Tag Archives: Rail to Dulles

A house divided

The debate over Rail-to-Dulles has taken a fascinating new twist. For years the controversy over the heavy rail project and its concomitant financing through Dulles Toll Road revenues has been a purely Northern Virginia issue. It received zero coverage in the Rest of Virginia (RoVa). Ninety-nine percent of downstate residents were ignorant of it, and the other one percent was indifferent (with the exception of your humble correspondent and a handful of others).

Now Rail-to-Dulles financing has become the sole remaining object of dispute between Senate Republicans and Democrats in resolving the state budget impasse. The controversy has spilled over regional boundaries. Suddenly, what happens in NoVa matters to RoVa.

So far, the proposal to borrow an additional $300 million — to be applied to reducing Dulles Toll Road fares incurred to help finance Phase 2 of the Rail-to-Dulles construction — has divided the General Assembly according to partisan, not regional, lines. Senate Democrats from RoVa have hung tough on the issue, even though their constituents will help shoulder the added debt burden. That raises the issue of whether Rail-to-Dulles is really a cause or pretext. Is it just a tool for getting Senate Dems what they really want, which is parity in committee and subcommittee representation in line with their 20 seats in the 40-member body?

It will be interesting to see if regional tensions manifest themselves later today at the Commonwealth Transportation Board. The McDonnell administration will ask the board to allocate $100 million to help offset tolls for the Midtown-Downtown Tunnel project in Norfolk and Portsmouth. Sounds fair, considering that Governor Bob McDonnell has already promised $150 million in state funds for Rail-to-Dulles (possibly contingent upon resolution of a controversy over Project Labor Agreements in the bidding process). Is that enough to mollify CTB members from Northern Virginia? Will they express support for the additional $300 million in borrowed funds? Will rural representatives object to all the swag going to urban districts. Or will they simply rubber stamp administration requests?

Stay tuned.

— JAB

Up, up and away... Outstanding state-supported debt. Source: Debt Capacity Advisory Commitee 2011 report

by James A. Bacon

General Assembly Democrats fought McDonnell administration proposals in the 2012 session to divert funds from the General Fund to transportation programs on the grounds that the transfer would short-change education, health care and other core programs. They don’t appear to be applying the same principle, however, to the issuance of state debt.

A 5% debt service/revenue ratio for state finances (primarily the General Fund plus the transportation fund) is deemed desirable to preserve the state’s coveted AAA bond rating. According to the Debt Capacity Advisory Committee’s December 2011 report, debt service on the Transportation Trust Fund (TTF) already exceeds 5%  of TTF revenues.  States the report:

To the extent the 5% measure is exceeded, capacity derived from the general fund is being utilized. This does not mean that general fund dollars are needed to supplement debt service payments on TTF debt. However, it does mean that some debt capacity derived from the general fund is being used to keep overall capacity for all tax-supported debt under the target of 5%.

Thus, borrowing more for transportation means borrowing less for schools, higher ed, prisons, parks, government buildings and other capital improvement projects.

Yet, while criticizing McDonnell for raiding General Fund revenues to pay for transportation projects, Senate Dems have pushed furiously for the state to borrow an additional $300 million to help offset the sky-high tolls on the Dulles Toll Road. Toll revenues will be diverted to help pay for construction of Phase 2 of the Rail-to-Dulles project.

With 20 members in the 40-member Senate, Dems forced Senate Republicans to adopt many of their budget priorities, including the $300 million for Rail-to-Dulles. In the budget reconciliation process, however, Republican-dominated Senate and House conferees stripped out the borrowed funds. Then late last week, Sen. Charles J. Colgan, D-Manassas, signed off on the conferee version, holding out the possibility that he might join with Republicans in giving the reconciled budget the Senate’s final approval, but he refused to commit.

Tax-supported debt issued over the past 10 years. Source: Debt Capacity Advisory Committee.

The state debt issue could prove crucial as the parliamentary maneuvering plays out. The Debt Capacity Advisory Committee has maintained since 1991 that the state’s debt service should not exceed 5% of blended revenues. The purpose, as the 2011 reports explains, “is intended to ensure that annual debt service payments do not consume so much of the state’s annual operating budget as to hinder the Commonwealth’s ability to provide core government services.”

In 2010, the Debt Capacity Advisory Committee refined its guidelines to “smooth the effect of dramatic revenue fluctuations, and to facilitate long-term capital planning.” The 5% target measure remained unchanged.

Maintaining a AAA bond rating has been a long-standing bipartisan objective in Virginia. Although the 5% limit is not a formal requirement of municipal bond rating agencies, the debt service/revenue ratio is considered in the rating of the state’s debt. All three bond-rating agencies reaffirmed Virginia’s AAA status in October, but Moody’s gave the commonwealth a “negative” outlook, suggesting that a future downgrade was possible.

In 2011 the General Assembly approved a McDonnell administration plan to accelerate previously authorized transportation bond issues and to issue additional GARVEE bonds, which are backed by future federal transportation funding receipts. Still, thanks to robust increases in tax receipts this year and the lack of other debt issues, the state still has unused debt capacity of roughly $460 million.

Allocation of state long-term debt 2002 to 2011. Source: Debt Capacity Advisory Committee.

It is unclear exactly what kind of debt the Democrats have in mind. Emails Jeff Caldwell, the governor’s press secretary: “We won’t know what type of financing is proposed or the details of these budget proposals until a budget bill passes the GA and is sent to the governor for review.”

Whatever the Democrats are thinking, they have to deal with two issues. First, a practical problem: There aren’t sufficient transportation funds to cover the expected debt service, which means under state code the bonds cannot be issued.

Anne Oman, legislative fiscal analyst for the House Appropriations Committee, explained the problem in an email to Del. James L. LeMunyon, R-Chantilly:

As [the revenue] stream currently stands, there is not room beyond the current fiscal year to continue at the $300.0 million annual issuance level, thus increasing the overall authorization from $3.0 to $3.3 billion as proposed by the Senate would not help projects in the foreseeable future because there is not enough repayment capacity in the [Priority Transportation Fund] revenue stream to support additional issuances at this time.

Then there’s a policy dilemma: While the state can issue another $460 million before hitting the 5% debt service/revenue benchmark, it already exceeds 5% for the transportation component of the budget. The Dems are on the record against under-funding schools, health care and other General Fund programs. Are they willing to under-fund capital spending projects for those very same programs? I can’t help but wonder if they’ve thought it through.

Sen. Charles J. Colgan. Photo credit: Times-Dispatch.

Sen. Charles J. Colgan, D-Manassas, signed off Friday on a state budget compromise that omits $300 million for the Rail-to-Dulles project, reports the Washington Post. Colgan said that his agreement in Senate-House budget conferee deliberations does not commit him to actually voting for the compromise budget when the Senate must ratify it. But his decision does appear to be the first break in the stand-off.

Colgan’s decision took place against a backdrop of furious negotiations between the McDonnell administration and Senate Democrats. According to another Washington Post article, Transportation Secretary Sean Connaughton had agreed to provide as much as $200 million of the $300 million demanded by the Dems, then backed off. (The article made no mention of $100 million or more demanded to buy down tolls for the Midtown/Downtown tunnels in Norfolk and Portsmouth.)

“What is particularly galling is, the administration has been giving mixed signals,” said Sen. Janet Howell, D-Fairfax. “Two weeks ago, they indicated that they had $200 million available. Two days ago, they said they had $175 million available. And yesterday, they had zero.”

Connaughton and his boss, Governor Bob McDonnell, had a difficult juggling act. Many Republicans balked at the idea of borrowing $300 million to help defray the interest expense on the Metropolitan Washington Airports Authority (MWAA) bonds that would be used to finance Phase 2 of the estimated $2.8 Metrorail project.

“I understand they want to secure that [$300 million], but to sell bonds to mitigate tolls, that really is kind of a stretch,” said Sen. John C. Watkins, R-Midlothian. “I’d be willing to put cash into it. But to sell bonds to mitigate tolls and have to run around and have to pay interest on them, fiscally, that’s not being responsible.”

The McDonnell administration had already agreed to funnel $150 million into the project. Still lurking is the issue of the Rail-to-Dulles Project Labor Agreement (PLA). Some Republicans wanted to make that $150 million contingent upon the MWAA board reversing a decision to give preferential treatment during the bidding process to companies that signed a PLA, in effect guaranteeing that all worker would be hired through labor union hiring halls. Critics say that provision could knock open-shop contractors out of the bidding, decrease competition and result in a higher price for the project.

— JAB

In my previous post, I objected to the Virginia state Senate voting to pump an additional $300 million into the Rail-to-Dulles heavy rail project without demanding more accountability from the Metropolitan Washington Airports Authority (MWAA), the entity in charge of overseeing design and construction. Now, let’s stop to think what happens when construction is complete and the Silver Line is handed over to the tender mercies of the Washington Metropolitan Area Transit Authority (WMATA) for day-to-day operation.

What do we know about WMATA? Well, as pointed out yesterday, the authority has racked up $13.3 billion in capital replacement and maintenance backlogs, including $6.5 billion for which it has not identified a funding source. That should come as no surprise now that we read in the Washington Times about WMATA’s “culture of complacence, incompetence and lack of diversity.”

WMATA is not only a union shop that resists efforts to increase productivity and efficiency, it has a clubby culture marked by rampant racial favoritism. People don’t talk about the favoritism because it doesn’t fit the dominant narrative of whites oppressing people of color. In WMATA’s case, blacks discriminate against whites and Hispanics, and men against women. As the Times leads its story:

Ninety-seven percent of the bus and train operators at [WMATA] are black, with only six white women out of more than 3,000 drivers, according to Metro documents — a lack of diversity at one of the region’s largest employers that has led to an acknowledgment of failure in affirmative-action documents and spawned a series of lawsuits.

With Metro’s budget chronically strained and reports of mismanagement coming more regularly than trains, interviews and internal records depict a likely root: an environment in which hardworking employees are actively excluded and those who rise are those willing to do the bare minimum — never causing a stir by flagging rampant safety violations, reporting malfeasance or proposing improvements.

Perhaps the most telling detail in the report is a description of the practice of “pencil whipping” — a practice so pervasive that there is a term for it. It refers to the fudging of inspections and other reports.

The state of Virginia and local governments served by WMATA help cover the organization’s operating deficit. When Rail-to-Dulles project is handed over to WMATA, the state will sink even deeper into the Metro morass. Unfortunately, if the recent past is prelude, Virginia will dish out funds to WMATA as passively as it has forked over money to MWAA.

Virginia will need more mass transit in the future as automobility becomes increasingly unaffordable. But the current model for mass transit in Virginia is badly broken, beyond hope of self-repair. Deficit-plagued bus and rail businesses will not survive a prolonged belt-tightening by state, local and federal government. What transportation options will Metro riders have if WMATA goes belly up?

Where are the supporters of mass transit? Why are they silent? Are they scared of stigmatizing their favored transportation mode? That’s happening already. They must join the clamor for reform or risk seeing mass transit swept away in a tide of red ink.

— JAB

by James A. Bacon

The good news for Virginians from late last week is that Republicans and Democrats in the Senate Finance Committee broke their deadlock over the state budget. The bad news is… Senate Republicans and Democrats broke their deadlock. The only way to paper over the divide between the two parties, of course, was to spread around more pork.

Funding for transportation and schools lay at the heart of the budgetary disagreement between the Rs and Ds. On the transportation front, the Dems held out for a new deal that would delay implementation of tolls on the Midtown and Downtown tunnels linking Norfolk and Portsmouth, and and provide $300 million extra to finance the Rail-to-Dulles project. The GOP caved. Assuming the full Senate passes the agreement brokered in committee — it is scheduled to vote this afternoon — the budget then will be await reconciliation with the House of Delegates version, which includes none of those provisions.

The first measure noted above would ask the state to re-open negotiations with Elizabeth River Crossings to “develop a strategy” to delay the imposition of tolls on Hampton Roadsters until 2014. That is entirely reasonable, as it is grotesquely unfair to ask commuters to pay for a facility that has not  yet been built.

The second measure would add $300 million more in state contributions for the Rail-to-Dulles project on top of $150 million already promised to help buy down toll increases on Dulles Roll Road users, the main piggy bank for Phase 2. Thus, the Senate would blindly dump nearly a half billion dollars into the project, no strings attached.

Meanwhile, Gov. Bob McDonnell has yet to sign the Comstock bill, which would nix state funds for the heavy rail project if open-shop (non-union) companies are discriminated against in the Phase 2 construction. The governor’s inaction has prompted speculation that he has backed off from his insistence that the Metropolitan Washington Airports Authority (MWAA), which is managing the Rail-to-Dulles construction, reverse its preference treatment of union Project Labor Agreements.

Adding to the jury-rigged nature of the Rail-to-Dulles bail-out, the Senate budget would borrow the extra $300 million and use the funds to defray the debt service on the Dulles Toll Road Revenue Bonds.

But the worst of it is that so many questions about the Metro Silver Line project to Dulles airport still fester.

• No one yet knows how much Phase 2 will cost. While Phase 1 is running close to budget, the Project Labor Agreement issue creates a huge uncertainty for Phase 2, which is estimated at $2.8 billion. MWAA’s preferential policy may discourage non-union companies from submitting bids, increasing the likelihood that the winning bid will exceed $2.8 billion.
• No one has firm numbers on how much it will cost Loudoun and Fairfax counties to subsidize the operation of the Silver Line on a year-to-year basis. Official estimates suggest the deficits could run $40 million to $75 million annually, but that could be low if the Washington Metropolitan Area Transit Authority (WMATA), which will run the Silver line once it’s built, maintains its low-fare structure.
• Long-term, ridership could be considerably lower than assumed. The recession and impending slowdown in federal government spending have reduced population growth projections for Loudoun and Fairfax, and Loudoun has downzoned much of its land, effectively capping population growth there in any case.
• WMATA remains a financial cripple. The organization has projected 10-year capital replacement costs of $13.3 billion, including $6.5 billion for which no source has been identified. Will Fairfax, Loudoun and the state of Virginia end up assuming a portion of that liability? Or will MWATA simply let service deteriorate? No one knows.
• Who will pay for the $3 billion in transportation improvements required to serve the anticipated traffic growth in Tysons Corner resulting from the increased density granted landowners there? The upzoning was justified on the grounds that, combined with heavy rail access, landowners would have the incentive to transform Tysons into a more walkable, mixed-use better functioning urban district.

Virginia’s political class lurches from decision point to decision point, patching up the current crisis while failing to consider entirely foreseeable problems down the road. Taxpayers and toll road users are gouged while landowners, unions, project contractors and other private interests are enriched. Citizens know they are getting hosed but the process is so opaque, accountability so diffused and the Mainstream Media so neutered that they don’t understand how.

Note: This post has been edited to reflect more up-to-date information provided by readers.