Drive Down Dulles Tolls by Restructuring Bond Financing

Sean Connaughton

by James A. Bacon

If the Metropolitan Washington Airports Authority (MWAA) restructured the way it plans to finance the Rail-to-Dulles project, it could reduce tolls on the Dulles Toll Road by $.90 per driver in the early stages, Transportation Secretary Sean Connaughton told the Commonwealth Transportation Board today.

“We’ve been going through their finances. We can show them very easily how they can … dramatically reduce the toll rates by changing how they sell bonds and [utilize] fund balances,” Connaughton said.

“These changes would be more beneficial than the $300 million being tossed around” in the General Assembly, added Virginia Highway Commissioner Gregory Whirley.

Northern Virginia toll rates emerged as the deal-killer issue in the budget showdown between Republicans and Democrats this year. Senate Democrats blocked approval of the 2013-2014 budget on the grounds that it did not contain $300 million to help offset the fare increases that would be needed to finance Phase 2 of the Metro extension to Dulles airport.

Connaughton expressed frustration that the VDOT analysis had gotten no traction in the Senate. “We are attempting to get them to understand. … This could have a dramatic impact.”

Phase 2 of Rail-to-Dulles, currently estimated to cost about $2.8 billion, does not meet the cost-benefit prerequisites to qualify for federal funding. Therefore, Fairfax County, Loudoun County, MWAA and the state of Virginia must finance the entire cost themselves. Under the original financing agreement negotiated by the Kaine administration, the state’s share would come from revenues from the Dulles Toll Road. It has recently dawned upon Northern Virginia politicians that the financing requirements of the rail project could push tolls to $10.75 by 2028.

Earlier this year the McDonnell administration said it could contribute an additional $150 million in undesignated transportation funds to help buy down the toll increases for the first two  years. But Senate Democrats, locked in a power struggle with Republicans, insisted upon $300 million more from unidentified sources.

Connaughton said it’s not easy to come up with $300 million on the spot. Transportation funding is bound by rules and restrictions. Funds allocated for roads and highways, for instance, can’t be willy nilly transferred to mass transit. Moreover, most state construction funds are committed already as matching dollars on federal projects, and yanking the money could lead to the loss of the federal dollars. And there are practical limits to how much more the state can borrow.

It would be easier to find the money next year. The irony, says Connaughton, is that the money for Rail-to-Dulles isn’t even needed until next year. He thinks the issue is a “power play.” First the Senate Dems, whose 20 votes are sufficient to block the budget, said they wanted more power sharing. Then they wanted money for K-12 schools in Northern Virginia. Now it’s money for Dulles rail. “Every time we address their concerns, it’s something else.”

Even if the General Assembly coughed up the $300 million from some as-yet-unidentified source, there is no assurance that the CTB, whose approval is required by state law, would allocate it to Dulles rail. Several CTB members expressed reservations yesterday.

Cord Sterling, representing the Fredericksburg district, will be a hard sell on extra money for Dulles Rail.

Most outspoken was Cord Sterling, the Fredericksburg district representative. Giving an extra $300 million to Dulles rail, he said, would be “draining the rest of the commonwealth of resources.”

“Somebody made an irrational decision to do a phase of the project that was not feasible,” Sterling said. The project could not be funded without sky-high tolls, and the prospect of high tolls raised an outcry. Now Northern Virginians want taxpayers from across the state to bail them out. “Northern Virginia is not hurting” in terms of transportation expenditures, he said referring to an earlier statement by Thelma Drake, director of the Department of Rail and Public Transit (DRPT) that Northern Virginia already consumes 89% of departmental funds allocated to transit capital spending and 72% allocated to transit operations.

Whirley contended that there was no need for added funds, at least not right now. VDOT has not conducted an “exhaustive” review but he’s seen enough to suggest that MWAA should go back to the table. By his calculation, MWAA could avoid issuing $400 million in bonds by 2016, enough to eliminate the need for two planned toll increases.

What makes VDOT, a highway agency, an expert in financing heavy rail projects? Said Connaughton: VDOT has developed considerable experience with mega-projects involving large fund balances.

Update: This just in… Governor Bob McDonnell has issued a press release hailing Senate passage of the state budget. Apparently, the final budget version does not contain the earmark for Dulles rail. Regardless, the McDonnell administration should push MWAA to take another look at its bond financing plans to see if the savings postulated by Whirley are achievable.

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  1. DJRippert Avatar

    People haven’t cared about the $300M because it is an almost trivial percentage of the budget.

    I believe the two year budget is $85B. That’s $42.5B per year. What percentage is $300M?

    7/10ths of 1%?

    I am not sure what McDonnell’s plans for borrowing that $300M were but I assume the payback would have been spread (with interest) over a number of years. Which means it would have been well under one half of one percent of the annual spend.

    That’s why less than 1% of the people care.

    Jim Bacon preaches Boomergeddon but then plays God with dust particles.

    I look forward to the day when Bacon deconstructs the entire state budget and puts forth article after article after article that cut spending bu double digit percentages rather than fractions of one percent.

    1. I’ll make you a deal. Find me a sponsor who’s willing to pay for coverage of state budgetary issues (as opposed to transportation and land use), and I *will* deconstruct the state budget!

  2. DJRippert Avatar

    “Thelma Drake, director of the Department of Rail and Public Transit (DRPT) that Northern Virginia already consumes 89% of departmental funds allocated to transit capital spending and 72% allocated to transit operations.”.


    The state is committed to what? 5.2% of the total Metro expansion? The fact that this represents a large percentage of the state’s almost non-existent transit budget is the type of transparent pseudo fact vomiting that I have come to expect from the Clown Show and its representatives.

    What percentage of Virginia’s expenditure on fisheries and agriculture is consumed by NoVa?

    Transit funds go to high density localities and funds for fisheries go to places where there is commercial fishing.

    I’ll be very interested to hear Cord’s backpedaling when his constituents start receiving those $300 – $500 monthly HOT lane bills in the mail.

  3. DJRippert Avatar

    I am in London tonight. Care to guess how I got from Heathrow to Westminster? Care to guess how I will get back to the airport on Friday?

    Care to guess how I get to and from the Loop and O’Hare Airport when I visit Chicago?

    The Luddities in Virginia need to walk back downstairs to their home offices and resume their long-standing practice of learning about the world by looking at the picture on Wikipedia. It’s as close as they’ll get to ever having a clue.

    1. Don, you persistently refuse to see the point. Almost everyone agrees that Metrorail is a good thing and that Metrorail to Dulles is a desirable thing. That’s not the issue. The first real issue is, how much does it cost? You seem to be willing to write a blank check — it doesn’t matter how much it costs. The second real issue is, who pays? If you think Metrorail is such a wonderful thing and you look forward to using it, why don’t *you* pay your fair share? Why look to Dulles Toll Road commuters and taxpayers in Grundy?

      Others don’t share your munificence toward a public service from which you would benefit and they would not.

  4. I think the NoVa folks could make a principled alternative such as a regional 1/2% sales tax to fund METRO rather than appearing trying to bleed RoVa.

    or bump up the congestion tolls on HOT lanes a tad.

    What NoVa is doing right now is demanding “their share” of the money for the Cville Bypass, the 460 road and the Hampton tolls buy-down.

    I think it’s comical that MWAA apparently does not know how to efficiently finance the bonds…. or was it VDOT, once again, beating their breast,singing their own praises?

    Hopefully, they DID LEARN something from the Pocahontas Parkway fiasco.

    If NoVa wants more autonomy, I think they have to show a willingness to take on their own challenges and stop being a crybaby to the GA.

    kinda of how to call Richmond clowns at the same time you’re begging them for money.

    Sounds like a teen trying to increase his allowance by calling his parents jerks, eh?

  5. It’s time for a little contest. According to the Federal Transit Administration’s 2007 estimate (Annual Report on New Starts, Proposed Allocations for Fiscal Year 2007), how many new transit passengers will Dulles Rail attract by 2030? A new transit passenger does not move from some other form(s) of transit, but stops driving a motor vehicle and takes the Silver Line.

    1. Don’t keep me in suspense. Tell, tell.

  6. Jim B got it right. WHY is METRO the financial responsibility of RoVa or for that matter the US?

    We have transportation infrastructure funds called TIFIA at the Fed level and I believe that Va now has an infrastructure fund.

    Why doesn’t METRO ask for infrastructure funds that it will pay back at the same time it asks for the ability to institute a tax to generate the revenues?

    why is METRO the responsibility of RoVa?

  7. The 2007 report indicates that, by 2030, the Silver Line would attract 16,000 brand new transit users. If the Silver Line is opened in 2014, that’s about 1000 new riders per year.
    My point is not to suggest any stop building the Silver Line. We are well beyond that point. But, at the same time, I find it extremely absurd for people to claim either Dulles Rail is the critical the transportation solution for Fairfax County or surprise and outrage at the impact of the Line’s construction on DTR tolls. It’s way too late for that also.
    I hope the Silver Line is more successful than the experts have forecasted. But, until then, all we have are the forecasts, studies and estimates.

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