After
months of wrangling over toll rates on the
privately financed and operated Dulles Greenway,
Commonwealth lawmakers have finally reached a
resolution. But in the process they may have done
damage that will make it harder for Virginia to
build the infrastructure necessary to keep people
and goods moving across the state.
Last
year the State Corporation Commission approved a
Greenway toll rate increase to allow the road’s
operator to meet its rapidly rising debt service
obligations. This prompted a strong response from
Congressman Frank Wolf, who asked the Attorney
General to scrutinize the recent toll increase,
encouraged the General Assembly to undo the law
that created the Greenway, and even called
publicly for the state to condemn the road and
expropriate it from the private parties that
financed, built and operate it.
Luckily,
cooler heads prevailed. Under the recently passed
HB 1140, negotiated by Sen. Mark Herring,
D-Loudoun, and Del. Joe May, R-Loudoun, the
Greenway operators will be allowed to increase
tolls at roughly the rate of inflation starting in
2013 after the recently approved toll increases
have been phased in. The bill also requires the
operator to submit annual financial reports to the
state.
Indeed,
May and Herring deserve kudos for and negotiating
a fair compromise that protects the public
interest while giving the Greenway operator some
predictability in toll rates moving forward.
However, HB 1140 may send the wrong signal to the
private sector.
Private
sector infrastructure investors like those who
built and run the Greenway make decisions about
where to do business based in part on perceived
political risks to their investments. Until HB
1140, Virginia had been seen as a relatively
stable political environment in which to invest.
For example, the Commonwealth’s landmark
Public-Private Transportation Act (PPTA) — the
statute granting broad authority to the state to
negotiate public-private partnerships to deliver
new, privately financed transportation projects
— has remained largely intact since passed over
a decade ago, despite several party changes in the
Governor’s office and in both houses of the
Assembly. It is under this Act that the new, $1.7
billion Capital Beltway high-occupancy toll (HOT)
lanes project was negotiated, among others.
But
the Greenway was built prior to the PPTA’s
passage and was authorized under stand-alone
legislation in 1988. That legislation gave the
State Corporation Commission the sole
responsibility for approving future toll rate
increases. HB 1140, in effect, represents the
Assembly stepping in and changing the rules of the
game midstream.
From
a private investor’s perspective, the Assembly
has just seen fit to effectively rewrite major
provisions of a twenty-year old law authorizing
the Greenway’s construction — a law that
formed the basis for Greenway investors’
original investments. So, how confident should
other private infrastructure investors be that the
same thing won’t happen in five or ten years
with the Beltway HOT lanes, the I-95/I-395 HOT
lanes project, or anything else negotiated under
the PPTA?
Privately
financed infrastructure projects generally involve
long-term (35+year) contracts, so it makes sense
that the investors who consider political risk
over the long term in their investment decisions.
Those private investors interested in expanding
and modernizing Virginia's transportation
infrastructure may ultimately find it less risky
to shift their focus — and their dollars — to
other states where they are being welcomed by
innovative policymakers.
Hopefully,
HB 1140 will satisfy those like Congressman Wolf
who complain about “unfair” toll increases but
don’t mention that, were it not for private
investors, the Dulles Greenway would not even
exist. Those investors stepped in and undertook a
great deal of financial risk to build a road that
government had long wanted but couldn’t afford
to pay for.
That
last bit is the key, given the current
transportation funding crunch in Virginia. The
Supreme Court recently put the last nail in the
coffin of last year’s transportation funding
“solution,” and there seems to be no political
will to raise taxes to a level that could fund all
of the transportation projects on transportation
planners' wish lists. State officials need all all
available options on the table.
Private capital
markets have an estimated $400 billion available
for infrastructure investment. With the
Commonwealth’s transportation needs so vast and
funding prospects so bleak, the last thing
Virginia needs is to scare off the one source of
capital big enough to meet the state's
infrastructure needs in the 21st century economy.
--
March 24, 2008
|