Yet Another Owner for Richmond’s Unwanted Road

pocahontasBy Peter Galuszka

Richmond’s “Road to Nowhere” is about to get yet another owner, showing again how the public-private partnership craze can result in unneeded transportation projects while denying resources elsewhere.

Australia’s Transurban which owns Route 895, otherwise known as “Pocahontas Parkway” is dumping the tollroad it picked up in an emergency financial deal in 2006. At that time, the highway that connects Interstates 95 and 295 southeast of Richmond was so underused that it was about to take down the state’s stellar credit rating.

But Transurban hasn’t been able to make a go of it despite tolls of up to $3.25 per car for a short drive through the fields of eastern Henrico County. The firm plans on selling it to a consortium of European banks that have $300 million in debt. The project also owes the feds $150 million for a loan.

The Pocahontas Parkway was the pioneer project for the Public-Private Partnership Transportation Act of 1995, which has been heralded as a nation-beater and a way to have your cake and eat it too as far as road financing. The allure was that you could build roads and have the private sector manage them and help pay for them through tolls.

Problem was, nobody seems to need the highway. It was billed as a way to expedite I-95 traffic to I-64 and I-95 around Richmond and perhaps open up relatively untapped areas east of the city for suburban sprawl development which hasn’t really happened.

The Richmond Establishment is loath to admit this, but the Richmond airport which has undergone a big expansion is not getting the flights and traffic it had hoped for. The Parkway was supposed to have helped promote the airport by providing easier access to it.

PPPT funding has been replicated in other areas in Northern Virginia and Hampton Roads, but a Portsmouth judge seems to have finally put a legal dagger through  the heart of the program by ruling that in the case of a local tunnel project, the state had unconstitutionally given its authority to tax to a private entity.

It isn’t clear what the ruling means for the PPT program, but the gist is clear. Democrats and Republicans alike want to live a fiction that you can transfer the state’s traditional responsibility to raise taxes and build roads and hand it over to private interests. It seems such a sweet arrangement – you get to keep Virginia from having to raise taxes, avoid violating the no-tax dogma  and not piss off voters while getting highways and construction jobs. It sounds too good to be true and it is.

Oh well. I wonder who will inherit the White Elephant when the European banks can’t make it work either.

14 Responses to Yet Another Owner for Richmond’s Unwanted Road

  1. The Pocahantas Parkway isn’t a failure because it’s a PPP (more on that later), but because it was a dumb road to build in the first place. It would’ve been a dumb road to build if VDOT paid the whole bill with taxes and bonds. It would’ve been a dumb road to build if VDOT hadn’t paid a penny and private investment picked up the whole tab.

    It met no defined need. Traffic coming from south of Petersburg already takes 295. Traffic from the southern end of Chesterfield can easily cut over to 295 on either Rt 10 or by Ft Lee in Colonial Heights. And rarely is the traffic crossing the I-95 bridge into Downtown all that bad.

    It was a gamble on suburban development of eastern Henrico, and as you state, that development never came. Frankly I think it was a poor gamble to ask people to live in Varina and ask them to pay $4-$6 a day to commute to Chesterfield or Downtown. It was always doomed.

    There are now two questions. (1) seeing as how the private entities are likely to default on the $150M loan from the Feds, does the PPP put the Commonwealth on the hook for all of part of that? And (2) how long before VDOT takes over maintenance requirements for the road and bridge?

    If there does come a day when the private entities simply walk away from it, hopefully VDOT will at least remove the tolls, maybe generating more usage of it. A boy can dream…

    As for PPP’s, I really do believe they still have a time and place, provided the state handles it in a legal matter.

    There are two legal challenges to the Midtown/Downtown Tunnel tolls you reference. One is that the tolls are taxes, and taxes in our country must be instituted by an elected body. In most instances, Highway/Tunnel/Transportation authorities have to run their toll rates and plans by the state legislature for approval before they can be implemented, thereby getting an elected body’s stamp on it. Virginia’s Delegates, living in paralyzing fear of being cast as in favor of “raising taxes,” need to suck it up and turn these PPP’s into Authorities that require annual GA buyoffs.

    Which, when you think about it, isn’t a major deal. There’s 100 Delegates. By my count there are ~22 representing Tidewater, maybe a few more depending which outlying counties you include. So… let the other 70-some vote FOR the tolls, while Tidewater Delegates vote against it. It plays well for all involved. The RoVA Delegate gets to tell his constituents “I made them pay for their own damned tunnel, and spared you guys the tax!” while the Tidewater Delegates get to say “hey, I tried, sorry!” Yes, it’s a game, but what in Richmond isn’t? You can play this game with the NoVA PPP’s as well. This solves all the constitutionality issues.

    The second issue re: the Midtown/Downtown project is the lack of available non-tolled options. I’m not what the law here states, but it was mentioned in the courtroom arguments. Adding tolls to already existing highways removes any free crossing of the Elizabeth River short of driving 20 miles each way on local roads to cross it down in Chesapeake. I do have qualms about this, but this issue is more about the Midtown/Downtown project and not about PPP’s.

    Bottom line: Pocahontas was a bad project, regardless of funding structure. VDOT’s paying for the whole of the Rt 29 bypass, and that’s a terrible project too.

    I have high hopes that the Rt 460 project will prove to be an example of PPP’s that do work.

  2. Neil, I totally share your analysis of the Pocahontas Parkway. It was a foolish project touted for its economic development potential. The problem wasn’t the PPP structure. The problem was that a demand for the road never materialized.

    Peter has drawn precisely the wrong conclusion. The Transurban PPP turned out to be quite a bargain for the state. Transurban sank hundreds of millions of dollars into the road speculating that its investment would pan out. That’s money that the state would have had to cough up instead. Transurban’s loss was Virginia taxpayer’s gain.

    The PPP worked as it should have. The project was speculative. Transurban took on the risk. If things had worked out, Transurban would have made a bundle. Instead, it lost its shirt. The state has no business engaging in such speculative projects. PPPs are a good way to transfer the risk.

    That doesn’t mean all PPPs are good. I think the Capital Beltway and I-95 HOT lane projects will turn out well for the state. The Midtown-Downtown Tunnel and the U.S. 460 projects may not.

  3. I have drawn precisely the wrong conclusion? What? Here’s the Granddaddy of PPT deals and it has had to be salvaged twice. One of the reasons it went through in the first place was that the state was experimented with its favor-the-prive-sector and pass the buck philosophy. Had the state had to fund it traditionally, it might never had been built.

    Jeez, you guys will do anything to support whatever smacks of the private sector taking over traditional public responsibilities!

    “It was a horrible mess, but it’s all good.”

  4. re: fail – if VDOT had originally put out a RFP for a toll road for the Pocahontas, it’s likely that no company after doing an investment-grade analysis would have answered because they would have know from that analysis what VDOT found out the hard way.

    Transurban did VDOT a favor and who knows how that affected other Transurban projects in the state….. just saying…

    re: ” Frankly I think it was a poor gamble to ask people to live in Varina and ask them to pay $4-$6 a day to commute to Chesterfield or Downtown.”

    re: “Midtown/Downtown project is the lack of available non-tolled options. I’m not what the law here states, but it was mentioned in the courtroom arguments. Adding tolls to already existing highways removes any free crossing of the Elizabeth River short of driving 20 miles each way on local roads to cross it down in Chesapeake. I do have qualms about this, but this issue is more about the Midtown/Downtown project and not about PPP’s.”

    what is Hampton going to be left with in terms of realistic options if tolls are ruled out?

    No private entity is going to build new/additional tunnels and neither is the State so what will that region ultimately due about their needs?

    Somehow, some of them have the idea that if they hold VDOT’s feet to the flame – they’ll fold up and build the tunnels with their existing money.

    I call this the ” we know you have a magic money vault in Richmond” ….”effect” …..

    Just imagine if Pocahontas almost ruined the states AAA credit rating what tunnels in Hampton would do to the State’s credit rating.

    Each region in Va has to confront the basic reality that – they not likely to get a lot more in funding than their region actually generates in taxes – because basically what that means is that some other region will have to cough up their money – and that’s just not realistic.

    NoVa is not going to give up their revenues for Hampton. Neither is Richmond or Roanoke or Lynchburg, etc, et all – and the Rest of Va even if it did – would amount to a piddle of dollars compared to what the urban areas generate in fuel taxes.

    So Hampton is going to have to decide how they are going to expand their tunnels (or not) and the money is going to have to come from somewhere and the lions share is going to have to come from the Hampton Region via taxes or tolls.

    It’s a bit ironic that roads like Pocahontas and Charlottesville actually tend to suck up revenues that could have been used by Hampton…..though and I’m sure the thinking down Hampton way goes along the lines that if Charlottesville can get a bypass they don’t want why can’t Hampton get a tunnel they DO want!

  5. Peter

    I fully admitted it was a terrible idea. This road never should have been built. My point is that this shouldn’t be an indictment of PPP’s, but rather the prioritization and selection of road projects by Richmond (The Rt 29 Bypass and now the BiCounty Pkway being examples that this poor decision making is still continuing, even without the PPP apparatus).

    Jim’s point was that if we were going to build this road, and we speculate either way as to whether or not the state would’ve built 895 without the PPP, at least the Commonwealth shared the hurt with a private entity.

    No, PPP’s are not a panacea to our highway funding ills. Personally I miss the old days (am I allowed to say that?) of bond referendums and tunnel and metro authorities from America’s Golden Age of infrastructure construction. The CBBT seems to have worked out just fine.

    Bottom line is that Virginia is still doing it wrong (both PPP’s and the Regional Authorities that the VSC struck down a few years back) by being too, um, spineless to bring final ownership of these Authorities, Partnerships, etc to the General Assembly.

    I’m reserving judgment on PPP’s until I see how a few more turn out; specifically those that were actually built to meet a current need, like NoVA’s congestion and Tidewater ports’ container traffic, and not justified purely on speculated development.

  6. re: ” the lack of available non-tolled options.”

    an interesting phrase….

    ;-)

    what would you need to have more non-tolled “options”?

    • The Midtown and Downtown Tunnels connect Portsmouth and Norfolk across the Elizabeth River. These are the only two crossings that do so, and are currently free. They were built with tolls 50 years ago, but have been toll-free for the last 25 years. The South-Norfolk Jordan Bridge is nearby (technically it joins Portsmouth with northern Chesapeake, just south of the Norfolk city line), but that is already tolled. The nearest free option, then, becomes Military Highway down in central Chesapeake, adding 20 miles to the commute.

      Hypothetical. 10 years ago you got a job at Eastern Virginia Medical College in Norfolk, let’s say as a maintenance mechanic making a decent but not great wage. Portsmouth, being a far more affordable city to live in than Norfolk, is right across the (free) Midtown, so you relocate there. Now, all of a sudden, a private company has decided to give you a better tunnel, but it’s going to cost you $6/day to commute to work, or $120/month, or $1,400 a year. You’ve got two kids at home, that’s a lot of money.

      Putting tolls on new roads? Hey, fine, it’s the cost of getting them built. But this is the rare (maybe unprecedented in Virginia?) instance where they’re tolling existing infrastructure. And not only that, if you don’t like it, there isn’t a reasonable local road you can use to avoid it.

      What they’re effectively doing is buying a monopoly on crossing a body of water from the State. Whereas today and every day for the last 25 years I could cross from Portsmouth to Norfolk and back again in a standard amount of time (traffic notwithstanding) for free, a year from now it’ll cost me my choice of $6 or an extra hour on the road every day.

      So I challenge you to do two things. (1) Name an instance where a toll in Virginia was added to a previously un-tolled road. And in those instances (2) name one that also can’t be easily avoided on side roads.

      This *was* part of the legal argument used in the successful challenge of the Midtown/Downtown project. In that hearing, the judge asked the defendant’s team to define “reasonable alternatives” and then debated what “reasonable” means. I don’t know the law, I don’t pretend to, so I can’t say whether it’s a valid *legal* challenge.

      But it does kind of stink.

      • re: “free” – tunnels are not “free” .. I challenge you to show that they are.

        they are very expensive to operate and the money to do that comes from where?

        re: your challenge:

        I totally concur with your view that no existing roads have been tolled but I ask you – how will you get new tunnels built if the state does not have the money and the private sector won’t do it without a revenue source ?

        the 2nd part – avoided – I just see as a non- issue. whether or not people can avoid a toll road is not a real issue.

        try doing that on some of the existing toll roads especially in the NorthEast. It’s technically feasible but in reality it’s not a real option.

        so back to you – how are you going to get new tunnels built in Hampton?

        blaming the govt is not a viable option that gets your tunnels built so how about a plan other than the one on the table?

        that’s the problem down Hampton way. They don’t want taxes nor tolls …they just want … and they want someone else to pay.

        it’s a no go.

        what the lawsuit did, in effect, was toss the question back to Hampton citizens… what’s the next option you choose other than blame someone?

  7. I am with Peter. I have growing concerns about the PPP for road funding.

    For example, I have little doubt that the Dulles Greenway interests are behind much of the North South Connector nonsense for their own private self interests. Another words, putting tolls on the backs of private citizens for corporate profit in the area of public infrastructure can easily have a dark side.

  8. Neil,
    I know you are right that the Parkway was poorly planed. I just want to razz Bacon. Makes my day. Puts a smile on my face.
    Thanks also to Reed.

  9. re: PPP. Here’s the reality. Va has no more money. They cannot borrow more without affecting their credit.

    what’s the next step?

    I see two options perhaps you see others.

    1. – raise taxes to pay for more roads

    2. – turn it over to the private sector to raise investor money the state cannot and to allow the private sector to get repaid so they can pay off their debt and make a profit.

    are there other options?

    I’m all for options and all opposed to a refusal to deal with the realities an choosing options rather than choosing nothing and blaming others.

    batter up. what’s your answer?

  10. I was under the impression that Virginia recently was flooded with “new found” money for roads by reason of GA legistation. If true it should not waste that money. It should use that money productively instead.

    Thus it should deep six the wasteful road projects in its hopper, starting with the N. Va North South Connector, and C’ville’s Route 29 By-Pass.

    It should also deep six the dysfunctional system that produces such wasteful and irresponsible projects. This includes cleaning up its procurement methods. Those that now promote waste and corruption, and encourage endless delay and study. Thus contractors should not be allowed to make so much money doing busy work they cannot afford to finish the job or build cost effective roads that reduce problems rather than compound existing problems and thus necessitate altogether new generations of fixes.

    In addition road decisions on timing, locale and placement should not be based on the political influence of private business interests.

    Hopefully these reformations will help to reduce roads built for the express purpose of opening up ever more land to every more sprawl that promotes ever more traffic and ever more delay that in turn requires ever more new roads, new sprawl, and new delay, all designed to line the pockets of those who promote them and build them on the backs of the citizens who are left to pay for them and thereafter shoulder the consequences of them.

    Instead, all monies for new roads should be spent to built roads that solve existing traffic problems in existing suburban and urban areas. In that regard laws should be passed that judge the viability of new developments on their ability to help solve existing traffic problems or be traffic neutral.

    • well you have the money McDonnell found a couple years ago which basically was stranded money on projects stalled for a lack of additional funding so some of those projects were just cancelled and the money “re-purposed”.

      Now we have a tax increase but if you go to

      http://www.virginiadot.org/newsroom/statewide/2013/gov._mcdonnell_announces_new65727.asp

      you’ll see how it is allocated to the regions – and it does not talk about tunnels. If you follow the link to the Draft 6yr plan and put in Hampton and search for Tunnel – you’ll see tunnel maintenance upgrades and the MLK road.

      The problem is that there is not enough funding for the tunnels and people are ignorant of the realities – don’t want to pay increased taxes nor pay tolls.

      It’s like global warming – they just want to believe what they want to believe
      and showing them the actual finances just evokes the “somebody is still cheating us” and wasting money on bad projects mentality.

      The costs of new tunnels is in the 2 billion plus range – not something you’re going to come up with by cancelling “bad” projects or waste/abuse.

      it’s just the financial reality and people refuse to deal with it – they’d rather find someone or something to blame instead.

      Major projects in Va – like the HOT Lanes, like the Tunnels, like the Western Bypass are going to require tolls. there is no way around it. Virginia simply does not have the financial capacity – even with the tax increase – to borrow money to pay for these projects. We found out just how close they are to that line with the Pocahontas Parkway.

      If Hampton does not want tolls on existing tunnels right now – they will have to wait for funding allocations to accrue in the intervening years before work can actually start on the tunnels.

      What the tolls on existing tunnels bought them – was to start immediately on the new tunnels.

      they do not see that apparently but that’s the dilemma.

  11. I’ve “slugged” in D.C. and “California Carpooled” in San Francisco…

    One GREAT way to beat the tolls is to carpool and if you can’t carpool with someone from the office/shop/plant (like, say, that $1,400 a year mechanic), then you pick up a “slugger” or two and you all benefit. High occupancy tolls “push” some drivers to find riders and “push” some drivers to utilize mass transit.

    Besides decreasing traffic and expanding the life of the road while decreasing maintenance costs, this begins a process of returning an “area” into a “community.” The issue is not cars, or commuters, the issue is “single occupancy vehicle” transportation.

Leave a Reply