The Back Story on the Transurban “Relocation”

No one's pulling the wool over this guy's eyes!
No one’s pulling the wool over this guy’s eyes!

by James A. Bacon

The governor’s office issued a press release yesterday touting the fact that Transurban, operator of the 495 Express Lanes and 95 Express Lanes, has relocated its U.S. headquarters from New York City to Fairfax County.

The two express lane projects have been highly beneficial to Virginia, said McDonnell, supporting 16,000 jobs, generating $3.5 million in economic impact statewide and bolstering productivity by reducing “billions of dollars lost every year due to traffic congestion.”

Then the press release quoted Jennifer Aument, group general manager-North America: “As we celebrated the opening of the 495 Express Lanes in Fairfax County last fall, Governor [Bob] McDonnell urged us during the ceremony to move our U.S. headquarters to Virginia. We’re pleased to officially call Virginia our home base as we continue to partner with Virginia on innovative transportation solutions that keep Virginians moving.”

What a heart-warming economic development success story! Kudos to Governor McDonnell!

But Toll Road News mentions a few details that the press release omitted (hat tip to Larry Gross): It turns out that Transurban shut down its New York office earlier this month and laid off all six of its senior staff because the top brass in Australia was “most unhappy” with the American business environment and the performance of the operations here, and “ordered a windup of expansion efforts.”

As the Times-Dispatch reported, no one actually moved from New York to Fairfax. Snagging the Transurban U.S. headquarters is something of a hollow victory, to say the least.

Transurban wrote off $181 million on its Pocahontas Parkway investment, and the company conceded earlier this year that traffic and revenue expectations were running behind the first-year projections for the 495 express lanes. From all indications, Transurban has done a fine job of delivering projects on budget and on time, and it has handled the marketing roll-out of its toll roads in a professional manner. The problem isn’t Transurban’s operational competence, it’s that traffic volumes are not materializing as expected when the company embarked upon the toll-road projects in the mid-2000s.

Transurban’s CEO has read the writing on the wall: The economics don’t support continued expansion of toll-financed express lanes in North America. Now the question is whether Virginia’s governor will experience a comparable revelation before he starts spending some $800 million a year in new tax revenue on a grab-bag of projects justified by the desperate need to combat congestion.

I’m not holding my breath. Transurban conducts an arcane exercise called preparing a “profit and loss statement” and it insists that its highway projects meet “Return on Investment” hurdles for new projects. The commonwealth of Virginia does not calculate profits and losses for its transportation projects, and it has no ROI hurdle. State officials have no way of knowing whether they are creating or destroying economic value. Transurban makes mistakes — but at least the big boss back in Melbourne knows when the company screwed up. Virginia is flying blind.

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3 responses to “The Back Story on the Transurban “Relocation””

  1. larryg Avatar

    I see the distinction a bit differently.

    Va is happy if a private sector company can find a profit in a toll road project.

    Transurban is happy if it can find a profit in a toll road.

    Transurban is a business that knows how to determine a bottom line.

    Va, like most govts, has other fish to fry.

    My suspects is that no one at Transurban sans political pressure from Va would have touched the Pocahontas Parkway with a ten foot pole.

    Somewhere between the Pocahontas Parkway and the 495 express lanes some kind of an informal agreement was reached that was somewhat of a quid-pro-quo.

    What I do not want to hear right now is that Transurban was buying McDonald Rolex watches or similar and that Transurban just flat screwed up in taking on the Pocahontas deal but the facts argue that Transurban should not have been a chump and should have easily recognized that Pocahontas was a dog of a deal from the get go.

    beyond that, one or more people inside of VDOT – have absolutely no business involving themselves in toll road financial analyses and I do fear they have gotten involved in the US 460 deal and possibly the Outer Beltway deal.

    I’ll cut everyone a little slack – at least thinking about tolls as a way to leverage transportation taxes does show some thinking beyond just looking at tax-only revenues but the problem is that tolls are not a game that VDOT engineers should be playing. 75 year financial plans are a different level of expertise than road building.

  2. According to the office of Transportation Public-Private Partnerships the outer beltway (North-South Corridor) is no longer being considered under PPTA.

    I-66 Outside the Beltway and Air Rights Development in Rosslyn are being pushed forward

  3. larryg Avatar

    I suspect the departure of Transurban from the PPTA scene might be related.

    But I’m curious how VDOT goes about deciding what to offer for RFPs or related for PPTA type projects as they simply do not have the money to
    do such projects with the current budget unless they throw out other designated priorities.

    I was thinking the only reason the North-South project was even a possibility was as a PPTA project.

    Sounds like Transurban (and possibly the other two major players) had an informal sit-down to discuss viability and the word was – “nope”.

    Clearly – in the case of the beltway HOT lanes – the “investors” were looking at 60K AADT (daily traffic) as the profit threshold and clearly the prospect of 30K AADT has them holding on to their financial butts.

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