Governance Reform for Transportation Spending

Governor Terry McAuliffe, Transportation Secretary Aubrey Layne -- a different approach to transportation governance

Governor Terry McAuliffe, Transportation Secretary Aubrey Layne — a different approach to transportation governance. Photo credit: Daily News

by James A. Bacon

Among key initiatives in the transportation package that Governor Terry McAuliffe announced yesterday are important proposals to reform the governance of the Commonwealth Transportation Board (CTB) and the Public-Private Partnerships (P3s) process.

CTB autonomy. The bipartisan legislative package, worked out with senior Republicans in the General Assembly, would improve oversight of transportation spending by creating a more independent CTB, specifically by establishing that the Governor cannot terminate a CTB board member without cause.

The measure responds to perceived abuses of the McDonnell administration in which former Secretary of Transportation Sean Connaughton dominated CTB proceedings. Among other actions, he demanded the resignation of CTB member, James Rich, one of the few board members who openly questioned administration priorities. After CTB approval of questionable mega-projects like the Charlottesville Bypass and the U.S. 460 Connector with little debate, I asked two years ago in “Kings of the Road?” if the CTB was a rubber-stamp board.  At the time, board member Aubrey Layne argued against such a characterization. After becoming Transportation Secretary under McAuliffe, Layne’s perspective changed. He pulled the project on the Charlottesville Bypass project and radically modified U.S. 460.

The legislative proposal indicates that the McAuliffe administration is willing to tolerate more open discussion and independent judgment in the CTB in order to head off other potential fiascos.

P3 governance. Changes to the P3 process are aimed at preventing a recurrence of the U.S. 460 debacle, in which the state spent $300 million on an upgrade to U.S. 460 between Petersburg and Suffolk without acquiring needed wetlands permits from the U.S. Army Corps of Engineers.

“The P3 program works for the right projects, such as the I-95 and I-495 Express Lanes in Northern Virginia where the private sector put their money and resources on the table in expectation of getting a reasonable return on their investment,” McAuliffe said in a prepared statement. “The P3 program was the wrong procurement tool to deliver the U.S. 460 project in southeastern Virginia, which cost taxpayers $300 million with nothing to show for it. To prevent this from occurring again, Delegate [Chris] Jones has played a significant role in reforming this process so it is transparent, the risk to taxpayers is minimized and clear lines of accountability are set.”

Specifically:

  • Private partners must disclose risk that is transferred to the commonwealth. The intent is to minimize risk for taxpayers by selecting projects in which the private sector is willing to make the appropriate investment in expectation of getting a reasonable return.
  • The transportation secretary will be accountable by signing a finding of public interest before a P3 deal is finalized, certifying that the risk transfer and all other findings are still valid.  This would prevent situations like the U.S. 460 P3 deal, where procurement changed over the course of the project, yet no one was held accountable.

Bacon’s bottom line: It is heartening to see Republicans and Democrats cooperating to achieve governance reform in the transportation arena, in which billions of taxpayer dollars are spent. As I have argued repeatedly, there are inherent tensions in the P3 process between the public’s need for transparency, especially visibility in its exposure to risk, and the private party’s desire for confidentiality. These proposals seem to be a positive step. Whether they create sufficient transparency remains to be seen.

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15 responses to “Governance Reform for Transportation Spending

  1. Not sure if you saw that the US 460 problem has been addressed and is back on track.

    Same thing with US 29 in Cville – there’s a plan and it’s moving forward.

    something has changed – and my bet is that changes were made inside of VDOT … because these two problems both festered.. until now..

    but the other thing – the State’s new priority system has some of the MPOs up in arms because they no longer control the selection of projects because VDOT had trumped them with it’s own statewide process that can result in one project in one place bumping other projects in other places so that the priorities of one MPO are not the final decision.

    I think this was bound to happen because MPOs typically look out for their own region and not the corridors of statewide significance…

    and a good example is the I-95 corridor from Fredericksburg to NoVa where the top priority of the MPO was an interchange to a county – and not the I-95 mainline where new bridges were needed over the Rappahannock.

    VDOT essentially de-funded some of the interchange .. and even though they temporarily delayed funding for the new bridges – the skuttlebutt is that the bridges are going to be funded… as a priority.. and the interchange down-sized and viewed as not a priority for the corridor.

  2. The “political class” gets a very sordid reputation among right and left.

    But, maybe, just maybe, they deserve a little credit here and there? Thanks for doing so. Yes, our political process is far from perfect. But it’s stories like this that still give you a little hope. Nice to see D’s and R’s working together on this issue.

    Don’t mean to threadjack, but I’m really interested in your thoughts on the 460 reversal. Will we ever really know what the McDonnell admin. was thinking?

    • It went something along the lines of

      “Hey corporate freight and coal companies, want some free money?”

    • yeah – I’d like to see a post from Jim on the US460 deal – in part – because it sounds like the PPTA thing is also going forward…. and now that it is split up into sections – how the tolling would work (or not).

      and yes.. in terms of transparency – we’re still not there.. where is the new map?

  3. So long as VDOT is in charge of the state’s roads, it will call the shots. Local governments and more importantly, residents, need to provide input to VDOT. The task force formed to work with VDOT on widening Route 7 west of Tysons and associated transit projects is a good model of what can work. And how to assemble stakeholders.

    • I’m starting to doubt that local elected leaders are capable of thinking strategically not only about corridors of statewide significance but even within their own regions.

      they basically align themselves in political ways that do not hold the region itself as the highest priority. It’s more about looking out for their own locality and then ally with other localities in ways that benefit the localities…

      I’m starting to think the concept of MPOs is fundamentally flawed.

      we may not like the way VDOT “works” and there is plenty of fodder for criticism…. but the way that MPOs work needs to be re-thought. Let them deal with regional priorities even if they do it badly – but don’t let them screw up corridors of statewide significance.

      Being able to move throughout the state – both for private purposes and business purposes is an imperative… and over and over the MPOs have shown they are either not seeing themselves as responsible or they are just flat out incompetent.

      We cannot screw up I-95 because the MPOs can’t figure out how important i is.. for the state – for the east coast… ditto for I-81 and other major corridors.

    • I am a little confused about VDOT scope as I was under the impression the NoVA Transport Auth was going to take over NoVA under the McDonnell transport bill. But all I hear about is VDOT now. We had one good year of snow removal last year now seemingly back to the same old.

      • re: NoVa – I believe the NVTA prioritizes NoVa projects.. but VDOT still manages them unless/until Fairfax devolves roads to itself.

        even then – any Va Primary or US signed road will still be the purview of VDOT.

        the roads that connect the USA and connect VA do not belong to the localities.

  4. If you want real autonomy for the CTB then it should – at the least – repeal the district appointments and replace them with elected members (one per district) instead.

  5. Scott Surrovell is proposing a constitutional amendment to allow Virginia governors to serve two consecutive terms. Terry McAuliffe is trying to put some teeth into the CTB. Chap Petersen may (or may not) take another crack at time limits on company and industry specific tax breaks.

    Is it just me or are all the good ideas at the state level coming from Democratic Party politicians?

    • so far, so good but who knows… everyone thought McDonnell was doing well also.. maybe a 65% rating- before he blew up.

      But I suspect your admiration would fade if he meets with Obama about health care, eh?

  6. Some mainstream media should look into the Virginia P3s, past and future.

    Why is media promoting the things as if they are capitalists gifts to taxpayers when any research illustrates that taxpayers get scammed? The latest info from — this time — Canada illustrates that the “public private partnerships” cost taxpayers much more than if the state built the toll roads themselves.

    Ontario’s auditor-general studied 74 P3s and determined that her province would have saved $8 billion over the past nine years IF Ontario had done it’s own work. Why? Because the private financiers require 14 times — yes, 14 times — the debt service costs. http://www.theglobeandmail.com/news/politics/private-partnerships-cost-ontario-taxpayers-8-billion-auditor-general/article22012009/

    In the end, P3 toll roads almost always (and perhaps simply “always”) go bankrupt, leaving taxpayers stuck paying off bondholders and unable to collect on massive loans that usually both the state and Uncle Sam gave the toll road shell companies.

    The only reason we don’t know that Capital Beltway Express and the 95 Express Lanes are potential disasters for taxpayers is that no one is reporting some crucial info. For example, NEVER do the toll roads generate the traffic/income which taxpayers and potential bond holders are told when the bonds/projects are being sold. The Capital Beltway Express, for example, projected $335,000 per day in tolls pre-construction but in April, almost three years after opening, was generating only one-fifth of that, $62,000 daily. Defenders of P3s say that the vaunted efficiency of private industry will ensure the privates make money BUT the privates do a worse job of projecting income than public entities and, in the end, make massive amounts of money solely out of the fact that, in the end, the bankruptcy, taxpayers pick up the check.

    Look, for example, at the Pocahontas Parkway which has twice — yes, twice — gone bankrupt in only 12 years of operation. As part of solving the first bankruptcy, Uncle Sam gave Transurban $95 million to refinance the debt — not to “pay off” debt, just to cost all the fees and charges of refinancing which the money men demand. $95 million to refinance the $548 million debt? One fifth? And then, of course, Transurban’s Pocahontas Parkway went belly up again with, now, of course, the debt even higher.

    Because most of the debt not in the form of loans from Virginia and Uncle Sam in all these things comes from “private activity bonds” — which are tax free bonds, like municipal bonds, EXCEPT sold to finance toll road construction for privates — when bankruptcy hits, taxpayers end up paying off amazing rates of interest, averaging 14.9 percent according to the only study of them I could find.

    • P3 projects basically come about because there is no money to build what is wanted/needed.

      The state, so far, is willing to let the private sector get it’s own financing to build a road – in exchange for a guaranteed profit ( a lot like we do with Dominion Power) or for that matter – allowing wireless companies to build cell towers on public road right-of-ways – and put a separate line item charge on their bills.

      HB2 – is a new law that seeks to have a prioritization process for limited funds to decide which projects have the most bang for the buck – but it would seem that those projects that are deemed the most “needed” would also offer the possibility of a toll road and if you toll it then it would allow other projects down lower on the list to be built with the money saved by tolling the most needed.

      what I do get by asking folks (as a member of the citizens group in the MPO) is that Virginians hate the gas tax and suspect it’s being:

      1. – wasted
      2. – diverted to non-road spending
      3. – diverted from their locality to other localities
      4-. hoarded in a secret vault in Richmond

      but as much as they hate gas taxes – they seem to hate the idea of a private company operating a toll road – at least as bad.

      they SAY they’d be more conciliatory if VDOT operated the toll road rather than the for-profit but almost in the same breadth they say they cannot trust VDOT to be a competent toll road operator… and they cite the Dulles toll road as an example.

      If you are an elected person or a top echelon VDOT guy, how do you deal with the public’s attitude towards these various options when it sort of seems like no matter what choice you make – it will unleash screaming meemies with the only uncertainty being from what door number they come from.

      Seriously. Is there a path that the public will coalesce more or less behind or is it a lot of different voices, lots of critics and really no support for any of the choices?

      serious question.

    • I think the attraction of the private tollers is the fact they can get construction money either subsidized or free..

      I’m not sure they could make a profit if they had to go to market money.

      OTOH – Va has no real financial options for some roads.. so it’s a choice between a road delayed for decades or bring online sooner.

      the question is – if Virginia’s knew all the facts – and not just the sound-bite propaganda – would they choose to wait rather than private tollers?

      what would an informed public choose?

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