Midtown Tunnel Could Die Without Tolls

Recently, in a column originally published by the Jefferson Policy Journal, my colleague Len Gilroy and I detailed the importance of moving forward with the Midtown Tunnel extension in the Hampton Roads area.

Despite the U.S. Department of Transportation providing a $422 million loan for the Midtown Tunnel project and Skanska Announcing the official financial close for the project, Hampton Roads area officials seem bent on delaying or cancelling the proposed public-private partnership (PPP) for the $2.1 billion Midtown Tunnel expansion.

More stringent fuel efficiency mandates and inflation have been yielding diminishing returns for federal and state gas taxes in recent decades. There is a consensus among economists, state transportation agencies and other experts that it’s a matter of when, not if, we make a dramatic shift away from gas taxes to other more direct and financially sustainable types of user fees, such as tolls. Additionally, Tolls are fairer than taxes, as those who benefit from the tolled facility pay for it as they use it.

But after years in the making, some Hampton Roads area pols have cynically stepped in at the last minute to undermine the Midtown deal, holding the state budget process hostage for more state transportation money so they can lower planned local tolls.

The Midtown PPP illustrates well the sorts of PPP benefits now in jeopardy. First, PPPs expand the funding pool by allowing governments to tap into new sources of capital not typically used in traditional tax- or debt-funded transportation projects. Second, a PPP provides the only viable method to finance new road capacity in the Midtown Tunnel. The new tunnel will also improve the frequency and reliability of bus service. Finally, PPPs transfer key project risks to the private sector and away from taxpayers. This is in contrast with traditional infrastructure projects where government sponsors shoulder most project delivery and operational risks.

Attacking the Midtown Tunnel PPP will do nothing for the region but make the project more costly and forestall needed congestion relief. The full commentary is available here.