NJ and VA Governors Reveal Transportation Funding Plans; Reports Examine Congestion Pricing, Public-Private Partnerships

I’ve blogged before about how the governors of New Jersey and Virginia, both elected in 2009, are tackling transportation issues in their respective states. Now, Chris Christie and Bob McDonnell are back in the news this month with ambitious transportation plans. Meanwhile, newly elected Kansas Gov. Sam Brownback is proposing tapping transportation funds to prop up other government programs in his state budget. And as other states seek ways to finance improvements to their own transportation systems, a number of recent reports and developments put the focus on such mechanisms as public-private partnerships, congestion pricing and tolling.

New Jersey Gov. Christie has proposed selling $4.4 billion of bonds over the next five years to help finance transportation projects in his state. That infusion would revive the state’s transportation trust fund, which is expected to dry up this year as debt-service costs eat up its $895 million annual appropriation. Christie’s plan also calls for $1.8 billion in funding from the Port Authority of New York and New Jersey and $1.8 billion of pay-as-you-go funding. The governor has said he wants to dramatically increase the state’s use of pay-as-you-go funding rather than doing additional borrowing. Christie would increase the amount of pay-as-you-go funding from the $38 million allocated by lawmakers this year to $605 million in FY 2016.

In Virginia, Gov. McDonnell has proposed a plan to spend $4 billion dollars over the next three years to make road improvements and to create a transportation infrastructure bank that would give low-interest loans to localities and to public-private partnerships to help them build projects. Robert McCartney of The Washington Post wrote last week about how the Republican McDonnell’s plan stands in sharp contrast to what’s going on in his neighboring state of Maryland. That’s where, in a bit of political role reversal, Democratic Gov. Martin O’Malley finds himself talking about trying to close a budget deficit by cutting spending on education and public employee pensions.

McDonnell’s transportation plan would issue $1.8 billion in accelerated bonds and $1.1 billion in Grant Anticipation Revenue Vehicle (GARVEE) bonds, using federal funds to pay debt service. The infrastructure bank would be funded using $250 million found in a state department of transportation audit last year, $150 million from last year’s surplus, and what he hopes will be a windfall from his proposed privatization of state-run liquor stores. McDonnell also reportedly wants to keep 0.25 percent of a discretionary sales tax in Hampton Roads and Northern Virginia for transportation projects. Legislation introduced in the General Assembly would allow for collection of $100 million in sales tax revenue from Northern Virginia and $50 million from Hampton Roads, LandLinemag.com reported this week. An article in the Richmond Times-Dispatch Tuesday said the funding plan is not without its skeptics in the state legislature, however.

Tollroadsnews.com reported last week that four stalled toll projects in the state would be the beneficiaries of $1.5 billion in state funding from McDonnell’s plan. Virginia Transportation Secretary Sean Connaughton told the website all four are public-private partnerships which will raise some $4.5 billion in private capital to make up the remainder of the expected $6 billion project cost. Among the projects is the expansion and upgrade of a portion of I-95/I-395 to HOT (high-occupancy toll) lanes.

Also on McDonnell’s agenda is a constitutional amendment to protect the state’s transportation fund from transfers to the general fund. Delegate Glenn Oder is introducing legislation to set the amendment process in motion.

Presumably no such constitutional limitation exists in Kansas, where it was reported last week Gov. Sam Brownback plans to transfer $200 million in funds set aside for highway projects to the state’s general fund so it can be used to finance aid to schools, social services and other programs. Brownback’s policy director said Thursday that it would be a one-time transfer and would not change the 10-year, $8.2 billion transportation program legislators approved in 2010.

Reports Assess Challenges of Public-Private Partnerships, Congestion Pricing

Tollroadsnews.com also reported last week that Puerto Rico will soon have its first public-private partnership toll concession. The territory has proposals from four companies that aspire to run tolling on two of the island’s expressways, PR 22 and PR 5. The head of the Puerto Rico Public-Private Partnerships Authority David Alvarez told the website the concession will likely be for 40 to 50 years with maximum toll rates keyed to an index of inflation. The company awarded the concession is expected to pay an upfront lump sum for the privilege. Alvarez said Puerto Rico is open to proposals that would vary the pricing of tolls to help manage congestion on the island.  In addition, a transition to all-electronic tolling is possible down the road.

The Competitive Enterprise Institute, a Washington, D.C.-based nonprofit public policy organization, has a report out this month assessing the limitations of public-private partnerships in both the surface transportation and real estate sectors. Among the report’s findings:

  • Long-term concession agreements do a poor job of dividing financial risk between the private and public sectors.
  • Transferring all financial risk to the private sector while the public sector still retains ownership of the infrastructure only increases overall costs.
  • Leaving too much financial risk with governments increases the odds of cost overruns, delays and project suspensions.

There is more on public-private partnerships this week as well on the National Journal Expert Blogs. John Horsley, the Executive Director of the American Association of State Highway and Transportation Officials, and others ponder the appropriate role for the private sector in developing and maintaining the nation’s infrastructure.

Congestion pricing meanwhile is the subject of a new report from the Federal Highway Administration. It examines how the mechanism was incorporated into the long-range planning processes for metropolitan planning organizations in four states (California, Minnesota, Texas and Washington). The report identifies several lessons learned from implementing congestion pricing, including:

  • All regions struggle with developing the right tools to provide the analysis to support public policy decisions surrounding pricing.
  • Communication of road pricing concepts can be difficult, especially when such concepts are unknown and untested in a region.
  • Demonstrating that road pricing was just one element among many of a cohesive transportation plan was effective at gaining public acceptance.