Google map shows location of major improvements in the Midtown Tunnel deal. (Click on map for larger image.)
by James A. Bacon
The McDonnell administration has entered into a public-private partnership agreement with Elizabeth River Crossings to rehabilitate the Midtown and Downtown tunnels between Norfolk and Portsmouth and to extend the Martin Luther King Freeway. Construction on the $2.1 billion project is expected to begin next year.
Of all the mega-projects under development by the McDonnell administration, this arguably offers the most clear-cut economic return on investment. The commonwealth will contribute $362 million to attract $1.7 billion in private investment, which will be repaid by means of higher tolls ranging initially from $1.59 to $1.84 per car for the tunnels and up to $1 for the MLK freeway extension.
That’s a big hit to motorists who now use the facilities for free. But the two tunnels are two of the worst transportation bottlenecks in Hampton Roads. In a prepared statement released this morning, Virginia Highway Commissioner Gregory Whirley estimated that the average round-trip user will save 30 minutes a day when the project is created. The improvements also will increase evacuation capacity in the event of a hurricane.
The agreement has been under negotiation for five months between VDOT, the new Office of Transportation Public-Private Partnerships and ERC, a joint venture between Skanska Infrastructure Development and the Macquarie Group. ERC will finance, build, operate and maintain the facilities for a 58-year concession period, and will assume risk for delivering the project on a performance-based, fixed-price, fixed data contract that protects taxpayers and users from cost overruns and delays.
The agreement calls for a slightly smaller financial contribution from the state, $362 million, than the $395 million envisioned only a few months ago. VDOT attributed the difference to lower-than-projected interest rates, buttressing the McDonnell administration’s argument that it makes sense to borrow borrowing more money now in order to take advantage of lower construction costs and interest rates in the post-recessionary economic environment.
“The Midtown Tunnel project has been at the top of the region’s priorities for many years,” said Transportation Secretary Sean T. Connaughton. “The state’s use of a public-private partnership structure will enable VDOT to attract approximately $1.7 billion in private investment to a project that yields tangible long-term benefits to the region and the state.”
Key components of the project include:
- Doubling the capacity of the Midtown Tunnel by adding a new two-lane tunnel under the Elizabeth River
- Increasing transit service between Portsmouth and Norfolk
- Rehabilitating the existing Midtown Tunnel and both Downtown tunnels
- Extending the Martin Luther King Freeway from London Boulevard to I-264, with an interchange at High Street in Portsmouth
- Modifying the interchange at Brambleton Avenue/Hampton Boulevard in Norfolk
ERC will provide financing through a $422 million TIFIA loan, and approximately $1.3 billion through equity, debt and revenue from operations. The state contribution will be used to buy down the cost of the tolls.
The press release made no note of how rapidly tolls are projected to rise or what oversight the state will exercise over future increases.
