The Statewide Importance of the 495 Express Lanes

express_lanes_photoby James A. Bacon

Traffic and revenues on Northern Virginia’s 495 Express Lanes increased steadily in 2013, generating a record 47,000 trips and toll revenue of $124,000 on December 19, according to data the company released yesterday. Whether that’s enough to meet expectations of parent company Transurban Holdings Ltd., headquartered in Australia, or to encourage additional private investment in Virginia’s transportation infrastructure, however, remains an open question.

At the end June 2013, Transurban stated in its annual report that the first half year’s traffic performance “has been lower than expected, but has continued to grow.” At that time the company said it was too early to determine any reliable traffic trends. The latest publication indicates that traffic volumes and average tolls have increased since then, even though 4th quarter results were hampered by the federal government shutdown. Of special note, revenues rose markedly, from $3.3 million in the first half of the year to $8.8 million the second half.

Source: 495 Express Lanes
Source: 495 Express Lanes

Here’s Transurban’s problem: When it was lining up financing in 2007 for the $2 billion project, which added four new lanes to a 14-mile stretch of the Capital Beltway, the economy was booming. A 2007 traffic and revenue study by Vollmer/Stantec forecast average weekday trips over the first full year of operations at 66,000 and revenue of $46.1 million, according to Toll Road News. After four years of operation, the study forecast, the express lanes would log 117,000 average weekday trips and annual revenue of $79 million. No one anticipated the severe recession or the national erosion in Vehicle Miles Traveled that eased congestion on the nation’s highways. The whole point of paying a toll to use the express lanes is to avoid the unpredictability and time delays caused by congestion. No congestion = no revenue.

The company pulled out of its investment in the Pocahontas Parkway outside Richmond last year but remains committed to completing the Interstate 95 express lanes project in Northern Virginia.

Bacon’s bottom line: For supporters of market-based and fiscally conservative solutions to Virginia’s transportation challenges, the 495 Express Lanes are a vital test. Failure would cast a shadow over future private investments in Virginia transportation infrastructure, and the state could return to Business As Usual practice of blindly building highway projects with no accountability for results.

The express-lanes concept is appealing for several reasons. First, the private sector raised most of the money to pay for the expansion of Interstate 495 capacity — money the state did not have — and assumed the financial risk should traffic and revenues prove disappointing. Given the shortfall in ridership and revenues, Virginians should be darn grateful that Transurban, not the commonwealth of Virginia, is taking on that risk. Transurban shareholders, not Virginia taxpayers, will take the hit if the shortfall persists.

Second, the express lanes use price as a rationing mechanism for scarce highway capacity. Those who place the greatest value on their time — to get to a business meeting, say, or to pick up a child from day care — can pay a premium to bypass the congestion and save themselves time. As it turns out, 84% of riders surveyed — yes, Transurban actually surveys its customers; take a hint VDOT — cited predictable travel times as one of their “favorite things” about the lanes. Sixty-eight percent said they use the lanes to “reach a destination on time.”

The logic of paying to avoid congestion is the antithesis of the all-too-common sentiment that roads should be “free” and that the state has an obligation to spend whatever it takes to keep those roads free-flowing — all with the expectation, of course, that “someone else” should pay. It is an axiom of economics that when a good is free, consumers will use far more of it than if they had to pay for it. In the case of roads,  excess demand creates pressure to create excess supply. Express Lanes avoid that trap — if motorists want free-flowing conditions during period of peak traffic, they pay for the privilege. If they are unwilling to pay, it’s a clear indication that they place trivial value on reducing their travel time.

Third, requiring road projects to cover their own costs is a mechanism for weeding out uneconomic projects, whether funded by private or public dollars. One good thing about 495 Express Lanes is that the public gets a regular accounting of traffic volumes, toll prices and revenue. (It would be nice if we got a cash flow analysis, too.) The project creates information about the economic viability of highway projects that we could not obtain otherwise. We get no such information from non-tolled projects, whose costs are buried within Virginia Department of Transportation budgets. We have no way to judge whether public investments in non-tolled projects such as Rt. 288 or the Interstate 295 circumferential highways around Richmond, to pick an example, were wise or foolish.

I regard the 495 Express Lanes as a template for transportation policy across Virginia. I would like to see it succeed financially because I’d like to see companies like Transurban propose more market-based solutions to Interstate congestion, not just in Northern Virginia but for congested stretches of Interstate 81 in western Virginia, Interstate 95 around Richmond and Interstate 64 in Hampton Roads. If the 495 Express Lanes project proves financially disappointing, I fear, the state will default to funding highway projects based upon political considerations with no mechanism to hold the decision-makers accountable. The end result will be construction of projects with weak economic justification and the squandering of billions of public dollars.

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25 responses to “The Statewide Importance of the 495 Express Lanes”

  1. Transurban’s off-peak tolls are higher than market. That’s costing them revenue and customers. Incremental revenue should not be ignored.

    1. Tysons Engineer Avatar
      Tysons Engineer

      I actually agree with TMT on this one. They are pulling the same mistake they made on the greenway and evidently haven’t learned from. You can’t juice money from few, to earn the projected revenue you have to make it a viable option economically.

      That being said, this is just another example of VMT vs vehicle count coming into play. People in our area of NOVA are reducing their VMTs. One could say “its the economy stupid” but the Fairfax unemployment rate has been at or around Clinton era for a decade now despite the recession. I think we are at something like 4% right now (which basically means if you want a job you can have one). It is a case of traffic engineers extrapolating projections without recognizing a plateau’ing that occurs in usage when you talk about distance from a CBD.

      They don’t understand that, because no where in any VDOT manual (Road and Bridge, AASHTO Green Book, Subdivision Design, MUTCD) is there any real discussion on land use.

      Ultimately, we’ll see what the impact of it is. I’m not gonna call it a failure after only a year. But take for instance the average daily of 37k. Thats ~18k users. Phase 1 of Silver Line even by conservative estimates carries this amount of passengers per day in year 1 (even without Phase 2). And those people don’t end up just coming to the end of the line only to jam up the 495 merge onto Am. Legion bridge, and Braddock Road, and Route 7. In 15-20% of the passengers cases, it is anticipated that an SOV will all together be removed. Those are the kinds of solutions that in the long run will prove to be more effective in my opinion (who knows, I’m not Nostradamus)

  2. re: ” You can’t juice money from few, to earn the projected revenue you have to make it a viable option economically.”

    someone better talk to MWAA!

    I don’t want to be cynical here but does anyone think the HOT lanes are not going to boom when the free lanes turn into parking lots?

    You’re stuck in a jam that WTOP says is probably going to take 2 hrs to clear and that HOT lane signs says 5.00.. then a few minutes later 5.50…

    you’re got a plane to catch or a birthday party or an important appointment and you’re gonna get on your cell to reschedule your flight or mea culpa for the birthday party or the appointment when for a mere 5 bucks you keep things together?

    we’ve got “resistance”, people who are boycotting.. but it won’t last.

    enough people are going to “cave” like they do right now on the DTR>

    1. Tysons Engineer Avatar
      Tysons Engineer

      The issue isn’t the peak usage, its off peak that they still charge more than DTR does in total from one side to other, in off peak.

      1. but you STILL have a choice! Isn’t there STILL some value in a less congested trip with fewer yahoos.. harassing you?

        1. There is value in the less congested trip most every time, but Transurban’s prices for off-peak usage are simply too high. A mid-day trip from Burke to Tysons might be worth $0.75 but Transurban is usually well above that level of pricing. Drivers are voting no.

          The idea behind the HOT Lanes was to keep them largely full, but consistent with a speed of at least 45 mph. As congestion on the general purpose lanes grows, the price on the HOT lanes for a trip speed of 45 mph. That’s not what’s happening on the lower volume times.

          1. and no harm, no foul.. it’s available capacity for the future but as I said before, one good way to separate yourself from the yahoos, is pay that toll.. it’s a much less stressful ride…

  3. the other thing – we have this schitzo view of “buying down congestion”.

    We want the state to do more to fix congestion – as if the money to do so just appears from a magic vault instead of from us…

    but then when we are presented with the opportunity -as individuals to “buy down” congestion – we feel we are being taken advantage of?

    I’m probably weird – but I always felt that paying a toll was going to give me a better trip than not.. that the people who charged the toll felt some responsibility to provide some additional value over a free road including the likelihood that congestion would be less.

    so I think the overhead signs for the HOT lanes showing the travel time for various exits is spot on in terms of selling something of value.

    Second, maybe I’m naive but so far there seem to be far fewer scofflaws on the toll lanes. Tail-gaters, left-lane squatters, people who pass on the left then cut back in front to make the exit… seem to be less of those types.

    It’s a calmer, less stressful trip.. a bargain even outside of rush hour!

    If you could separate yourself from idiots and scofflaws for a couple bucks.. it’s an easy decision!

  4. Re: Transurban “pulling out of its investment in the Pocahontas Parkway”

    The Pocahontas/895/Airport rip-off road was a big-time failure for Transurban. They pulled out, but not without taking a bath and having to be rescued by European creditors.

    1. Actually it was Transurban who rescued VDOT … the question is who built the Pocahontas Parkway originally and why in the world would Transurban buy a toll road that clearly was failing to meet the original projections by VDOT?

      who built the Pocahontas parkway originally and on what basis for traffic projections?

      1. Tysons Engineer Avatar
        Tysons Engineer

        I dunno, but we must start building the outer beltway and toll road immediately because the traffic projections tell us we must. Infinite growth is coming because people will just want to keep living further and further away from their jobs.

        1. well I keep saying if you REALLY want to find out if a proposed road has a real demand… propose it as a toll road first – to see if it could actually be self-supporting.

          If it can’t meet the self-supporting test – is the road really needed?

          1. Tysons Engineer Avatar
            Tysons Engineer

            Except by the way the contracts are set up with the private businesses (like Transurban) Virginia ends up with a faux-protection against failure of the road. It seems like we remove the risk of lack of traffic but in reality we are on the hook for a lot more than most would feel is frugal for a speculative project.

            And, often the state is investing plenty of money into the toll road also (see 460 bypass) which when failed would have been an unmitigated disaster. The same would be likely for any Bi-County Outer Beltway of Importance.

  5. DJRippert Avatar

    Consider the Dulles Toll Road a hot lane equivalent to Rt 28 and Rt 7 and voila! – the MWAA price hikes are perfectly normal and reasonable.

    This whole HOT lane plan sucks. It will continue to suck until all major roads in Virginia are tolled. Then, it will be fair. And, all the members of the Imperial Clown Show in Richmond will be voted out of office for putting tolls anywhere other than NoVa.

    1. The continued tolling of the DTR is abdominal. Voters were told the tolls ended once the bonds were retired. That’s what passed the GA.

      But Kaine and other, knowing the Silver Line could not qualify for federal funding; the landowners had a cap on their liability and the GA would not pour money into Dulles Rail, gave away the DTR with the ability to impose outrageous tolls to get the Silver Line built, which, in turn, permitted the rezoning of Tysons at great profits for the landowners. The business community fully supported this huge transfer of wealth from many to some.

      You can make a good argument that urban density at the rail stations can bring benefits. But you cannot argue the affected landowners paid a sufficient portion of the costs that enabled their rezonings. Nor can you argue Tysons will not increase traffic substantially. We are now in a situation where we need to try to squeeze as much public benefit from Tysons and the Silver Line, but never forget this was a huge transfer of wealth from the many to a few. As Larry would say, that’s the Virginia way.

      1. I think it’s wrong but I also think almost no NoVa legislators have lifted a finger to help regardless of what Kaine did – a long time ago – now.

        How could the leaders of NoVa have done nothing about it?

        we have all kinds of bills in the GA from giving tax credits for sending ashes into outer space to killing red light cameras to restructuring the CTB where are the bills to do something about the DTR?

        blaming it on Kaine is so yesterday. When Kaine did this dastardly deed, how may leaders in NoVa opposed it?

  6. sharks2th Avatar

    I don’t believe the following statement is factually correct:
    “Virginians should be darn grateful that Transurban, not the commonwealth of Virginia, is taking on that risk. Transurban shareholders, not Virginia taxpayers, will take the hit if the shortfall persists.”
    It is my understanding the contract for the HOT Lanes requires VDOT to make payments to TransUrban if certain revenue streams are not met. As a contract the Commonwealth entered into, there are quite a few questionable clauses which do not appear to be in the best interest of the Commonwealth’s taxpayers. It might be good for someone with a legal background to go over some of the wording in the HOT Lanes Contract.

  7. shaunalex Avatar

    “It might be good for someone with a legal background to go over some of the wording in the HOT Lanes Contract.”

    If one of you legal minds does dig into the contract, perhaps you could find something I’ve long been curious about: Is there something in the contract that prevents VDOT from making improvements to any nearby roads that could possibly compete with (and draw customers from) the HOT lanes? This could mean that improvements to Route 7, Gallows, Braddock, Ffx Cnty Pkwy, Little River Tpk, etc. could all come with a large penalty that VDOT has to pay if they want to improve the mobility of these roads.

    1. Re: Braddock Rd., thought I heard the long term plan was to run the HOT lanes down Braddock so you can take a bus from Burke VRE to Tysons under 30-minutes. Not holding my breath of course.

      Re: HOT lanes, I was a critic but I am hearing some positive reports from acquaintances who use the Beltway during rush hour. Maybe this is a project actually addressing traffic problem and may help spur economic development in NoVA (eg; FBI HQ).

    2. re: what if you had a road that you did not have enough money for – only 1/2 the money but you could charge tolls that would not completely pay for the road – just 1/2 of it?

      If that was your choice, would you 1. not build the road? 2. build it 1/2 from taxes and 1/2 from tolls?

      Some state already do essentially this – they have some toll roads that are cash cows and some that provide the road but cannot sustain itself totally on tolls.

      That’s essentially what they’re talking about with US 460 if not mistaken.

      is that kind of arrangement , bad, wrong, etc?

      so – you get two roads.. one a cash cow and the other partially subsidized by the cash cow and the other part paid for with taxes…

  8. […] Here Jim Bacon talks about the 495 express lane project in Virginia. The program has so far seen lower then expected revenue.  Jim attributes that to reduced traffic overall and the recession. Personally I’m ok with that, since the alternative was traditional funding mechanisms. (aka taxpayers). I do believe based on what I’ve read that eventually it will be a profitable venture for transurban. And again, if it isn’t the risk was all on them. That’s what the market is all about. […]

  9. folks have to admit – a mega project like the HOT Lanes on 495 went surprisingly fast – with work done concurrently rather than sequentially and it went forward with relatively few impacts to existing traffic.

    If VDOT had done the construction – it would taken longer and had more disruptions.. in my view.

    one of the differences is that Transurban had all the money in hand at the get go and it was in their direct interest to get the thing built and producing revenues as quick as possible.

    VDOT owes money to Transurban if TOO MANY carpoolers use the HOT Lanes.

    think of what this really means – this means that the main (untolled) lanes are going to benefit. It would be like VDOT providing the untolled lanes with additional capacity – for a LOT LESS money than if they actually had to buy more r/w and build that extra lane.

    why would this harm drivers and taxpayers? it’s a win-win.

    1. One part of the deal not often known is there is cap on Transurban’s profits that, once reached, triggers sharing with VDOT. I don’t know the cap level or even whether it’s public information. And I do agree had VDOT run the construction, things would have taken a lot longer.

  10. it _sounds_ like a deal with Dominion in that Va guarantees Dominion a minimum profit.

    but the business model is different. Dominion is allowed to raise rates if their profit falls short.

    whereas Transurban is constrained (I believe) in high high they can raise tolls (and that may be why they toll higher in off peak also).

    but in a convoluted way – what is going on with Transurban and VDOT/taxpayers is similar to gas tax dollars spend on commuter lots to provide free parking to those who carpool.

    who would complain if VDOT took even more gas tax money to build even more commuter lots if the existing ones fill up and the demand is there for more lots?

    Virginia is essentially giving gas tax rebates to those that carpool because that’s cheaper than building more roads. they’re buying capacity back.

    is that a bad, wrong policy?

    it’s the same logic used to provide subsidies to people to use mass transit rather than drive.


    bad, wrong?

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