U.S. 460: Peeling Back the Onion

peeling_onionby James A. Bacon

Structuring the U.S. 460 Connector as a public-private partnership (P3) shielded the $1.4 billion project from much of the oversight required for conventional Virginia Department of Transportation (VDOT) projects, found a confidential report by VDOT’s Assurance Compliance Division and the Office of the State Inspector General.

As a consequence, the McDonnell administration was able to pursue a “very aggressive or extremely aggressive” schedule for advancing the project without informing the Commonwealth Transportation Board (CTB) or the general public of major regulatory issues that threatened the project’s viability. Due to concerns over the impact on nearly 500 acres of wetlands, the U.S. Army Corps of Engineers had balked on issuing needed environmental permits. Even so, VDOT paid $250 million to the design-build contractor, US Mobility Partners, under the terms of the contract.

“This action may have placed additional permitting risks and associated schedule risk on taxpayers of the commonwealth of Virginia,” states the confidential, 54-page report obtained by the Richmond Times-Dispatch.

Secretary of Transportation Aubrey Layne, appointed by Governor Terry McAuliffe, suspended the project early this year until the permitting issues could be resolved. He said the state potentially could be exposed to $500 million in losses. VDOT is examining alternative routes for the project that the Army Corps might find more acceptable.

I have not seen the report. I base this commentary purely upon the distillation of it appearing in the T-D. What appears to be absent is any assessment of who was responsible for pursuing the project so aggressively and whether that effort triggered any alarms or pushback within VDOT. Perhaps that omission is inevitable, given that McDonnell administration officials and U.S. 460 Mobility Partners declined to hand over requested documents. The governor, his chief-of-staff Martin Kent and Transportation Secretary Sean Connaughton said that the state code protected the documents as governor’s working papers.

(Update: A copy of the report has fallen into my hands, and I was incorrect to surmise that it did not address who was responsible for pushing the project. In fact, the report concludes: “The Route 460 project was a priority of the McDonnell Administration and championed by the former Secretary of Transportation, who provided persistent oversight and direction to both the Office of Transportation Public-Private Partnership (“OTP3″) Director and VDOT staff to ensure the timely execution of the Comprehensive Agreement.”)

There is an inherent tension between confidentiality and the public’s right to know in a public-private partnership. A prospective private-sector partner understandably does not want to negotiate a contract in the media. On the other hand, when a contract is completed, it is presented as fait accompli. If the public does not like the terms, too bad, the contract will not be renegotiated. Also, as it transpires in this case, US 460 Mobility Partners was able to withhold invoices that would be public record if the project had been conducted by VDOT.

The original impetus behind the P3 project was understandable. The McDonnell administration wanted to solicit independent and creative thinking from the private sector on how to finance the project. But all three of the consortia that submitted proposals agreed that tolls could support only a small portion of the total cost. The McDonnell team scrapped the idea of contracting with a private partner to design, build, own and operate the 55-mile, Interstate-grade highway, and decided to hire one of the three, US Mobility Partners, to design and build the project, and then turn it over to VDOT to own and operate. Why not let VDOT handle the entire project? In theory, US Mobility Partners would shoulder the risk of completing construction on time and on budget.

In practice, the use of the partnership structure allowed the McDonnell administration to cloak problems from the CTB and the public. While VDOT did brief the CTB on the project, it never mentioned the Army Corps permitting issues that could put the entire deal in jeopardy. The inspectors concluded that the state had not broken any rules in handling things the way it did but there is no denying that the McDonnell administration kept a massive problem out of the public eye until the McAuliffe team took over and Layne could see what had transpired.

The report made two worthwhile recommendations. First, there should be a 30-day cooling-off period for public-private deals to allow legislators to review negotiated contracts before they take effect. Second, VDOT should consider the Corps’ input in the planning stages of highway projects, not after a project has been contracted. Sounds pretty basic.

This report doesn’t close to answering all the questions I have (and that others should have) about this project. But it does represent progress. We know more now than we knew before.

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14 responses to “U.S. 460: Peeling Back the Onion”

  1. Tysons Engineer Avatar
    Tysons Engineer

    I think you are missing the point here Jim. The project, at its core, is a bad one. It costs too much for the good it provides to everyone except the freight industry, which last I checked has a S&%@ ton of money they could just pay for the damn thing themselves. Instead they got a “partnership” so they could defer a lot of the cost to the taxpayers. Shut the whole thing down, its a sunk cost, let it be a lesson to not vote in crooks who sell virginians out for corporate friends.

    I dont care about the wetlands, if the project had no cost to us, and the wetlands were damaged I would be fine. I have a problem with 1 billion dollars of very limited funds, going towards a favor project to the freight industry under the faulty premise that Hampton Roads will be the one and only Panama Canal ready port.

    Sorry Jim, the cool aid has evaporated, Baltimore, NY, Philly all have the infrastructure in place too, the economic benefits of the project assumed they didnt. At best we could keep pace with them on this front. Either way, it should be those who will gain billions from this route who should be fronting the bill for it. Not a public private anything.

    1. TE, I share your skepticism regarding the economics of this project. I blogged extensively on that very subject before you began following this blog and I raised many questions. But I would humbly submit that I am not “missing the point” with this post. The investigators were looking into how the state came to spend $250 million before even getting the necessary environmental permits. That’s a big deal, too, and it has ramifications for future P3 mega-projects. We need to get this sorted out… or the next fiasco might involve the Bi-County Parkway in your neck of the woods.

      1. DJRippert Avatar

        If they get back the $250M they can build the Charlottesville bypass “for free”!

  2. larryg Avatar

    re: ” The report made two worthwhile recommendations. First, there should be a 30-day cooling-off period for public-private deals to allow legislators to review negotiated contracts before they take effect.”

    How about the legislators NOT WRITE A LAW that allows VDOT to do this kind of stuff – FIRST? The Virginia General Assembly wrote the enabling legislation that allowed VDOT to easily circumvent public process and accountability. Put the blame where it belongs.

    ” Second, VDOT should consider the Corps’ input in the planning stages of highway projects, not after a project has been contracted. Sounds pretty basic.”

    This is not new and the Corps is not the only resource agency that VDOT tries to circumvent the law, evade the regulations – by turning it into a political issue.

    Again – other states REQUIRE their DOTs to get resource agencies concurrence at the preliminary stages and not go forward until there is concurrence.

    In Virginia, the General Assembly goes out of it’s way to not mess with VDOT.

    Again – I want to make clear that my view VDOT as a state agency is huge and the vast majority of VDOT is a good and valuable organization but the part of VDOT that does new location roads has always been a bit of a “damn the torpedoes” type group.

    But if you pass legislation that enables VDOT to avoid a real public process, refuse to collaborate with the resource agencies and in general escape accountability – then don’t waste your time looking for who it was inside of VDOT that fully exploited full advantage of all those legislative loopholes.

  3. Let’s not forget transit. Unlike the Beltway Express Lanes, Dulles Transit Partners (a/k/a Bechtel) did not put a dime into the Silver Line, Phase I. How did that non-action meet the standards of the PPA? Transurban put some of its own dollars into the Express Lanes. Why the difference?

    And like it or not, the Silver Line, Phase 1 did not meet federal funding requirements twice. The FTA tightened the funding guidelines, and it was clear Dulles Rail would not pass. So Senator John Warner got the Project grandfathered. The Project still would not pass the old standards. So every elected official – D and R alike – lobbied the hell out of the US DOT, which caved. But the Project still didn’t pass funding standards.

    Of course, it’s too late to whine about this. The Silver Line, Phase I opens July 26. We need to ignore the spilled milk and work to make Dulles Rail successful. But we should broaden the definition of transportation scams to include roads and transit.

    1. larryg Avatar

      The PPTA process for roads is different than for rail I believe but agree that the HOT Lanes were done on a similar basis except that the environmental resource issues were not there.

      In terms of METRO and Warner. There were a series of Va elected that participated in advancing METRO – and as far as I recall – none that stood up and opposed it.

      trying to put this on one guy – is a tiresome thing… that simply is not the reality of the politics. At no point in this process, as far as I know, did any Va Gov, or any Va Govt or Congressman or any Va Delegate or Senate – stand up and say that METRO was a bad deal and we should drop it.

      why do you continue to try to put these things on one guy – usually a Dem?

      1. Larry, you’ve become so defensive about Democrats that you misread my post. I wrote that Senator John Warner (R) was able to get Dulles Rail, Phase I grandfathered under the old funding requirements.

        My story is true. Senator John Warner did the deed. I don’t know what would have happened in the event Warner had not championed this effort. Someone else might have done it, or the project might not have received the $900 M in federal funding. But the point remains, Senator John Warner got the project grandfathered. Why isn’t that relevant?

        And all of the big Rs and Ds later lobbied the Bush Administration to override the old grandfathered standards for funding heavy rail. Bottom Line: Dulles Rail, Phase 1 did not meet federal funding guidelines. Again, our elected officials from both Parties obtained funding for a project that did not meet federal cost-benefit standards. Why is that not relevant? And why isn’t this project viewed the same as other projects funded when they don’t meet cost-benefit standards?

        1. larryg Avatar

          You got me TMT! I saw “Warner” and that was it.

          but my bigger point remains – Over a long period of time a LOT of local, state and Federal GOP/DEP-elected were involved in the Silver Line and I know of few if any who stood up and said: “this thing does not meet cost-benefit and we should kill it”.

          but then again – I don’t think there is a transit system on earth that is 100% supported by farebox.

          but then again- at least in Va – the roads themselves are not supported 100% by farebox either.

          and further – I challenge the idea of congestion being a legitimate cost-benefit.

          why is it the job of govt to subsidize congestion-reduction in the first place?

          what exactly are you actually entitled to beyond a “free” road when you pay your gas tax. Who says that you are entitled to a certain level of service for your taxes or else it’s economically not viable?

          Anything that is tax-supported could be subjected to the “cost-benefit” criteria – even public education or incarceration.. right?

  4. DJRippert Avatar

    Follow the money, Jim. Who put the $250M into their pocket? How much did they contribute to the campaign funds of various Virginia politicians? How many “Rolexes” were handed out? To whom?

    You know this is crooked.

    1. larryg Avatar

      I think it’s fairly simple. There is a belief that mega projects generate jobs… boost the economy… and sometimes, ultimately pay off…. downstream.

      there is not a single road in Virginia that was built and no one showed up to use it that I know of!

      The folks who build highways are hurting – because normally in a recession, we get legislation to build infrastructure – and this time that’s not happening.

      I think it’s basically about building roads and the jobs and economic benefits that accrue from it.

      and we have lots of conflicting perspectives here also.

      Even DJ thinks NoVa needs more roads… and it is asserted that Virginia is “behind” on transportation and infrastructure.

      so which is it?

      Then we have the other conundrum which is – why did 460 need to be a PPTA toll road and the Cville Bypass -not?

      Does anyone here have any idea what the process is – that determines whether a given new road proposal is going to be a non-toll road or a PPTA toll road? Any insight?

      1. “Does anyone here have any idea what the process is – that determines whether a given new road proposal is going to be a non-toll road or a PPTA toll road? Any insight?”

        I have no insight, none at all. I suspect it all boils down to pure political calculation.

      2. The legislation that increased taxes requires projects to be rated in terms of return on investment as measured by reductions in traffic congestion. Many elected officials don’t like this requirement – even those who voted for the law. They still want to say “yes” to rent seekers who believe taxpayer money is their private property.

  5. DJRippert Avatar

    Hot off the presses at BlueVirginia – “New emails made public last night detail Del. Terry Kilgore’s negotiations with State Senator Phil Puckett for a cushy job at the Tobacco Commission, weeks before Puckett resigned his seat and swung control of the legislature to the Tea Party.”

    If this is true I have to wonder whether Bill Howell will continue to insist that Virginia doesn’t need ethics laws with teeth.

    1. larryg Avatar

      Holy BeJesus – this sounds like a REAL scandal.. not one of those FAUX kind!

      what do you want to bet that Kilgore’s hard drive crashed?


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