A judge’s ruling striking down the Midtown and Downtown tunnel tolls has cast a cloud over other transportation projects, exposed the state to unknown damages and left financial markets “at best, confused,” according to a court memo by lawyers for the Virginia Department of Transportation.
For those and other reasons, the state will ask Circuit Judge James A. Cales Jr. at a hearing today to suspend his May 1 ruling until it can be appealed.
The plaintiffs in the lawsuit counter that the state has failed to show why a suspension of Cales’ order is necessary. They argue in a court filing that any financial injury to VDOT is the consequence of the agreement it negotiated with Elizabeth River Crossings, the state’s private partner in the tunnel project.
The plaintiffs also argue that suspending Cales’ order will not resolve the financial uncertainties around it; only a decision by the Supreme Court of Virginia on the appeal will.
Cales ruled earlier this month that the General Assembly had exceeded its authority by ceding “unfettered power” to VDOT to set toll rates for the Midtown project. The ruling against the fees invalidates a major component of the financing and profit-making structure of the $2.1 billion public-private deal.
An analyst from Fitch Ratings said in a report to investors that Fitch believes the state would be responsible for repaying the project’s debt if the tolls were invalidated by the lawsuit. A federal loan and private bonds issued for the work total more than $1 billion.
Virginia Secretary of Transportation Sean Connaughton said last week that officials do not yet have an estimate of the state’s exposure if they lose their appeal. He also declined to discuss potential contingencies if the appeal fails, such as trying to get the General Assembly to endorse the tolls or diverting road money from elsewhere to fund the project.
Del. Lacey Putney, I-Bedford County, has written Connaughton, inviting him to the June meeting of the House Appropriations Committee, which Putney chairs, to discuss issues surrounding the tunnel toll litigation. The letter from Putney seeks insight on the potential impact to the state if the Supreme Court agrees tolling is unconstitutional in this instance. It also requests some sense of how long it will take for the legal wrangling to be resolved.
The tolls are scheduled to start Feb. 1, 2014, at $1.59 or $1.84 for passenger vehicles, depending on the time of day. They can rise by at least 3.5 percent per year after 2016 and are set to run to 2070.
The project involves construction of a second Midtown tube, rehab of the Downtown and Midtown tunnels, a freeway extension in Portsmouth and private operation and maintenance of the roads for nearly six decades.
The plaintiffs say in their court filing that the Supreme Court “will undoubtedly decide any appeal” by Feb. 1.
VDOT and Elizabeth River Crossings continue to move ahead on design and construction work. Elizabeth River Crossings reported expenses totaling $348 million as of March 31.
The plaintiffs take a shot at VDOT’s assertion that it wants Cales to suspend his ruling to “reduce the drain on the Commonwealth’s treasury.” That “rings hollow,” the plaintiffs wrote, “because they are continuing construction and thereby adding to the potential damages that will be claimed.”
In one of their court filings, lawyers for VDOT and Elizabeth River Crossings call Cales’ ruling “unprecedented, both in substance and impact.” They say no state or federal court has ever equated a highway toll to a tax, as Cales did.
The parties also dispute each other’s interpretation of what, exactly, Cales meant when he verbally gave a brief ruling from the bench on May 1. A formal written order still must be entered into the court record, and both sides have drafted different versions of what it should say.
Lawyers for VDOT and Elizabeth River Crossings contend the plaintiffs “misstate and exaggerate” what Cales ruled and are trying to expand it to cover all projects authorized under Virginia’s Public-Private Transportation Act of 1995.
Cales also will consider the parties’ arguments on what his final order will say at today’s hearing.
Pilot reporter Julian Walker contributed to this story.
Dave Forster, 757-446-2627, firstname.lastname@example.org