U.S. 460 — Looks Like a Loser

Three conglomerates who want to build a new, improved U.S. 460 between Petersburg and Suffolk have submitted cost estimates ranging from $1 billion to $1.5 billion — two to three times what the Virginia Department of Transportation thought it would cost. And all three companies want public money to help defray the costs, Malcolm T. Kerley, chief engineer for VDOT, told the Commonwealth Transportation board yesterday.

Writes Bill Geroux with the Times-Dispatch: “Among the questions Kerley did not answer yesterday was how much of the financial risk the companies had volunteered to bear in case the highway ran far over budget or attracted too few paying customers.

Bottom line: The project cannot pay for itself. It is not economical. One must question whether it should be built.

This is hard news in many ways. It undercuts the hopes of those (like myself) who hoped that toll-financed projects could pay for many of the transportation projects on the drawing boards.

But the news also undercuts those who would pay for such projects through taxes. The beauty of soliciting private bids is that it forces people to take a hard look at the economics of a project. In the case of U.S. 460, either the design is too expensive, or the demand for the improvements is too meager, or insufficient economic value is being created in property aligning the route. If the project can’t pay for itself… if the private sector isn’t willing to assume the risk of failure… maybe the project shouldn’t be built!

Indeed, when the private-sector proposals come in at two or three times VDOT estimates, it calls into question the cost estimates of a lot of other mega-projects. Like the $4 billion price tag on building the Rail to Dulles project — championed by Bechtel, the guys who brought the Big Dig to Boston. Is anyone believing that forecast? How much risk is Bechtel willing to assume on that project?

(The good news: It sounds like the transportation board was asking good questions: Who would assume the risk if the project tanked? Very, very good.)

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9 responses to “U.S. 460 — Looks Like a Loser”

  1. “The beauty of soliciting private bids is that it forces people to take a hard look at the economics of a project. “

    This is absolutely correct, Jim. And the same goes for many non-road projects, be they light rail, schools, or conservation projects.

    Was the economic value of property aligning the route really taken into account? Usually with roads the cry seems to be that property value increases are part of the giveaway, whereas with rail projects it is counted as part of the benefit.

    Ususally the way you handle risk on something like this is cost plus fixed fee. You are guaranteed your profit, and maybe a bonus for underruns, but if you run over all you get is costs and your profit margin declines.

  2. Larry Gross Avatar
    Larry Gross

    There’s a level of irony here. Before PPTA … how did we (VDOT) determine that a given road WAS needed as well as AFFORDABLE?

    Underlying many of VDOT’s justifications for many roads is the use of the “gridlock” word – usually in the form of a predicted year when congestion will drive the road to failure.

    So.. we end up with a 100 billion dollar backlog – in no particular order much less a ranked and prioritized list according to some intelligent metric beyond.. “give us more money” …

  3. Larry Gross Avatar
    Larry Gross

    so.. if 460 is “not needed” then what is all the hubub about with respect to the “crisis” on I-64 especially with respect to goods moving points west from the Tidewater Ports?

    I think folks, without being aware of it, were automatically thinking that 460 would be a “reliever” road for I-64 but not appreciating the fact that 460 would also Compete against I-64 for traffic.

    I don’t think.. that the financial data with respect to 460 … indicates …that there is NO need for improvements on .. roads between Tidewater and points west.

    It may well indicate that whatever is done needs to be coordinated with I-64.

    Think of this from the point of view of the investors.. would you consider I-64 as a competitive threat to a 460 TOll Road that you’ve invested your money in?

    it’s a dumb question but I think it illustrates the tepid response of the investors – NOT that there is no need for more east-west road capacity.

  4. Anonymous Avatar

    You want private industry solutions, you’ve gottem’. Yes – the proposed teams are taking risk in more ways people will know. Can you predict the price of a ton of asphalt or a cubic yard of cement in 2010? The profit margins aren’t that great either. And yes – these teams are incetivized to do good work.

    The 460 Bypass project is one element to consider for the long-term future of transportation in Hampton Roads and the economy of Virginia. Whether containers, freight, and business travels west via north or south of the James needs to be considered. Third Crossing? Parallel Hamton Roads Tunnel?

    Will our legislative body have the courage to lead and make these decisions? Not looking too good…

  5. James Atticus Bowden Avatar
    James Atticus Bowden

    If you put tolls on I-64 on The Peninsula and 460 on Southside you pay for the fix of 460 to take traffic from the Port of Virginia. The old cost estimate would have been satisfied by tolls on 460 alone.

    Toll both routes. Build up 460.

  6. Larry Gross Avatar
    Larry Gross

    re: “Toll both routes. Build up 460.”

    What this issue really points out is the per-project basis that we approach transportation planning .. and the fact that we confuse a specific approach as the only approach and we all go home if that approach goes belly-up.

    Does the 460 data indicate that there is no need for expanded capacity between Tidewater and points west now or within the next 20 years?

    Here’s a NOVEL concept – how about OPTIONS… for addressing the need and we don’t allow the one for 10 more million and 5 more years of study?

  7. Toomanytaxes Avatar

    I seem to recall that the state auditor’s report on VDOT and the CTB found that projects were funded without regard to their place in an overall transportation plan. No surprise here!

  8. Larry Gross Avatar
    Larry Gross

    Some of this goes back to a decision to seek a new alignment road (as opposed to upgrading 460 in place) rather than upgrading I-64 as an answer to a need to improve connectivity between Tidewater and points west.

    The significant question not answered (in my mind) is why this choice rather than I-64 upgrades?

    What is the criteria that drove the decision towards a new road rather than upgrades?

    Wouldn’t it had been better for VDOT to solicit from PPTA – proposals on how to upgrade road capacity between Tidewater and Richmond – and let them have the ability to respond with OPTIONs.

    The way that VDOT did this – it was an all or nothing proposition – where.. if it went down – the study would end – even though the purpose behind the study – remains – upgrading transportation capacity between Tidewater and Richmond.

    Over and over – VDOT presumes it knows the answers before the studies are done and it pre-selects projects and rules out others…. and then calls it a “study”… put millions of dollars and years of effort into it – and instead of an answer of how to proceed – we end up at a cost dead-end.

    This is what folks are fed up with I believe and this drives opposition also – because people don’t believe that credible efforts are put into the decisions and it basically empowers NIMBY responses.

    VDOT is the absolute opposite of Nimble and Results-oriented in my mind when it comes to planning. It’s more luck throw a mudpie on the wall and see if it will stick.

  9. Jim Bacon Avatar

    Larry, You make a really good point here. VDOT’s “new alignment” decision does solve one problem that I had been worrying about. How were all the residents of all the little towns strung along U.S. 460 going to get around if 460 were turned into a tolled, limited access highway? 460 is literally the “Main Street” of a half dozen small towns. I suspect that’s why VDOT felt compelled to build a new 460.

    Now that VDOT has its answer — a new 460 is way too expensive — they’ll have to revisit your scenario of making more modest upgrades to the existing 460. But if the project is financed with tolls, there’s still the question of what the local residents will do….. Hmmmm. I wonder if it would be possible to build bypasses around the little towns (Wakefield, Windsor, Zuni, etc.), collect tolls with wireless, EZpass technology, and give locals free access to the toll road. As long as they had a transponder, in their car, they could drive for free.

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