Hey, It’s Worth a Look

The good news: The McDonnell administration has discovered $5.4 billion in “surplus” bond proceeds to help pay for Dulles Rail. The bad news: Money dribbles in slowly and it’s all there is to pay for Dulles Toll Road improvements over the next four decades.

Virginia Highway Commissioner Gregory A. Whirley

by James A. Bacon

The General Assembly faces a major policy decision regarding the financing of Dulles Rail — what to do with a projected $5.4 billion in surplus Dulles Toll Road revenues to be collected over nearly four decades to provide security for the project’s bond holders, Virginia Highway Commissioner Gregory A. Whirley told members of the Joint Commission on Transportation Accountability Monday.

To obtain affordable interest rates on the bonds it issues, the Metropolitan Washington Airports Authority (MWAA) is required to maintain minimum debt service ratios set by the terms of its bond agreements. Toll revenues must cover two times the debt service for senior (AA-rated) debt, 1.35 times for intermediate debt, 1.2 times for lower-rated debt and 1.0 time for the most subordinated debt. The excess revenues will be set aside in a separate fund.

The state has three broad options on what to do with the money: Use it to pay for improvements to the toll road, one of Northern Virginia’s critical transportation arteries; renegotiate bonds to lessen the burden on toll road users, who could wind up paying as much as $8.75 per trip in 2025 and $18.75 by 2048; or return the money to the state. Initially, the surplus will be small, Whirley explained, but enough money could accumulate within a decade to help out toll road users by renegotiating some of the project’s more expensive debt.

The escalation of Dulles Toll Road tariffs has become a heated issue in Northern Virginia, where tens of thousands of commuters rely upon the limited access highway to get to and from work. Under the final financing agreement, revenues from the toll roads will cover about half the$6 billion cost of building both phases of the heavy rail project.

The state allocated $150 million this year to cover interest payments in the early years of bond payments, making it possible for MWAA to slow the rate of fare increases on the toll road. The surplus funds identified by Whirley would dwarf that sum, although they would have to cover far more years of interest payments. In April, Transportation Secretary Sean Connaughton said that tapping the surplus funds could reduce tolls by $.90 per rider in the early years.

MWAA has issued $1.3 billion in toll-backed bonds so far to finance Phase 1 of the project, which is nearing completion, and anticipates selling approximately $2 billion more over the next five to six years. The bonds will be sold in four tranches, each offering a different level of security for investors and paying a different interest rate. The top-rated, “flagship” bonds will bear low interest rates of 2.5% to 3%. Investors will regard them as having minimal risk because they will be first in line, after operating and maintenance costs, to receive toll road revenues and they will have a 2.0-to-one coverage ratio. Other tranches will stand behind the senior bonds in line and have lower debt-service coverage. A key component of MWAA’s financing strategy is to reduce the risk on the lowest-rated bonds by getting the federal government to back them under the Transportation Infrastructure Finance and Innovation Act (TIFIA).

Andrew Rountree, MWAA chief financial officer.

MWAA’s interest rate projects are conservative, said Andrew Rountree, MWAA’s chief financial officer. Projections assume an average cost of capital of 6.5%, which is considerably higher than interest rates today. MWAA’s AA bond rating for senior debt places it among the top 11% of all airport authorities in the country. MWAA runs Dulles International Airport and Reagan National Airport, and has been entrusted with managing construction of the Dulles Rail project, which will run along MWAA-owned right-of-way.

Under a new transportation bill agreed to by Congress, the federal government will expand its TIFIA loan program substantially, Rountree said. By converting the project’s expensive, subordinated debt to TIFIA-backed debt, MWAA could bring down toll road fares considerably. “We’ll be doing everything we can to access that program.”

Otherwise, Whirley’s idea of tapping the surplus debt-coverage funds offers the only realistic prospect of ameliorating the plight of toll road commuters. Rountree cautioned that it will take years before the funds could be accessed. “The opportunity to tap the surplus won’t come about for quite a while,” he said. A big chunk doesn’t become available until the very last two years. Read more.

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  1. How quaint. NoVa Republican legislators complaining about tolls. I will have to research how they feel about tolls in Hampton Roads, I-95, US 460, etc. Perhaps they have ignored the talking points paper from the McDonnell administration. Bosun.

  2. larryg Avatar

    of course the tolls in NoVa are the fault of the Clown Show and Hampton Roads people.

    NoVa is by far the richest bunch of whiners in the history of the Commonwealth.

    They elect these guys that then screw over those that elect them – then they blame Richmond!

  3. DJRippert Avatar

    Don’t believe everything you read on BaconsRebellion. The vast majority of Northern Virginians support the Rail to Dulles Phase II project and are willing to fund a big chunk of that project through whatever means are available.

    Jim Bacon habitually picks a couple of GA members who have districts on the far end of the Dulles Toll Road. While I can’t object to these people complaining about the increased tolls which will impact their constituents, I can complain about Jim Bacon’s fixation on a very few of NoVa’s elected officials. Where are the questions for Janet Howell, Dick Saslaw, Chap Petersen, etc?

    Even the few elected officials Bacon chooses to quote are weak choices. For example, here is Jumpin’ Jim LeMunyon’s point:

    “Rountree was grilled by Republican lawmakers from Northern Virginia whose constituents have fought the rail project. Del. James LeMunyon, R-Chantilly focused on the decline in tolled transactions between 2009 and 2012 as a sign that MWAA toll revenues forecasts are flawed. Although Rountree said that toll revenues have hit very close to forecasts — 99.6% of forecast in 2009, 102.8% the next year and 97.5% the year after that — LeMunyon was not reassured. “How accurate are the projections 10, 20, 30 years in advance? If we’re wrong by 20% on these projections 20 years out, we’re all sunk.”.

    So, LeMunyon first tries to hammer Roundtree by asking about the decline in toll revenues during a recession. When his simple-mindedness is corrected by Roundtree explaining that the actual revenues were very, very close to forecast, LeMunyon changes direction and asks about estimates 30 years into the future.

    This guy is one of Jim Bacon’s “go to” guys on transportation policy? Dear God.

  4. In Jim’s defense, he stated that he was reporting from the meeting yesterday afternoon. The quotes were taken directly from those on the panel. It is not hard to guess why J. Howell, Saslaw, Petersen, etc. were not on that panel. Bosun

    1. Thank you. You are exactly right.

  5. Don, I quoted LeMunyon and Hugo because they both asked pointed questions about the toll rates. Del. Jimmy Massie, from the Richmond area, asked questions of a more fact-finding nature, but I didn’t quote him. Absolutely no one, including none of the Democratic members of the commission, made statements in defense of MWAA. Indeed, they asked few questions.

    I don’t make the stuff up. I report fairly. I reported Rountree’s response to LeMunyon, which you evidently found persuasive. You can disagree with my commentary, but don’t say, “Don’t believe everything you read on Bacon’s Rebellion.” If it’s relevant to the debate, it’s in there.

    1. DJRippert Avatar

      “Absolutely no one, including none of the Democratic members of the commission, made statements in defense of MWAA. Indeed, they asked few questions.”.

      So, if you are reporting rather than editorializing – wouldn’t you ask these politicians their opinion? Whether you ask them in the meeting or separately? have you asked any of the many, many Northern Virginia politicians what they think of Rail to Dulles? How about the Loudoun County Board of Supervisors members who voted for RTD II?

      You cherry pick statements and make outlandish comments about “rich Tyson’s landowners” and other imaginary creatures. Your omissions lead people to believe that there is a huge cry against Rail to Dulles up here in Northern Virginia. You paint a picture of lots of invisible rich “Tyson’s landowners” demanding Rail to Dulles against the anguished screams of most of NoVa’s residents. The picture you paint in misleading.

      Reading your columns is like listening to Rachel Maddow sometimes. You pick a position and report on it in a slanted manner.

      Do you know of any elected officials who support Rail to Dulles? Have you ever quoted any of them?

      If you are going to editorialize – fine. You can keep writing about how you want to see changes in human settlement patterns without actually ever changing human settlement patterns.

      If you are going to report – shouldn’t you at least try to get both sides of the story? The RTD project has come up for vote after vote by group of elected officials after another. It seems to win every time. Are the rich “Tyson’s landowners” stuffing all the ballot boxes or are there elected officials who actually support the program?

  6. constructionandlaborguy Avatar

    I’m alarmed by this statement:
    “Tolls are less than what residents of New Jersey and New York pay, Frasca said.”

    Drive up I-95 into New England you get hit with these excessive tolls if you drive a regular car:

    And then this bridge/tunnel toll:

    I’m sure I am missing a few South of NJ along I-95.

    NoVA needs to be doing all that it can to avoid becoming anything close to NJ/NY tolls, even if we have high incomes.

  7. “The vast majority of Northern Virginians support the Rail to Dulles Phase II project and are willing to fund a big chunk of that project through whatever means are available.”

    First part, absolutely, because they have been led to believe Dulles Rail will relieve traffic congestion. People will support public infrastructure projects that can reasonably be expected to reduce traffic congestion. Had people been told up front and continuously the truth about Dulles Rail – that it will not only fail to reduce traffic congestion, but it also will trigger even more traffic congestion and the need for billions more in road improvements and non-rail (bus) transit — I don’t know whether, and to what extent, the public would support Dulles Rail. They might still support rail or they might not. Given the opposition to the elevated line, the project could have possibly tanked had the public been told the truth.

    As to the second part, how much people are willing to pay, I’m not sure how much. We know the landowners in the tax district were willing to pay $400 million in change and only $400 million and change. Their liability is capped. The Feds were willing to pay $900 million after massive lobbying overcame the FTA’s decision that the project was not cost-justified. Loudoun County was was willing to pay $270 million, plus build two parking garages, towards Phase 2 through a special tax district that exempts most of the county. Fairfax County was willing to pay for the Route 28 station and parking garage, along with another parking garage at the Herndon-Monroe station cite. And our favorite CTB was willing to have Dulles Toll Road users pay the rest.

    Part of the concern of elected officials about the level of DTR tolls is genuine concern about their constituents. But much of it is concern that people won’t pay the high tolls and will take other roads. Former MWAA chief Jim Bennett told several people, me included, at the August 2009 meeting on Dulles Rail at McLean High School that MWAA’s analysis showed drivers would start leaving the DTR to the point that rate increases would produce less revenue once the tolls hit $7 and change. If MWAA’s toll forecasts have been fairly accurate, as they seem to be, doesn’t that suggest Bennett’s remarks about the price ceiling are true? How would the public feel about this information? I don’t know for sure. I think it would certainly weaken support for Dulles Rail.

    I have long predicted a grand jury will someday investigate Dulles Rail and Tysons Corner. I still feel that way.

    1. DJRippert Avatar

      “First part, absolutely, because they have been led to believe Dulles Rail will relieve traffic congestion.”.

      Partly, although that is a secondary reaction. The primary reaction is that people in NoVa have completely given up on The Imperial Clown Show in Richmond. We have no faith in that pack of hapless people ever doing anything of significant value for our region. So, when the Feds offer to put up a bunch of money for something that is a step forward and we have to create special tax districts and pay outlandish tolls to get that step forward – we take the deal.

      What’s the alternative? Wait for the jack-wagons in Richmond to act?

      The CTB is a great example of Richmond in action. The unelected and unaccountable CTB is meant to reflect the desires of the people it represents. The vast majority of the board seats are dedicated to the representation of particular regions. Only one teensy-weensy problem – that representation has not be adjusted for changes in population since 1935. There have been eight censuses since 1935 to help ensure that the US Congress properly represents the actual population of the United States. But not one iota of change to the CTB.

      Meanwhile, Jim “Quissling” LaMunyon sits on the CTB and goes with the flow. Earlier this year he pit forth a bill to reset the CTB to Virginia’s actual population distribution. However, the puppeteers in Richmond told him to drop that idea so he did.

      If the man had any political courage at all he’d resign from the CTB and publicly demand that it be reconstructed in an ethical, democratic and representative fashion.

      1. Just to clear up one thing: LeMunyon is not seated on the CTB. He sits on the Joint Commission on Transportation Accountability, a General Assembly entity.

        Perhaps he should resign from the General Assembly?

        1. DJRippert Avatar

          I think all the NoVa representatives in the General Assembly should consider the Japanese approach of committing hari kari in the face of obvious and public failure / humiliation. Absent that level of integrity – they should most definitely resign and apologize to their constituents.

  8. larryg Avatar

    we ought to try to be more clear (or find out) what the public’s expectation is.

    I would argue that they do not actually believe it will reduce congestion but it will provide them with a reliable trip time including at rush hour.

    When you actually want to get somewhere and you know that it’s next to impossible to do at rush hour – you take METRO.

    How it actually gets paid for is a different question as many of those who are familiar with the rest of the world – know that most every major metropolitan city in the world – has a subway – and that’s proof enough that NoVa should have one and the funding for it will be found.

    If you could sit down with Bob McDonnell and have a honest injun conversation with him – he’d likely admit that NoVa SHOULD have a METRO in his view also.

    NoVa is going to have a subway system. That’s pretty much pre-ordained. All of the rest of it is interesting but irrelevant side issues.

  9. Reliable trip time at rush hour. No one is telling what the capacity of the Silver Line is. WMATA just adopted a new policy that sets the per-car capacity at 120 people. Mind you, more or less may get into a car, but for planning purposes, it strikes me that the official figure should be used. Let’s assume 8 car trains on the Silver Line. That gives us 960 per train in each direction maximum.

    WMATA has shifted three Blue Line trains to the Yellow Line’s track, leaving ten trains per hour maximum in each direction for the Blue Line on the “northern” track network, if you will. That’s 17 Orange Line trains today. But once the Silver Line starts up, those 17 trains need to be shared between the Orange and Silver Lines. The Orange Line in Virginia is extremely crowded. So let’s assume we get seven Silver Line trains. If so, we have a capacity of 6720 riders per rush hour in each direction. Is that a reliable trip during rush hour? I don’t know. Do people know this? Of course not. Would it change views had they been told this up front? Yes, but to what degree? Regardless, I think the truth should have been told to the public.

  10. larryg Avatar

    I just think most people instinctively realize that no subway system can reduce congestion but they do assume (perhaps too optimistically) that they could hop METRO to get to the airport on time whereas they’d have to allow extra time if they were going to drive.

    As you point out – perception my not be reality – but I’d suspect that most folks realize METRO could not handle enough people to actually reduce congestion – any more than they might think a new road could reduce congestion even though that’s how most of them are sold also.

  11. MWAA has said that, realistically, a train ride from downtown D.C. to Dulles will take more than an hour. And how many trains will come each hour? A train ride to the Airport during off hours might be reasonable. What if the train is packed?

    MWAA has recently downplayed the Train for Airport passengers and has been emphasizing its value to employees. Who knows?

    Dulles Rail is all about enabling massive increases in density for well-connected landowners.

  12. larryg Avatar

    are there ANY NoVa elected that are on the record – opposed to the Metro expansion to Dulles?

  13. Rountree’s bond council pointed to outrageous tolls elsewhere; in like manner, others will point to the outrageous overcosts and tolls of this rail job, to justify further outrages in other places.

    If Virginia will have some supposed surplus in future years, doesn’t it seem that it needs to go into the returement fund? We were told about a supposed Virginia surplus not long ago, but somehow a much larger hole in Virginia’s retirement fund was not paid of – so how can it have been called a surplus?

    This is a bunch of funny money, IMHO. Terms like ‘Balanced Budgets” mean nothing if such glaring contradictions are allowed to continue.

    At the county level, I read that Fitch published a report on Fairfax County on July 11 or 12, 2012. I would have to subscribe to see this report, and I’m too cheap to do that. So, I have searched – but after more than a week, I have not seen Fairfax County taking any bows for an excellent Fitch report from July 11 or 12, 2012. So, I wonder what’s in that report. I suspect that the huge amount of funny money in this rail project will not sit well with the financial market, or its overseers, so I will not be surprised if the bond rating people have some negative things to say about it at some point. The resounding silence about this latest Fitch report makes me wonder if that has already begun.

    1. I’d like to see that Fitch report, too. I wonder how deeply Fitch dug into the finances. Is the Fitch analyst aware, for instance, that Fairfax will take on a significant obligation to maintain its share of the METRO. Does he (or she) recognize WMATA’s tremendous backlog of capital needs for which there is no obvious source, other than the localities it serves?

  14. larryg Avatar

    looks like one can register and get the rating…

  15. I’m too cheap, larryg. Eventually I’ll see something that will tell me what the report said.

    To answer your earlier question, I think pretty much the only elected official who opposed rail to Dules was Fairfax County Supervisor Pat Herrity.

  16. Supervisor Herrity opposed Dulles Rail Phase II when it was being considered by Fairfax County in April 2012, so I consider that he was against Rail to Dulles Airport, or at least that particular plan for such rail.

    In Loudoun County, several BOS members voted against the extension of Rail to Ashburn. They could not be sure that rail would not be extended to Dulles Airport regardless of their votes, but they opposed the July 2012 plan to ‘opt in’ and extend it to Ashburn. I can’t say that they opposed rail to Dulles Airport, though. Of course, the Loudoun County BOS decided to ‘opt in’.

  17. Oops, I forgot Ken Cuccinelli, Virginia’s Attorney General. That’s an elected office… Cuccinelli called the Dulles Rail project a ripoff, and said that it shouldn’t be continued past Wiehle Avenue. That places him definitely in the anti Rail-to-Dulles camp, I think.
    Cuccinelli: Dulles Metrorail a “Rip Off”
    Fairfax News, June 7, 2011

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