States Move Forward With Transportation Projects Involving Public-Private Partnerships & Tolling

From the Columbia River Crossing bridge project in the Pacific Northwest to the Illiana Expressway project in the nation’s midsection to Maryland’s Purple Line light rail project, a number of transportation projects that involve public-private partnerships (P3s) and/or tolling have been in the news of late. Meanwhile, a state Supreme Court decision in Virginia appears likely to pave the way for more tolls and P3s in that state. I also have updates on projects in a number of other states as well as links to recent related reports and articles.

Washington’s Pullout & Columbia River Crossing Tolls

When lawmakers in Washington State this summer weren’t able to approve their half of the plan to build the Columbia River Crossing between Vancouver, Washington and Portland, Oregon, it left the project on life support and left Oregon holding the bag for its full $2.6 billion cost. As The Oregonian noted last week, Oregon lost not just an equal funding partner in Washington, but also an experienced toll-collection agency in the Washington State Department of Transportation.

Oregon is planning to move ahead with the project on its own but will need to create its own tolling organization, which the state DOT estimates could cost as much as $56 million. Washington’s pullout also will likely require legislative action by both states to resolve some thorny legal issues, Oregon DOT Director Matt Garrett has noted, including whether Oregon will be able to collect tolls on the Washington side and pursue collections efforts against Washingtonians who don’t pay.  

Oregon lawmakers are reportedly considering holding hearings on the CRC later this month.

Virginia Supreme Court Rules in Favor of Tunnel Tolls

In case you missed it, the Virginia Supreme Court ruled recently that tolls can be implemented to help pay for the $2.1 billion Elizabeth River Tunnels Project in the Hampton Roads area. The court’s decision reversed a May ruling by Portsmouth Circuit Judge James A. Cales that the Virginia General Assembly had exceeded its constitutional authority by giving “unfettered power to the Virginia Department of Transportation to set toll rates without any real or meaningful parameters.” Residents and business owners had filed suit hoping to stop the tolls, which they see as unfair, illegal and harmful to commerce, The Virginian-Pilot reported.

The tunnels project seeks to relieve congestion and improve freight access with the construction of a second Midtown Tunnel, rehabilitation of the existing Midtown and Downtown tunnels, and the extension of Martin Luther King Blvd.

Tolls, which are expected to cover 43 percent of the cost of the project, are now expected to begin February 1. But the fight may not be over. State Sen. Kenny Alexander, who represents Norfolk, said he plans to introduce legislation to try to either delay the tolls until the new Midtown Tunnel opens in 2016 or use new tax revenue from the transportation bill passed by the General Assembly this year to buy down the price of the tolls.

As Tollroads News reported, a key ruling in the court’s 55-page opinion was that tolls are user fees and not taxes because:

  • Tolls are paid in exchange for a “particularized benefit not shared by the general public.”
  • Drivers are “not compelled by government to pay the tolls or accept the benefits of the project facilities.”
  • The tolls “are collected solely to fund the project, not to raise general revenues.”

That ruling is important because if the tolls were considered taxes, the General Assembly’s delegation of toll rate setting to the state DOT would have been deemed unconstitutional.

Illiana Expressway Seeks Investors

The Indiana Finance Authority and the Indiana Department of Transportation this week issued a Request for Qualifications for the development, design, construction, financing, operation and maintenance of the 12-mile Indiana portion of the Illiana Corridor project, which would run from I-65 northeast of Lowell, Indiana to Interstate 55, near Wilmington, Illinois. The Indiana portion of the project would also include adding capacity on I-65. Indiana plans an availability payment concession under a public-private partnership agreement on the project. As part of the arrangement, investors would provide much of the upfront financing for construction of the expressway and the state would make annual payments to the investors once the expressway is open. January 10 is the deadline for firms to respond to the Indiana RFQ. A shortlist of three or four finalists will be selected in February with a final Request for Proposals to follow in May. The state hopes to close the deal by this time next year.

The Illinois Department of Transportation issued the RFQ for the 35-mile Illinois portion of the expressway last week. Statements of Qualifications are due December 19th for it. The Illinois portion is also being procured as an availability payment-based public-private partnership. According to the RFQ: “The Illiana Corridor Project is a much-needed east-west link that will improve regional and national travel by providing an alternative for interstate truck and auto traffic, increasing capacity for local traffic and relieving congestion and improving safety on local roads; and private sector innovation in the design, construction, operations and maintenance of the Illinois Project offers the opportunity to deliver the Illinois Project more quickly, more efficiently, and at less cost.”

The Indiana and Illinois portions combined are expected to cost $1.3 billion. An all-electronic open road tolling system will be used on the corridor. Tollroads News noted this week that previous industry outreach by the two states showed there was no interest in a toll concession in which the private sector investors would carry the traffic and revenue risk. As a result, the states opted for the availability payment P3 model in which payments from the state to the contractor for operating the toll road are guaranteed by contract regardless of traffic and revenue.

Plan Approved for Maryland’s Purple Line Light Rail Project

Last week, the Maryland Board of Public Works, which is made up of the Governor, State Treasurer and Comptroller, officially approved the Maryland Department of Transportation’s plan to seek a public-private partnership for a 16-mile light rail  project known as the Purple Line, The Washington Post reported. Transportation officials can now begin pursuing private companies to design, build, operate and finance the $2.2 billion project which will allow residents of Maryland’s DC suburbs to travel between Montgomery and Prince George’s counties without passing through the District of Columbia, as they must now do when riding Metrorail. The state hopes to complete a deal by late next year for the project, which would become one of the broadest public-private partnerships on any U.S. transit project. The state is seeking a 35- to 40-year contract that could be valued at more than $6 billion. A Request for Qualifications is expected in the next few weeks, according to a department press release.

State legislators who attended our recent Transportation Policy Academy in Washington, D.C. received a briefing on Maryland’s plans for the Purple Line as part of a transportation-focused tour. You can read more about the event here.

Additional State Updates on Tolling & P3s

  • Nevada: Project Neon, the project to widen and make improvements to Interstate 15, has attracted four design proposals. The Nevada Transportation Board will decide who will finance, design, build and maintain the 3.7-mile, $1.3 to $1.5 billion project next year. The project will be the largest job ever undertaken by the Nevada Department of Transportation. Three of the four firms submitting proposals are based outside the United States, The Las Vegas Sun reported.
  • Pennsylvania: PennDOT recently hosted an industry forum to educate potential private sector firms on the P3 project the state hopes to do to replace hundreds of structurally deficient bridges, Gant Daily reported. The Rapid Bridge Replacement Project would replace 200 to 300 bridges of similar design under one contract to streamline design and construction.
  • Texas: With traffic worsening on Interstate 35 in the Austin area, state transportation officials are contemplating a radical move, Aman Batheja of The Texas Tribune reported. At a recent meeting, Texas Transportation Commission Chairman Ted Houghton said the commission needs to look at the possibility of tolling I-35 in the city and making part of the nearby State Highway 130 toll free. Originally conceived as an alternative to I-35, the privately managed SH-130 has drawn less traffic than anticipated, which has prompted fears that the company running the toll road might default on a debt payment next year.
  • Virginia: The project to build express lanes on Interstate 95 in Northern Virginia is halfway done and on schedule, The Washington Post reported recently. The high-occupancy toll lanes are expected to be complete by late next year and open to traffic in early 2015. The express lanes on I-495, the Capital Beltway opened to traffic one year ago this month.

Further Reading

  • I have an article in this month’s issue of The Lane Report, a Kentucky business and economic news magazine, looking at the Ohio River Bridges Project in the Louisville area. The $2.6 billion project is now under construction and already having an economic impact on the region. State and local officials also have high hopes for the region’s economic future once the two new tolled spans being built open to traffic in 2016 (and hopefully relieve one of the country’s worst bottlenecks). Some however still have concerns about the rates proposed for the tolls and about the overall design of the project. Kentucky is taking the lead on the Downtown Crossing bridge and using the design-build approach, while Indiana is employing a public-private partnership with WVB East End Partners to build the East End Crossing eight miles upstream from downtown Louisville. Officials for both states say the project is on schedule and already proving to be a model for bi-state cooperation.
  • Speaking of Louisville and the bridges project, a reporter for WAVE-TV 3, the local NBC affiliate, recently traveled to North Carolina to find out how electronic tolling planned for the Louisville bridges will work and found that it may not be as accurate as some might claim. For one thing, North Carolina doesn’t have agreements with all states to be able to look up DMV records of drivers whose license plates are caught on camera if they pass through toll road sensors without a transponder. North Carolina has agreements with only 12 states and Kentucky is not one of them. 
  • This month’s issue of Governing magazine has a piece by Ryan Holeywell that serves as a good overview and history of public-private partnerships in the United States.
  • Stateline had a piece recently on how a number of states are using tolling to fill the gap in transportation funding left by declining gas tax revenues.
  • Edward Regan and Michael Townes of consulting/engineering/construction firm CDM Smith write about “An Emerging Nexus” between tolling and transit in the November issue of the Eno Brief Newsletter. “With increasing evidence that traditional transportation funding sources are insufficient, many state and local agencies are looking at tolling as a possible solution,” they write. “At the same time, growing desires for transportation choice and more sustainable development patterns coupled with concerns about climate change and increasing congestion in our nation’s cities have encouraged significant investment and growth in transit. These trends offer potential new synergies which can help provide integrated, multi-modal solutions to the urban mobility challenge.” The authors say bus rapid transit and managed lane projects are important examples of the emerging transit-tolling nexus.
  • The International Bridge, Tunnel and Turnpike Association issued a brief recently called “Debunking the Myths of Highway Tolling.” Among the myths addressed: “our highways are already paid for;” “tolling is double taxation;” “tolling causes delays and congestion;” “tolling technology violates driver privacy;” and “it costs too much to collect tolls.”
  • And finally, in case you missed it: the question of whether the federal ban on interstate tolling might one day be overturned was one of the topics addressed by USDOT Under Secretary for Policy Polly Trottenberg when legislators met with her last month during our CSG Transportation Policy Academy in Washington, DC. You can read what she had to say on the subject here.