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.