnell in a prepared statement yesterday.

“The Port of Virginia is one of the Commonwealth’s greatest economic assets,” he continued. “Over the coming years, the port is expecting to undergo tremendous growth, but it cannot achieve this growth without the infrastructure and support systems necessary for a thriving port. The proposed new Route 460- Interstate 85 Connector will help address these infrastructure concerns and, combined with the proposed Economic Development Zone, will provide an incentive to grow for the many different businesses and support facilities that will help create jobs for thousands of Virginians.”

The opening of a wider Panama Canal in 2014 is expected to transform the economics of East Coast ports. The Port of Virginia, one of the few ports with channels deep enough to accommodate the massive new vessels now under construction, is well positioned to gain market share. The primary constraints to growth are the rail and highway bottlenecks out of Hampton Roads. The state is addressing rail capacity through partnerships with Norfolk Southern and CSX, while the I-85 connector will provide a high-capacity link to Interstates 95 and 85 around Petersburg. So far, however, the McDonnell team has been sparse with details about the industrial development it hopes the project will stimulate.

The Chmura report, “Economic Impact of the U.S. Route 460 Corridor Improvement Project,” provides background on that subject that had not been disseminated widely before:

Plans are currently in place to develop two manufacturing mega sites in the Route 460 Corridor. Mega sites are certified manufacturing sites that are suitable for large scale economic development. These two planned mega sites are located in Sussex County near the town of Waverly and in Isle of Wight County near the town of Windsor. The Windsor mega site is over 1,860 acres,  while the latest document indicates that the Sussex mega site is 610 acres. The combined size of the two mega sites will be around 2,500 acres.

Typically, writes Chmura, mega sites are used for large-scale manufacturing such as automobile assembly. Both sites are still in the development stage, however, and the targeted industries are unknown.

Based on comparisons with comparable industrial mega-sites, Chmura estimates that new manufacturing firms have the potential to directly generate about $4.4 billion in economic output in 2020, supporting 2,635 permanent jobs. In support of that goal, McDonnell has proposed an Interstate 85 Connector Economic Development and Promotion Zone “wherein companies shipping goods through the port or engaged in maritime commerce can operate income tax free for their first two years in operation.”

In addition, Chmura projects, increased port activities are estimated to create $1.4 billion in economic impact (measured in 2020 dollars) while supporting 4,730 jobs in the U.S. 460 Corridor. Of that amount $762.9 million will come from increased operational revenue of the Port of Virginia, which is expected to generate 2,906 direct jobs.

Other than the Chmura study, which was prepared for Deputy Secretary of Transportation David Tyeryar, the economics and finances of the project have yet to be subjected to close public scrutiny. A year-old Coalition for Smarter Growth brief took a critical look but was written before the economic-development dimensions of the project came into clear view. While the Chmura study does quantify the economic impact of the project, it does not purport to answer the question, “Is this a good investment of state dollars?”

The U.S. 460/I-85 Connector is the largest, most ambitious and most expensive economic-development initiative of the McDonnell administration, commanding a $500 million allocation of state dollars. Nothing else comes close. So far, it has received a sliver of the public attention it deserves. Let us hope that members of the General Assembly are asking the tough questions.

6 Responses to U.S. 460 Project as Economic Development Powerhouse

  1. Question? Since the road is being touted as an economic development initiative, can the Commonwealth use eminent domain to condemn property if needed?
    Answer. The proposed constitional amendment say no if the primary use is for private gain, private benefit, private enterprise, increasing jobs, increasing tax revenue, or economic development.
    Result. The road will cost more leading to higher tolls.
    Bosun

  2. The road is for public use. Private economic benefit is a side event.
    Historically roads are a legitimate public use for which Eminent domain applies: I doubt any court will agree with your interpretation.

    The problem with eminent domain is not eminent domain itself: it is the process by which it is applied and the price to be paid is derived.

    The originalpurpose of eminent domain was to ensure that people be treated fairly by the government, that they be comepensated for losses they may incur at the hands of government.

    That purpose has been subrogated to one in which the government uses any means to chisel its citizens, in order to get the lowest possible cost. The obvious error in this is that such accounting attempts to obtain the lowest cost for taxpayers, but does not include the full cost to the one taxpayer whose land was taken.

  3. I think Bosun might be on to something… especially if the current ED bills in the GA get passed that will impose much tougher rules not only for determining public benefit but on compensation… which right now is heavily tilted toward the state in terms of lost opportunity and lost use of remaining parcel.

  4. I don’t think so. The bills are designed to prevent having the state take over property and then turn it over to a private party. The sole public use being the increased tax revenue.

    Unless this would become a private road sitting on private property, that would not apply. More likely the state will own the property, and allow the operator to collect tolls in return for improving the state property with asphalt.

  5. I agree with that. The state will own the road and a concessionaire will operate it. The state will owe the concessionaire the costs of constructing the road and will pay it back via tolls that the concessionaire will collect… PLUS tax money.

    Last I heard, the investment grade analysis indicated that this road could not be built for the maximum tolls that could be collected and the state would have to subsidize the gap.

    In terms of economic development -why would the state need to get in the business of setting up spec industrial sites?

    I would say that that is a job best left to the counties and if the state wanted to help then offer grants and other incentives with strings attached.

    Ultimately the land will very likely be a brokered private sale to and industrial development authority anyhow.

    Finally – again – as with the HOT Lanes – I hope they do this PPP so that the principles will build this run in concurrent sections not sequential ones.

    Get enough design, engineering, and construction resources on the project as soon as possible and finish the job in 2-3 years, not 10-20.

    that’s one of the biggest problems perceived with VDOT now days especially in comparison with equivalent private sector efforts.

    I tend to think that VDOT just takes too long to get the job done probably because it’s fixed staffing essentially causes bottlenecks in the process flow. Just turn it over to a company with a drop dead date and let them get as big as they need to get as quickly as they need to proceed..and then when done -they can disassemble the temporary staffing.

    I know locally, one of the oft-cited complaints with private sector road work is “waiting for the VDOT review”.

    Time is money for the private sector but VDOT marches to it’s own drummer it seems.

  6. I know locally, one of the oft-cited complaints with private sector road work is “waiting for the VDOT review”.

    Ther is a reason we have government reviews. They don;t always work, but…..

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