Commentary

Virginia Needs to be Cautious and Not Ruin Its Public-Private Partnership Track Record

The Virginia Legislature is considering bills in both the House and the Senate (House Bill 1248 and Senate Bill 639) to establish a Virginia Toll Road Authority. Given the structure of toll facility operations in Virginia, serious consideration should be given to possible unintended consequences of this legislation.

The Commonwealth has eight toll facilities within its borders, but the Virginia Department of Transportation (VDOT) only operates two: the George P. Coleman Bridge in Gloucester County and the Powhite Parkway Extension Toll Road in Chesterfield County (near Richmond). The remaining six toll facilities are operated by other entities including private entities such as Dulles Greenway (totally privately owned and operated) and Pocahontas Parkway (the first capital project under the Virginia Public Private Partnership Act of 1995). Other public entities have financed and continue to operate and pay debt service on their bonds. These include the Chesapeake Bay Bridge-Tunnel, the Chesapeake Expressway, the Downtown Expressway/Powhite Parkway and the Boulevard Bridge. The Dulles Toll Road is now operated by the Metropolitan Washington Airport Authority.

Virginia is considered one of the leaders in public-private partnerships completed and underway since the passage of the Public Private Partnership Act of 1995 (PPTA). Numerous projects have been undertaken bringing innovative financing and new ideas to the Commonwealth such as the new Express Lanes on the Capital Beltway. Other states have used the PPTA as their model for legislation as they moved to join the era of public-private partnerships.

The main purpose of the bill appears be to set up an authority that can consider creating new toll facilities. The legislation would allow the authority to issue bonds that are backed by toll revenues and are not backed by the full faith and credit of the Commonwealth, which is standard practice in toll finance. In other words the bonds of the authority would be “off the books of the Commonwealth.” However, if the new project is viable, why wouldn’t a private entity consider this project under the existing PPTA?

Of particular concern is that the toll authority might decide to compete with the private sector for potential public private partnership (PPTA) projects, using its governmental status to gain a “leg up” on the private sector. For example, several years ago in Texas a long-established toll agency intervened in a public-private partnership procurement at the last minute, after the winning bidder had already been selected, and used its political clout to prevail. It subsequently persuaded the legislature that public sector toll agencies would, from now on, have the right of first refusal on any new toll roads within its metro area-regardless of whether its proposal offered the best value.

That kind of favored status has caused a number of world-class toll road companies to avoid Texas, depriving that state of needed expertise and investment. By contrast, Virginia continues to attract the cream of the crop of infrastructure investment funds and experienced toll road developer/operators for projects like the Beltway Express Lanes and the Mid-Town Tunnel in the Hampton Roads area.

Given that kind of risk, and the demonstrated willingness of investors to develop toll projects under the PPTA, the proposed state toll authority looks like a solution in search of a problem.

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the Ronald Reagan, the George H.W. Bush, the Clinton, and the George W. Bush administrations.

Surface Transportation

In the field of surface transportation, Poole has advised the Federal Highway Administration, the Federal Transit Administration, the White House Office of Policy Development, National Economic Council, Government Accountability Office, and state DOTs in numerous states.

Poole's 1988 policy paper proposing privately financed toll lanes to relieve congestion directly inspired California's landmark private tollway law (AB 680), which authorized four pilot toll projects including the successful 91 Express Lanes in Orange County. More than 20 other states and the federal government have since enacted similar public-private partnership legislation. In 1993, Poole oversaw a study that coined the term HOT (high-occupancy toll) Lanes, a term which has become widely accepted since.

California Gov. Pete Wilson appointed Poole to the California's Commission on Transportation Investment and he also served on the Caltrans Privatization Advisory Steering Committee, where he helped oversee the implementation of AB 680.

From 2003 to 2005, he was a member of the Transportation Research Board's special committee on the long-term viability of the fuel tax for highway finance. In 2008 he served as a member of the Texas Study Committee on Private Participation in Toll Roads, appointed by Gov. Rick Perry. In 2009, he was a member of an Expert Review Panel for Washington State DOT, advising on a $1.5 billion toll mega-project. In 2010, he was a member of the transportation transition team for Florida's Governor-elect Rick Scott. He is a member of two TRB standing committees: Congestion Pricing and Managed Lanes.

Aviation

Poole is a member of the Government Accountability Office's National Aviation Studies Advisory Panel and he has testified before the House and Senate's aviation subcommittees on numerous occasions. Following the terrorist attacks of Sept. 11, 2001, Poole consulted the White House Domestic Policy Council and the leadership of the House Transportation & Infrastructure Committee.

He has also advised the Federal Aviation Administration, Office of the Secretary of Transportation, White House Office of Policy Development, National Performance Review, National Economic Council, and the National Civil Aviation Review Commission on aviation issues. Poole is a member of the Critical Infrastructure Council of the Los Angeles Economic Development Corporation and of the Air Traffic Control Association.

Poole was among the first to propose the commercialization of the U.S. air traffic control system, and his work in this field has helped shape proposals for a U.S. air traffic control corporation. A version of his corporation concept was implemented in Canada in 1996 and was more recently endorsed by several former top FAA administrators.

Poole's studies also launched a national debate on airport privatization in the United States. He advised both the FAA and local officials during the 1989-90 controversy over the proposed privatization of Albany (NY) Airport. His policy research on this issue helped inspire Congress' 1996 enactment of the Airport Privatization Pilot Program and the privatization of Indianapolis' airport management under Mayor Steve Goldsmith.

General Background

Robert Poole co-founded the Reason Foundation with Manny Klausner and Tibor Machan in 1978, and served as its president and CEO from then until the end of 2000. He was a member of the Bush-Cheney transition team in 2000. Over the years, he has advised the Reagan, George H.W. Bush, Clinton, and George W. Bush administrations on privatization and transportation policy.

Poole is credited as the first person to use the term "privatization" to refer to the contracting-out of public services and is the author of the first-ever book on privatization, Cutting Back City Hall, published by Universe Books in 1980. He is also editor of the books Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington Books, 1981), Defending a Free Society (Lexington Books, 1984), and Unnatural Monopolies (Lexington Books, 1985). He also co-edited the book Free Minds & Free Markets: 25 Years of Reason (Pacific Research Institute, 1993).

Poole has written hundreds of articles, papers, and policy studies on privatization and transportation issues. His popular writings have appeared in national newspapers, including The New York Times, The Wall Street Journal, USA Today, Forbes, and numerous other publications. He has also been a guest on network television programs such as Good Morning America, NBC's Nightly News, ABC's World News Tonight, and the CBS Evening News. Poole writes a monthly column on transportation issues for Public Works Financing.

Poole earned his B.S. and M.S. in mechanical engineering at Massachusetts Institute of Technology (MIT) and did graduate work in operations research at New York University.

Shirley Ybarra is a former senior transportation policy analyst at Reason Foundation, a nonprofit think tank advancing free minds and free markets.

Ms. Ybarra served as Secretary of Transportation for the Commonwealth of Virginia from 1998 to 2002, overseeing a budget of $3.2 billion and a staff of 13,000 people. Between 1994 and 1998, Ybarra was Virginia's Deputy Secretary of Transportation.

Ybarra also served as senior policy advisor and special assistant for policy for U.S. Secretary of Transportation Elizabeth Dole from 1983 to 1987. In that role, Ybarra managed the transfer and privatization of Dulles and National Airports to the Washington Metropolitan Airport Authority.

Ybarra authored Virginia's Public-Private Transportation Act of 1995, considered the model public-private partnership legislation in the United States.

In 2001, Ybarra received the American Road and Transportation Builders Association's "Public-Private Ventures Entrepreneur of the Year Award" for her leadership in designing innovative infrastructure financing.

She holds a Master's degree in Economics and a Bachelor's degree in Business Administration from the University of Nebraska, Lincoln.