Loosening the Beltway

Tolls, private-sector innovations will ease I-495 gridlock and benefit taxpayers

Good news, Northern Virginia commuters: Relief for Beltway gridlock is on the horizon, thanks to the Commonwealth’s embrace of innovative, market-based congestion solutions.

On September 10th, the Virginia Department of Transportation (VDOT) announced that it had settled on terms with a private-sector consortium to finance, build, and operate four new high-occupancy toll (HOT) lanes on a 14-mile section of the Capital Beltway stretching from the Springfield Interchange at I-95 to north of the Dulles Toll Road. This will be the first major Beltway expansion in several decades and will include significant repairs and upgrades of the existing roadway.

When completed, buses and carpoolers will be able to drive in the new HOT lanes for free, while single- and double-occupancy vehicles will have the option to pay to use the new lanes, giving them a guaranteed express travel option when they need to get somewhere on time. (Note: for a detailed overview of HOT lanes, see Geoff Segal’s March 2007 Bacon’s Rebellion column, “HOT to Trot.”)

Variable pricing is the key to preventing congestion on the new lanes. Tolls will rise and fall based on the amount of traffic on the lanes to maintain free-flow conditions at all times, even rush hours. Adjusting toll rates is the only proven way to maintain free-flowing lanes over the long term.

Because they’re free-flowing, HOT lanes move a lot more people than congested freeway lanes. By drawing traffic away from the main lanes, HOT lanes also benefit drivers who opt not to pay tolls. Further, the ability to keep the lanes moving will make it possible, for the first time, to introduce reliable bus transit service on this stretch of I-495.

The Beltway HOT lanes represent a market-based congestion solution in another important way. Faced with declining transportation dollars and a dysfunctional federal highway funding system that diverts limited resources from priority to pet projects, states are increasingly partnering with the private sector to build new roads and combat congestion. Public-private partnerships like the Beltway project can mobilize large new sums of private capital investment to meet a significant share of the need for new highway capacity and reduce the reliance on traditional, tax-based financing. In this case, the Texas-based construction firm Fluor Corporation and Australian toll road operator Transurban have agreed to finance over three-quarters of the project’s $1.7 billion cost in return for the right to build, operate and maintain the lanes for 75 years.

Commonwealth taxpayers will benefit from this partnership in several key ways:

  • Tapping private capital: The injection of private capital frees up tax dollars for other transportation projects and will expand the Beltway years faster than would have otherwise occurred.
  • Only users will pay: Anyone who uses the Beltway today will still be able to drive the road without paying tolls. Use of the toll lanes will be entirely voluntary, ensuring that the costs of the new lanes will be borne by those that choose to use them.
  • Private-sector efficiencies: VDOT’s original plan to add four HOV lanes to this section of the Beltway would have cost taxpayers over $2.4 billion. Without private sector funding and expertise, the project would have been prohibitively costly to build. The Fluor/Transurban team applied value engineering and design changes to shrink the footprint of the project, cutting the costs dramatically and minimizing the amount of land to be acquired through eminent domain. As VDOT Commissioner David Ekern recently opined, the partnership will bring “an affordable solution to the most congested highway corridor in Virginia”.
  • Revenue sharing: If the project is a financial success, Virginia taxpayers will benefit from a revenue sharing agreement that kicks in if toll revenues exceed certain levels. These additional revenues can supplement existing funding and help the Commonwealth get other gridlock-busting projects built faster.

Luckily for commuters and taxpayers, this type of innovation is unlikely to stop at the Beltway. VDOT and Fluor/Transurban are currently in negotiations on a separate project that would add new HOT lanes on I-95/395 and extend two new lanes south to Massaponax. And earlier this year, Governor Kaine signed a bill granting public toll agencies in Northern Virginia and Hampton Roads the authority to craft similar public-private partnership deals to advance needed road projects in their regions. Officials in Maryland may ultimately follow Virginia’s lead; they’re currently considering several similar toll lane projects on the Beltway and other highways.

As the Beltway HOT lanes project demonstrates, tolling and public-private partnerships need to be part of the solution if Virginia is serious about getting traffic moving. The willingness of transportation officials to embrace market-based, taxpayer-friendly mobility solutions will dramatically improve their ability to reduce the congestion that increasingly threatens Virginians’ quality of life and the economic health of our cities.