State: Public-private road projects a good investment

Objection! A response to the Nov. 18 editorial "Investors vs. taxpayers"

Your editorial presents an incomplete picture of the use of public-private partnerships to deliver transportation infrastructure, including the Downtown Tunnel/Midtown Tunnel/MLK Extension Project. That project - ranked the highest priority by the Hampton Roads Transportation Planning Organization - is ready to move forward, with construction beginning in early 2012.

Virginia is recognized nationally for its use of innovative techniques to finance projects. The P3 structure planned for the Midtown will enable VDOT to attract more than $1.3 billion of private investment to deliver the project under a fixed-price, date-certain construction contract and have the private entity operate and maintain all the facilities.

In exchange for its $1.3 billion investment, VDOT's partner, Elizabeth River Crossings, hopes to achieve a reasonable return. VDOT is not providing any guarantee - instead ERC is taking the full risk that revenues and costs will be consistent with forecasts. The agreement will provide for revenue-sharing with VDOT if the project exceeds specified thresholds.

VDOT has negotiated a fixed price of about $1.45 billion for design and construction (total project costs, including financing, operations and maintenance, are approximately $2.1 billion).

Those costs include construction of the new Midtown Tunnel ($1.164 billion); rehabilitation of the Midtown and Downtown tunnels ($94 million); and extension of the Martin Luther King Freeway ($192 million). ERC will also provide $2 million annually for transit between Norfolk and Portsmouth.

In addition to the private investment, the U.S. Department of Transportation is offering a low-interest loan of $422 million. Also, VDOT is investing $395 million to reduce toll rates. Tolls will escalate to account for increases in costs for operations and maintenance.

The agreement for the project does not include a non-compete clause. VDOT will retain the right to expand existing facilities or construct new facilities in the region. The comprehensive agreement will allow ERC, after an exhaustive analysis, to make a claim should such expansion or construction affect the ability of toll revenues to fund the Midtown Tunnel project. VDOT would pay such a claim only if it is supported by an independent traffic and revenue analysis.

The 460 corridor (between Petersburg and Suffolk) has been studied since the mid-1990s as part of the Trans America Corridor. This project will facilitate freight movement as the Port of Virginia expands; construction is estimated to have a direct employment impact of up to 4,800 jobs annually. Long-term economic impact analysis suggests it will result in about 13,000 to 14,000 jobs annually from project operations and contingent developments. This project has the added benefit of providing additional capacity in the event of evacuation.

The development of complex transportation improvement projects such as the Midtown Tunnel and 460 requires long-term planning and mutual support from local and state elected officials. The governor put full support behind the Midtown at the urging of local elected officials.

In response, VDOT has conducted a fair and open procurement, including presentations to the Commonwealth Transportation Board, public hearings in Norfolk and Portsmouth and outreach to the community groups and leaders. While the commonwealth should continue to work toward other needed transportation solutions in the region, those efforts should not move forward at the expense of the Midtown Tunnel project - a priority for the region and a project ready to go. The commonwealth's $395 million investment will leverage approximately $2 billion in construction improvements yielding long-term tangible benefits for the traveling public.

Sean T. Connaughton

Virginia Secretary of Transportation

Richmond