for transportation projects raise little private
equity capital and undermine normal planning
processes. The enabling legislation desperately needs
to be updated.
need and deserve innovative solutions to their
transportation problems. A more balanced and
efficient approach is required to address gridlock
and longer commutes, as well as the heavy toll that road-building and accompanying
sprawl takes on our pocketbooks, health, farmland,
solution receiving a lot of attention is to tap
into the creativity and financial resources of the
private sector through public-private partnerships
to build highways and other projects. While this approach holds some promise, the
law allowing such projects is flawed, and its
track record raises serious concerns.
instead of attracting new private capital for
projects, proposed public-private partnerships
have relied almost exclusively on the public’s
money, using taxpayer dollars and/or tolls.
these projects circumvent normal planning
processes, limiting public input and consideration
of alternatives, and they have tended to foster
third, the costs and potential liability to
taxpayers for projects are often understated.
1995 Virginia Public-Private Transportation Act,
or PPTA, allows private companies to build,
maintain, and operate highways and other
transportation facilities. Some 15 state
construction projects have been proposed or
explored under the Act, including the Pocahontas
Parkway, Route 288, I-495 and I-95 High Occupancy
Toll (HOT) Lanes, widening I-81, and the Hampton
Roads Third Crossing.
has been an explosion of PPTA proposals in the
past few years, and recent proposals by Gov. Mark
R. Warner and House Republicans would earmark
millions of taxpayer dollars to encourage more of
these projects. Meanwhile, measures pending before
the General Assembly would relax the requirements
PPTA proposals must meet.
partnerships can be an innovative tool to speed
and improve building projects.
But it is a limited tool, and the PPTA’s
performance falls short of proponents’ promises.
Southern Environmental Law Center has released the
first comprehensive analysis of the law. The
report – prepared by Jim Regimbal, a consultant
with Fiscal Analytics, Ltd. who has over 20 years
of experience in state policy analysis--provides a
dose of reality and suggests some sensible reforms
to lawmakers and others steering our
On To Your Wallet
is no free lunch with public-private projects.
The PPTA has failed to live up to its
promise of attracting significant private equity
risk capital to fund increasingly expensive
large construction consortiums are proposing
projects that primarily use taxpayer subsidized
revenue bonds backed by tolls or local taxes, and
supplemented with whatever traditional government
transportation revenues are available.
are on the line for many public-private project
costs, and the public typically is paying the rest
of the costs through tolls.
In addition, taxpayers subsidize these
projects in various ways, including picking up the
tab for project maintenance and reducing the cost
of capital since bonds floated to pay for many
projects are tax-free.
is also potential public liability if a company
were to default on bonds. Consider the Pocahontas
Tax free bonds financed much of the construction
costs, an $18 million state loan has not been
repaid, the state is paying to maintain the
highway, and the bonds have been downgraded to
junk status by at least one rating agency. Or
consider Route 288, paid for entirely with
law also enables public-private proposals to jump
to the front of the line for consideration and
funding. Projects the state and localities have
agreed upon may languish with insufficient
funding, bypassed by proposals that have not gone
through the typical planning process.
can put profits ahead of sound transportation
planning. The PPTA is intended to be a procurement
statute, harnessing market forces to speed and
improve transportation projects, but it has
increasingly been used as a planning statute to
determine which projects should be built. The
danger is that our limited transportation dollars
will be used on projects that will benefit
companies’ bottom line but do little to relieve
traffic congestion or provide other public
Planning and Competition
PPTA circumvents normal transportation planning
processes. It shifts authority away from the
Commonwealth Transportation Board--Virginia’s
official transportation policymaking body00to VDOT
and other agencies.
In addition, it can short-circuit citizen
participation since the law does not require
the PPTA can undermine processes designed to
consider alternatives to a particular proposal and
to evaluate impacts on communities and the
thus can result in putting the cart before the
horse, with the state deciding to enter into an
agreement with companies to build a project before
it has decided what project, if any, should be
example, STAR Solutions, which proposes a $13
billion plan to double the size of I-81 from one
end of the state to the other, is negotiating with
VDOT to improve I-81 even though the study to
determine the best solution to the highway’s
traffic and safety problems has not been
“ready, shoot, aim” approach is not a sensible
way to choose which projects to pursue.
although the law’s most attractive feature is
the potential to harness market forces, it
actually threatens to undermine competition by
making it more difficult for smaller contractors
to get work. Companies submitting proposals also
insist that the state limit improvements to other
roads or rail lines that could provide alternative
routes that would not require paying the tolls
they seek to impose.
most PPTA projects proposed thus far would
contribute to sprawl.
Quite simply, project proponents have a
vested interest in promoting rapid growth and
greater driving to increase facility use and toll
public-private partnerships can be beneficial, we
must do more to ensure that we are making smart
transportation investments that are in the
public’s interest. The Public-Private
Transportation Act and guidelines should be
improved before millions of additional taxpayer
dollars are earmarked for these projects, and
before further projects are authorized or
January 31, 2005