Category Archives: Transportation

Does Uber Save Lives?

Should have called Uber.

Should have called Uber.

Speaking of safer roads… Consider the impact of Uber on peoples’ driving habits. Richmond Biz Sense reports that more than 1,200 vehicles in the City of Richmond, Chesterfield County and Henrico County have signed up with the Virginia Department of Motor Vehicles to pick up passengers for hire under the Uber banner. That’s more than double the number of traditional taxi vehicles registered to provide service.

Twelve hundred vehicles is a lot of cars, seemingly enough to inundate the Richmond market. But Uber wouldn’t be contracting with all those drivers if there weren’t a demand for the service.

People employ Uber for many reasons, but the one with which I am most acquainted is to avoid drinking and driving. Most people know that driving while intoxicated is an exceedingly bad idea. But if staying alive and not killing others isn’t incentive enough, Henrico County courts are draconian in their punishment of drunk driving.

Many people of my social acquaintance carry breathalyzers with them. If their alcohol levels exceed the legal limit, they call Uber for a ride home. Some friends don’t even bother driving to social functions at all — they call Uber for rides both ways. I don’t know the percentage of Uber riders who are intoxicated, but I’d wager that it’s a high number.

Tough laws, breathalyzers and Uber — it’s a powerful combination. I’m betting that roads in the Richmond region are a lot safer these days.

— JAB

Stricter Penalties, Safer Roads

safety_penalty_correlation
by James A. Bacon

I will concede this upfront: Bacon playing with statistics is like a toddler playing with a gun. Nothing good can come of it. With that word of warning, I ask readers to indulge me for a moment.

WalletHub, the financial advisory website, has come up with yet another listicle — a ranking of the 50 states (and Washington, D.C.) by the strictness of their speeding and reckless driving laws. This is a matter of more than passing interest to me because my son got his driver’s license just last week and my wife is a nervous wreck. Oh, no, it’s drizzling outside — the streets are dangerous. Oh, no, it’s bright and sunny outside — the glare can blind you. Readers who have had wives and teenage drivers know exactly what I’m talking about.

Back to WalletHub… It turns out that Virginia has the sixth strictest penalties in the country for speeding and reckless driving. Knowing the strictures put on teen drivers and drunk drivers, I can well believe that the traffic regimen is tough on speeders as well. But I asked myself a question that WalletHub didn’t answer: Do tough driving laws make a difference? Do they save lives, or do they just punish drivers for no reason?

In the spirit of social scientific inquiry, I compared the WalletHub ratings with data from the Insurance Institute for Highway Safety on the incidence of fatalities per 1 million vehicle miles traveled (VMT). The results can be seen in the chart above. The Y axis shows the WalletHub ranking, with the strictest states at the bottom and the most lenient states at the top. The X axis shows deaths per million VMT. The red dot shows Virginia.

Assuming I am analyzing the data properly (not something to be taken for granted), Virginia does seem to get some benefit from its strict speeding and reckless driving laws — but not as much as might be expected. The R², a measure of correlation, suggests that 5.6% of the difference in highway fatalities between states is explainable by the variation in speeding and reckless-driving penalties. That’s not a dominant determinant but a non-inconsiderable one. Yet the Old Dominion has the sixth strictest laws in the land but only the 11th lowest fatality rate.

Speeding enforcement and penalties are not the only means to reduce speeding. Other options include lower speed limits, road design and traffic-calming measures, and driver education, especially for young drivers. Other factors may come into play as well. Insofar as fatalities are correlated with driving speed, states with large rural populations driving on country roads may be at greater risk of fatalities, for instance, than largely urban states where city streets have lower speed limits. It is no accident that Washington, D.C. has a lower fatality rate per miles driven than any of the 50 states.

Could Virginia do a better job? My job is to ask the questions. Keener analytical minds are needed to come up with answers.

Closing the Books on the U.S. 460 Fiasco

us460The state will recover $46 million from US 460 Mobility Partners for work never performed on a 55-mile highway between Petersburg and Suffolk, reports the Virginian-Pilot. Under the settlement negotiated with the McAuliffe administration, US 460 will keep about $210 million of the payments it received under former Governor Bob McDonnell but waive an additional $103 million it could have been owed under the contract.

The settlement allows both sides to avoid a lengthy court fight.  The payments were made under a $1.4 billion contract to build an Interstate-quality highway on U.S. 460 to improve transportation access to Hampton Roads. Construction never commenced because the state could not obtain necessary wetlands permits from the U.S. Corps of Army Engineers. The McAuliffe administration does not dispute that US 460 billed and received the money legally, but argues that the company did not spend all money it received while waiting for the permitting issues to be resolved.

The final tally: US 460 keeps $210 million, and the state eats about $43 million spent on its own work developing the project. The total cost for a road never built: $253 million. Transportation Secretary Aubrey Layne had guesstimated that the bungled project could cost the state $300 million to $400 million.

The settlement closes the books on one of biggest contracting fiascoes in recent Virginia history. Meanwhile, the Virginia Department of Transportation has developed a scaled-down plan to build a 12-mile highway between Suffolk and Windsor and make other improvements to U.S. 460. That plan is expected to cost in the realm of $400 million.

— JAB

An Update on the Tysons Makeover

Map credit: Fairfax County Department of Transportation

Planned Tysons street grid. Map credit: Fairfax County Department of Transportation

by James A. Bacon

Transforming Tysons in Fairfax County from an “edge city” into a walkable, mixed-use urban district may be the biggest, most ambitious suburban makeover ever attempted. Anywhere. In the history of the human race.

The obstacles are formidable. The area grew up in such a helter skelter manner, and the layout of streets, buildings and parking lots are so thoroughly auto-centric in design, that Tysons’ built environment will have to be rebuilt from stem to stern. The cost of creating a street grid and providing transportation connections in and out of the district will run into the billions of dollars. It’s not clear where the public dollars are coming from. And it’s not clear either, given Northern Virginia’s current overbuilt office environment, whether the private dollars will be forthcoming any time soon.

But Fairfax County and Virginia are plunging ahead with the decades-long effort. In a presentation to the Tysons Citizens Coalition two weeks ago, Tom Biesiadny, director of Fairfax County’s department of tranpsportation, gave a recap of where things stand. I did not attend the meeting, so I did not hear Biesiadny’s remarks, but a long-time friend of Bacon’s Rebellion who goes by the pen name of Too Many Taxes shared the presentation with me. While the numbers come from Biesiadny, the commentary that follows is mine.

Existing development consists of 48.6 million square feet of mostly commercial office space, with some retail and a smidgen of housing thrown in. Another 2.8 million square feet is under construction, with 45 million square approved or proposed. The street grid won’t be built until landowners begin re-developing their properties and completing their links in the grid.

Tysons is caught in a Catch 22. The real estate market is moving towards walkable urbanism, but Tysons has little walkable urbanism to offer. While developers can create small islands of mixed-use walkability, the fundamental character of the district won’t change until a critical mass has been attained. Until that critical mass is attained, Tysons will suffer a competitive disadvantage with downtown Washington, Arlington, Alexandria and other locations where the walkable, mixed-use fabric is already in place.

Planners are counting upon completion of the first phase of the Silver Line spur on the Washington metro to jump start the development. However, at present, Silver Line ridership averages around 16,000 boardings per day, according to Biesiadny. After nearly a year since the Silver Line opened, ridership falls far short of the 46,000  forecast made as recently as 2013 in the Washington Metropolitan Area Transit Authority’s marketing plan. (Update: I have been told that comparing 16,000 boardings to 46,000 total riders is comparing apples and oranges. Sixteen thousand boardings translates into 32,000 trips, or riders. Thus, ridership has fallen short of projections but not by as grievous a margin as implied.)

Other parts of the plan appear to be unfolding on schedule. Six major road projects are in the works. Farthest along is a Route 7 bridge over the Dulles Toll Road, for which a design-build contract has been approved. Funding has been approved for a widening of Route 7. Four other projects are in various phases of study and design.

Meanwhile, Fairfax County is working on Tysons’ bicycle and pedestrian connections. Twelve projects have been completed, nine are under design, nine are in the land-acquisition phase and five are under construction. A Virginia Department of Transportation repaving project will add eight miles of bike facilities this summer.

Also of note, the Tysons Partnership has developed a transportation demand management program that will provide services to property owners on a subscription basis. Services include trip reduction strategies, ride-matching assistance, telework support, transit incentives and monitoring of travel behaviors. So far, eight companies have signed up.

Bacon’s bottom line: My reading of this presentation is that Fairfax County is doing all the right things but the Tysons makeover still has a long, hard climb ahead of it. We may not see much visible progress until the Northern Virginia commercial real estate market rebounds strongly, vacancies fall and developers have an incentive to start building again. But I’ll be the first to admit that I’m not close to the situation and my interpretation could be all wrong.

At Last: Objective Criteria for Scoring Transportation Projects

weighting_frameworks

by James A. Bacon

After lengthy study, the Commonwealth Transportation Board yesterday approved new metrics for prioritizing transportation funding in Virginia. The new metrics are designed to create objective criteria for evaluating the selection of road and rail projects. It remains to be seen how the metrics will be applied in practice, but in theory they represent a big step forward.

As seen in the chart above, the metrics will be assigned different weights for different parts of the state. For instance, Category A, which assigns the greatest weight to congestion mitigation, consists primarily of the highly congested Northern Virginia and Hampton Roads transportation planning organization districts. Category D consists mainly of lightly traveled rural districts. (View the classifications here.)

The different weights reflect the different priorities of different parts of the state. The classifications and methodology can be amended as needed to reflect changes in priorities and advances in technology, data collection and reporting tools.

Here is a breakdown of the measures that go into the weighting framework:

measure_breakdowns

These metrics will provide CTB board members unparallelled insight into the relative benefits of different transportation options. It should be much more difficult now for any administration to gain approval for “highway to nowhere” road and rail projects.

Bacon’s bottom line: I have long called for tools that make it possible to measure projects based on their “Return on Investment,” reflecting congestion mitigation, safety improvements and environmental benefits. This methodology goes beyond that by incorporating additional measures, such as economic development and accessibility, but falls short by providing no mechanism for calculating ROI. Given the complexity of the evaluations, it may be impractical to boil down all these metrics to a single ROI figure, so CTB board members will retain considerable discretion.

Some of the criteria look really fuzzy. How does one evaluate “land use consistency?” How does one measure “project support for economic development”?

Despite modest reservations, the new approach appears to represent a big step forward by limiting the potential for ideology, politicking and log rolling in transportation funding decision-making. I look forward to seeing how the new methodology works in practice. While one can rarely go wrong by taking a cynical view of human nature and the political process, I am hopeful that the transparent use of objective metrics will curb the worst instincts of the political class.

Important Road Trip Advice

Source: WalletHub

If you’re thinking about loading up your “go” cup and taking a  road trip this summer, my advice is to head north to Maryland or, if you’re in a pinch, south to North Carolina. The penalties against drunk driving aren’t nearly as severe there as they are in Virginia.

According to WalletHub, Virginia ranks 8th in a list of states based on the harshness of penalties meted to drunk drivers. Maryland is 47th (woo hoo! pop me another Budweiser!), while North Carolina is 27th (yeah, baby, I’ll take another swig of Ripple). It would be big mistake, however, to head west. West Virginia has the 4th toughest laws in the nation.

Oh, if your road trip culminates in Washington, D.C., you’re in good shape. D.C. has the 2nd most lax drunk driving penalties in the country. Hmmm…. D.C…. Congress… Minimal penalties for drunk driving… Coincidence? I don’t think so.

— JAB

When Forecasts Go Bad: Dulles

Dulles airport runway

Dulles airport runway

by James A. Bacon

Washington-area media finally have woken up to the major problems gripping Washington Dulles International Airport. In an April article Michael Neibauer with the Washington Business Journal noted that this important “economic engine” of Northern Virginia is sputtering. The problem of declining domestic traffic, siphoned mainly to Reagan National Airport, is compounded by the reckless expansion of the airport last decade that left its balance sheet over-leveraged. The debt service is $240 million a year, or roughly $23 of the $25 cost per enplanement. As Neibauer wrote:

A major capital improvement program and, more generally, the high cost of managing international passengers, has driven the average “cost of enplanement” at Dulles to near $25. At Reagan, it is $14.

Airlines don’t want to shoulder that burden, so they cut back on seats, or flights, or opt not to fly there at all, driving passenger numbers down and cost per enplanement up, precipitously.

Of course, none of this is news to readers of Bacon’s Rebellion. More than a year-and-a-half ago — long before other media had discovered the story — Reed Fawell detailed the airport’s problems. His articles, “Dulles’ Grand Plan” and “A Mortgage on Northern Virginia’s Future” are still worth re-reading.

So, now that Metropolitan Washington Airports Authority (MWAA) management is finally facing up to its Dulles problems, what is it doing?

Lobbying. Dulles’ friends are seeking to restrict the continued expansion of capacity at National. (In other words, they’re conceding failure and Dulles’ inability to compete with Reagan.)

Subsidize. Through a new lease-and-use agreement, MWAA is transferring $300 million in revenue from National to Dulles over ten years. (Rob from Reagan to pay Dulles.)

Attract new carriers. New carriers include Frontier Airlines and Air China.(This is a positive response — competing harder adds economic value and forces Reagan and Baltimore-Washington Airport to up their game.)

Belt tightening. “We’ve tightened our belt,” said Jack Potter, CEO of MWAA. “We’re not spending money if we don’t have to spend it. We’re not investing in anything new.” (A little late in the game, but better late than never.)

Bacon’s bottom line: The good news is that MWAA management is dealing with reality instead of pursuing a fantasy. Although one can question the rent-seeking, I-win-you-lose approach to fixing Dulles’ problems, the airport’s clamp-down on costs and hustling for new airlines are positive signs.

But I’m wondering if anyone else has learned the lesson. Dulles overbuilt in the early-mid 2000s because it extrapolated the extraordinary traffic growth of Northern Virginia’s post-9/11 boom indefinitely into the future. When that growth did not materialize, Dulles was left sucking wind. Northern Virginia’s commercial real estate sector was the next to learn that its growth forecasts not only were excessively optimistic overall but wrong as to where growth would occur within the metropolitan region. The result: many suburban office parks on the metropolitan fringe are faring even worse than Dulles.

What other growth forecasts based on outdated, 10-year-old numbers are underpinning investment decisions in Northern Virginia? Could the Virginia Department of Transportation be relying upon outdated numbers to justify its $2.1 billion capital spending program for Interstate 66? Numbers used for planning purposes tend to get updated at a glacial pace — once embedded in the system, the assumptions behind the numbers stay in place for years. That’s fine when the system is stable but potentially disastrous if the numbers fail to reflect a dramatic inflection point like that which occurred in the 2007-2008 recession.

Bacon’s Rebellion and friends will be giving the numbers a closer look.

How Tax Policy Favors Trucks over Rail

Source: Congressional Budget Office. Instead of publishing a range of costs, I include here an average cost figure for the top four categories. For CO2 emissions, I include CBO's middle-rage estimate.

Source: Congressional Budget Office. Instead of publishing a range of costs, I include here an average cost figure for the top four categories. For CO2 emissions, I include CBO’s middle-range estimate.

The “external” costs of transporting goods differ widely by truck and rail, but freight-transport prices do not reflect those costs, argues a new report by the Congressional Budget Office (CBO). In very rough numbers, I calculate from the CBO numbers, the differential amounts to $.03 per ton-mile transported.

That differential is not reflected in the taxes paid by trucking and rail companies. The result is that a far greater share of products are shipped by truck than by rail. Writes David Austin, author of “Pricing Freight Transport to Account for External Costs“:

Adding unpriced external costs to the rates charged by each mode of transport—via a weight-distance tax plus an increase in the tax on diesel fuel—would have caused a 3.6 percent shift of ton-miles from truck to rail and a 0.8 percent reduction in the total amount of tonnage transported. Such a policy would have eliminated 3.2 million highway truck trips per year and saved about 670 million gallons of fuel annually (including the increase in fuel used for rail freight). On net, accounting for the effect of fuel savings on revenue from the fuel tax, such a policy would also have generated about $68 billion per year in new tax revenue and reduced external costs by $2.3 billion.

I don’t know the odds of such a weight-distance tax being implemented on the federal level. I wonder if Virginia could implement it on the state level. One consideration not included here: the cost of administering such a tax.

— JAB

Layne’s Law

Map credit: VDOT

Proposed Interstate 66 improvements. Map credit: VDOT

by James A. Bacon

After spending a year and a half cleaning up the mess left by the previous administration — the Charlottesville Bypass, Norfolk’s Midtown-Downtown Tunnel, the U.S. 460 Connector in Tidewater — Transportation Secretary Aubrey Layne now has the opportunity to show whether or not he has the chops to handle a complex, politically charged transportation mega-project — the $2.1 billion in proposed improvements to Interstate 66 west of the Capital Beltway.

The Virginia Department of Transportation is focusing on two key dimensions to the mega-project, which is intended to address one of the most congested traffic corridors in Northern Virginia. The first is engineering. VDOT engineers have conceptualized a plan to build a corridor that will include three free lanes running both directions, two express lanes in each direction and high-frequency bus service  linking commuters with major activity centers. That plan will be subject to extensive environmental review and public input.

The second key question is how the state will finance and manage the project. Should VDOT use the controversial public-private partnership (P3) legal/financial structure to build and operate the project, much as it did with the Interstate 495 and Interstate 95 Express Lanes projects? Should VDOT undertake the project entirely on its own? Or should it create a hybrid approach? The question assumes tremendous urgency given the problems created by the P3 approach with the Norfolk-Portsmouth tunnels and the U.S.460 Connector.

Parenthetically, I would add that there is a critical third dimension to the project which appears to be getting less attention: What will be the impact of the project on Northern Virginia land use patterns? Will the project subsidize suburban sprawl (scattered, disconnected, low-density land use patterns) in the far western reaches of the Washington metropolitan area, which in turn will generate more demand — and more congestion — in the years ahead? In other words, will the state spend more than $2 billion to “fix” a problem that will re-emerge a decade or two after the project is completed?

In an interview yesterday, I sat down with Layne to discuss the financial dimension of the project. The transportation secretary has given enormous thought on how best to structure highway mega-projects, balancing the twin imperatives of controlling costs and limiting risk.

Layne sees transportation projects as forming a continuum between a model in which VDOT does everything, and a privatization model in which all functions are delegated to a private-sector concessionaire through an asset sale or a long-term lease. Any project is comprised of several parts:

Design
Construction
Financing
Operation
Maintenance

Any one of these pieces can be performed by the state or out-sourced to the private sector. In Layne’s view, because no two projects are identical, there is no standard configuration. He tends to think that the private sector does a better job of designing and managing construction than VDOT, but not by such a wide margin that jobs should automatically default to private players. In other areas, VDOT has a clear advantage. The fact that VDOT can tap tax-free bonds, which sell at lower interest rates, and requires no private equity financing often means that the state can finance a project at less expense than a private entity.

But there is more to managing a project than driving for the lowest cost or, as the previous administration tended to do, the lowest up-front public subsidy. Costs should be viewed over the lifetime of the project, which runs 50 years or longer, after adjusted for risk. One risk is the potential for cost overruns. In the past, VDOT used to eat construction cost overruns, which meant that the taxpayer paid. But that risk, says Layne, usually should be transferred to the private contractor. Another risk is that toll revenues might not materialize as forecast. Private entities pay especially close attention to that risk, and they try to negotiate all manner of protections into a P3 project to offset it.

Express lane projects get tricky because a private entity is motivated to maximize toll-paying traffic through its tolled lanes in order to maximize revenue, while the state’s goal is to maximize the throughput of riders, which means encouraging High Occupancy Vehicles and buses. In its negotiations over Interstate 95, the original plan called for Transurban to make a $250 million up-front investment to provide a robust mass-transit component. But as the negotiations proceeded, the mass-transit piece got whittled down drastically. If High Occupancy Vehicles exceed 24% of total traffic on I-495 (35% on I-95), the state is obligated to pay 70% of Transurban’s lost revenue. Meanwhile, the state pays for mass transit on I-95 out of its own funds — an expense that was not included in the announced project cost.

Layne’s Law is to start by first defining what the state wants in a project, and only ascertaining which mix of functions it should outsource to the private sector. “I’d love to have a private-sector partner,” Layne says, “but only if the risk transfer makes sense.” In the case of I-66, bargaining away a robust mass-transit capability to protect a private entity’s revenue stream probably would not make sense. Continue reading

Coping with Risk in Highway Megaprojects

Aubrey Layne explains the concept of fiduciary risk.

Aubrey Layne explains the concept of fiduciary risk.

by James A. Bacon

As Transportation Secretary Aubrey Layne has had more time to dig into his job, he has developed an ever more nuanced appreciation of how things went wrong with the U.S. 460 Connector. There was more to the fiasco, which could cost the Commonwealth up to $300 million, than a simple failure to acquire necessary wetlands permits before opening the spending spigots and then discovering that the permits were not forthcoming. The McDonnell administration, he says, negotiated a public-private partnership deal without sufficient appreciation of risks entailed with the project.

“I can’t tell you if they didn’t know they weren’t transferring the risk [to the private-sector partner] and got out-foxed, or whether they didn’t give a damn,” Layne told Bacon’s Rebellion in an interview today. Either way, the Commonwealth was left holding the bag when plans for the 55-mile Interstate-quality highway linking Petersburg and Suffolk had to be redrawn to do less environmental damage. He still hopes to recover some of the $250 million paid to U.S. 460 Mobility Partners (over and above $50 million in sunk design and engineering costs) for pre-construction work, but that outcome is uncertain.

Layne is optimistic that public-private partnership (P3) reforms enacted with bipartisan cooperation this year will prevent recurrences of the U.S. 460 debacle and help the state negotiate better terms in future deals than it got with the Interstate 495 and Interstate 95 express lanes projects in Northern Virginia, which effectively capped bus transit on the highways for the next half century. The McAuliffe administration’s big test will be to do a better job structuring the financing and risk of $2 billion in proposed improvements to Interstate 66 in Northern Virginia.

Before 1995, the Virginia Department of Transportation (VDOT) had one way of building roads. It designed them, put construction out for competitive bids, arranged its own financing, operated them, maintained them and absorbed the risk of anything going wrong. The system got the job done but it had drawbacks. It overlooked potentially creative solutions to engineering and design problems, and it was prone to cost overruns. Then the General Assembly passed legislation enabling public-private partnerships, which provided the Commonwealth a whole new range of options for financing big projects and shifting selected risks to the private sector.

Facing a severe transportation budget crunch, the McDonnell administration made the strategic decision early on to use P3s to leverage scarce public dollars with private capital. From a high-level perspective, this made sense because the Commonwealth had limited capacity to issue road-building bonds without jeopardizing its AAA bond rating and then-Governor Bob McDonnell had not yet pushed through tax increases to bolster transportation funding. Moreover, the administration wanted to take advantage of historically low interest rates on long-term bonds.

But politics and ideology were pushing P3s as well, says Layne. There was a bias that something is always better if the private sector does it. Sometimes the private sector can do things better than VDOT, he says, and sometimes the private sector is better suited to take on certain risks than the state. But not always. The McAuliffe administration’s goal is to find the best fit — the best balance of cost and allocation of risk — on a case by case basis.

The devil is in the details. Layne, a Republican and a McDonnell supporter at the time, backed the governor’s mega-project funding priorities and voted to approve them while serving on the Commonwealth Transportation Board. Indeed, he chaired an independent bonding authority that issued bonds for the U.S. 460 project.  But now that he’s transportation secretary, he realizes the issues were far more complex than presented to him and the CTB board.

The McDonnell administration first proposed a public-private partnership for the U.S. 460 project with the hope that outsiders could devise a more creative way of building and financing the highway than VDOT could come up with. Three consortia took a look and came up with similar conclusions — there would be insufficient toll revenue to finance more than a fraction of the construction cost with bonds. The McDonnell administration then switched gears, deciding to pay for most of the project with state funds but retaining the P3 structure in order to outsource the design and construction of the project to a private-sector partner, which turned out to be U.S. 460 Mobility Partners. The state should have gone back to square one and started over, says Layne, re-defining the project and putting it up for bids instead of using the P3 structure. Instead of getting multiple bidders to compete, the state wound up negotiating with a single player, U.S. 460 Mobility Partners. Even worse, Governor McDonnell had signaled that U.S. 460 was his highest priority, and there was no back-up plan — the administration had to reach a deal with U.S. 460 Mobility Partners or the project would never get built during McDonnell’s term. U.S. 460 Mobility Partners had all the bargaining leverge.

Negotiations took place within the P3 structure, which meant that the deliberations were secret and the contract not released to the public. VDOT briefed the CTB, the state’s transportation oversight board, but failed to disclose the information that critical wetlands permits had not been obtained and might not be obtainable.

The final contract for the U.S. 460 deal was more than 700 pages long. Layne says he can’t imagine than anyone in state government read the whole thing. “I’m confident that no one person understood it all. No one person could tell you what the deal was, what risk was transferred, and what risk the state was taking. And that’s a recipe for disaster” when negotiating with sophisticated business people on the other side of the table.

The dynamic would have played out very differently, says Layne, if the McDonnell administration had set up U.S. 460 as a design-build project.  First, VDOT would have opened up the proposal to competitive bids, very likely getting a lower price even while the private contractor took on the risk of delivering the project on budget and on time. Second, VDOT guidelines would have ensured that all necessary permits were granted before the project commenced and the state started shelling out money.

Layne doesn’t blame U.S. 460 Mobility Partners for negotiating the best deal for itself that it could. It’s not a charity. The company’s managers had a fiduciary responsibility to get the best deal for its shareholders that they could. But elected officials have a fiduciary responsibility to the public. The challenge for the Commonwealth is to bring to bear an equally acute understanding of risks and rewards and to cut the best deal possible for the taxpayers. That’s where the state failed utterly with U.S. 460. If he’d had negotiated such a disastrous real estate sector when he worked in the real estate business, he says, he would have been fired.

Now it’s Layne’s turn. He has to structure a mega-project deal for I-66. Tomorrow, I’ll describe how he is approaching that task.