Public-Private Transportation Act Needs Reform

I-495 Express Lanes: reasonably fair to taxpayers and the traveling public.

Virginia’s reliance upon the Public-Private Partnership (P3) process to build large bridge, rail and highway projects has led to the centralization of decision making in the hands of the governor’s office with little effective oversight, contends James J. Regimbal Jr. with Fiscal Analytics, Ltd., in a report sponsored by the Southern Environmental Law Center (SELC).

That centralization makes it all the more imperative that decision-making under the Public-Private Transportation Act be more transparent and accountable, concludes Regimbal in “An Examination of the Virginia Public-Private Transportation Act of 1995.

As traditional funding sources for transportation construction decline and formula allocations to systems and regions dry up, transportation decision-making is shifting away from a more diffuse system of local, regional Metropolitan Planning Organizations (MPOs), and Commonwealth Transportation Board (CTB) decision-making, to the PPTA proposer and Governor’s administrative agencies in charge of soliciting, screening and procuring PPTA projects. …

The increased centralization of transportation decision-making through the PPTA makes is more important than ever for the public and their representatives in the General Assembly to be kept adequately informed throughout the PPTA decision process.

Midtown-Downtown Tunnel — not so fair to the traveling public.

The former Virginia Finance Committee staffer advances a number of recommendations, including (1) promoting competition by requiring more bidders, (2) making the state’s “Value for Money” analysis available to the public, (3) strengthening the independence of the Commonwealth Transportation Board, and (4) requiring a public hearing after all major business points have been disclosed and before a P3 agreement has been signed.

In some cases, Regimbal suggests, the state should limit private-sector involvement to design-build contracts, which ensure that projects get built on time and under budget, rather than giving private concessionaires an ownership stake in a project. He also advocates treating some projects as regulated utilities as a way to offset risks to private-sector partners without messy non-compete clauses, built-in toll escalators and other undesirable features.

Unlike in some states, the General Assembly has no role in selecting P3 projects. The CTB has no statutory role and is referred to only as an “oversight board” in PPTA implementation guidelines.

Furthermore, says Regimbal, there are no established criteria or a transparent process for determining the level of state subsidy to P3 projects. Thus, the Downtown/Midtown Tunnel project, the top transportation priority of the Hampton Roads region, received $300 million in state subsidies for the purpose of holding down toll charges, while the Route 460 Connector, which has a much lower regional priority, will receive more than $1 billion in state and Virginia Port Authority subsidies.

The key decision point in the P3 project-development process is the Value for Money analysis conducted by the Office of Transportation Public-Private Partnerships. This cost-benefit-risk analysis has not been made available to the public in time to solicit meaningful feedback from the citizenry or affected interests.

Bacon’s bottom line: Regimbal does an excellent job of laying out the main issues associated with the increasing use of P3s. He shows how some projects, such as the Interstate 495 Express Lanes project, accomplish important public objectives at a reasonable public cost and risk profile, while others leave many questions unanswered.

Regimbal wisely refrains from criticizing the McDonnell administration or particular state agencies, focusing instead upon the structural flaws of Public Private Transportation Act as currently written. Legislators enacted the law in 1995 and have made major updates since then, but it is only in recent years, since the state has negotiated a significant number of P3 projects, that the problems Regimbal highlights have become glaringly evident. The General Assembly needs to revisit the Act again. Hopefully, we’ll see legislation in January reflecting some of his proposals.


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7 responses to “Public-Private Transportation Act Needs Reform

  1. I think the PPTA needs more sunshine but this is what caught my attention: ” In some cases, Regimbal suggests, the state should limit private-sector involvement to design-build contracts, which ensure that projects get built on time and under budget, rather than giving private concessionaires an ownership stake in a project.”

    I see this as an essential part of any highway proposal in that it forces the use of a true “needs” metric.

    A project that no PPTA contractor would touch with a 10 foot pole is likely PORK.

    But I do agree.. that it’s very worrisome that the state is now “backfilling” projects that cannot stand on their own from tolls and committing state money to it – not for one year – for decades.

    it won’t take long doing business this way before the state eats much or most of whatever little money it has available for construction – and in fact, my understanding is that we’re not going to have ANY construction money in less than 5 years so committing transportation money to subsidize tolls – for decades – on money we won’t have – seems pretty scary.

    What this does is it forces the state to use it’s full faith and credit to pay for these future unfunded liabilities.

    And yes.. Bob McDonnell IS signing off on this. This could be …one of the worst ideas since George Allen downsized VDOT and they had to turn around and hire them back as higher-paid consultants.

    Apparently, no one in the General Assembly finds this troublesome.. which is even more worrisome…

    we may be making decisions right now that are heavily in-debiting the state in the future.

    Bad Karma.

  2. Mark my words: we will rue the day we wnt down this path.

    This is a mistake, and a giveaway of governemtn assets to big corporations.

    It is a tax hike off the books.

    Dumb. Incredibly dumb.

  3. I do not think PPTA is going away. It’s fundamentally a good idea IMHO.

    the question is should any PPTA project to totally self reliant on user fees or can it have user fees and tax support?

    I’d compare it to something like a YMCA where a local govt agrees to provide some land next to a school and water/sewer but the “Y” still charges user fees.

    but you do need some sunshine and an accounting approach that demonstrates that the pubic is getting value from the arrangement including less taxes than if it were totally tax-funded and government operated.

    It’s clear Connaughton, VDOT and McDonnell are convinced and moving ahead – leaving the public behind in their actions – which some define as leadership and some would say is arrogant.

  4. Take a look at the new Metropolitan Washington Council of Government’s study that projects, despite spending billions, traffic in 2040 will generally be no better and, in many locations, much worse.
    I support paying more to match inflation, but why should people pay much more to fund transportation projects that won’t work? Why should landowners be permitted rezoning that will effectively confiscate taxpayer dollars?

  5. @TMT – if you push residential growth to the exurbs but the jobs are still in NoVa – what’s the solution? Realistic solution?

    No urbanized area in the US that I know of has “fixed” the rush hour congestion thingy …. so what’s a reasonable expectation for transportation policy for urbanized areas?

    It can’t be “stop growth”.

  6. Use the Tysons formula – tie rezoning approvals to the construction of needed transportation facilities and require those getting more density to pay 59.5% of the costs. If they cannot afford or will not pay those costs, they don’t get rezoned. If there’s no rezoning, we won’t have the huge increases in traffic. If they pay the costs, we still are likely to have less development than if no costs were imposed and we get the transportation upgrades. In either event, traffic will not be as bad as it would be under the status quo.

  7. @TMT – given the current geography of Fairfax – are there still opportunities if money was obtained aka Tysons, to expand infrastructure/mitigate congestion?

    where would you see the additional money spent?

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