Transportation Policy Academy 2016—Virginia Secretary of Transportation Aubrey Layne

Aubrey Layne is the secretary of transportation for the Commonwealth of Virginia and serves as the 2016 vice-chair of the CSG Transportation Public Policy Committee. He delivered a keynote address May 19 to state legislators from around the country attending the 6th Annual CSG Transportation Leaders Policy Academy in Washington, D.C. He spoke about the Commonwealth’s recent efforts to reform its processes around transportation project prioritization and public-private partnerships.

On why assessing the project prioritization process was important in the wake of 2013 transportation funding legislation and the election of Gov. Terry McAuliffe later that year…

“Coming into office (in 2014) we felt it very important that we demonstrate to the public that there were benefits of these new taxes (from the 2013 legislation). We had to address the concerns of many of the lawmakers and advocates that we were not advocating projects for the most urgent needs. And of course Governor McAuliffe campaigned quite frankly, and I believe rightly so, on picking the right projects.”

On House Bill 2, the 2014 legislation establishing the new process…

“This legislation was championed by a Democratic Governor and a Republican Speaker of the House. It was unanimously adopted by the Virginia General Assembly. …The basis of the prioritization process means that the legislation requires us to consider six factors and weight them in determining these projects. (The factors are) congestion mitigation, safety, accessibility, economic development, environment and land use. The law required that in the major urban areas, which would be Northern Virginia and Hampton Roads, congestion mitigation had to be the most heavily weighted factor. … It was left to the Secretary of Transportation and the Commonwealth Transportation Board to implement this policy and use it and they gave us basically two years to do so.”

On project prioritization in Virginia before the changes…

“Many transportation decisions were made on political (considerations) versus the actual transportation problems you were trying to solve. … It became very political, particularly in light of declining revenues. You’d finally get money set on your project … and then all of a sudden a couple of years later and the priorities have changed and the project monies had moved. Very inefficient. VDOT (The Virginia Department of Transportation) would start projects and then a new governor would come in. … And then of course there would be no integrity in the six-year improvement plan. It was also cumbersome. Our six-year improvement plan was over 1,000 pages, several thousand projects. It was finally delivered in late April to May. The (Commonwealth Transportation Board) voted on it in June and the public was supposed to figure out what happened and why every project did or didn’t get in. So it was very, very opaque.”

On Virginia’s new emphasis on ‘state of good repair’ in project selection…

“One of the things we were not accomplishing was taking care of our current roads. … We had a maintenance program and that was pretty much (for repaving roads and repainting bridges). … Construction dollars, because they were scarce, were saved for new capacity. We had many assets that had to be reconstructed but we weren’t using it for that because we had scarce resources and of course our maintenance budget wasn’t taking care of it. …A big part of (the new process) is the first 45 percent now of all the monies that come into our construction program must go to what we call ‘state of good repair,’ keeping our current infrastructure in place. I didn’t think it made much sense to add if we couldn’t keep up what we already had in place. And that 45 percent was not made up. It’s what VDOT said over the next decade it would take for us to invest to start bending that curve from our assets deteriorating until they start coming back up to standard. So that leaves 55 percent of our monies that would go for new construction and they were broken into two pots: We have nine construction districts so half went to the nine construction districts. … The remaining 27.5 percent went into the statewide pot for the major interstates. … For the first time, every construction dollar in the commonwealth is now either asset managed by VDOT for the state of good repair or it’s competitively scored and ranked for allocation.”

On how the new process provides greater certainty to project stakeholders…

“It is a totally, fiscally constrained plan. Every project that is selected must be funded through construction. So that means that as a stakeholder, a local government, a (metropolitan) planning organization, you now know that your project is going to get done in that next six years of time. VDOT… can now plan their construction schedules out six years. Our construction industry in the commonwealth can now plan their businesses knowing what’s coming in the pipeline.”

On how the new process can help transportation officials make the case for additional funding…

“Another side benefit to this is … I can now stand up in front of the legislature and say ‘here is what we have left on the table.’ It’s no longer ‘we need more money.’ And the response is ‘you’ve got to be more efficient.’ … I can give a scored set of projects, stand in front of the legislature and say ‘here’s what we left on the table.’ You can look at the projects. Of the $5 billion we didn’t fund, is $2 billion no good? $3 billion? It’s up to you but it’s no longer this esoteric conversation (about) if we were more efficient we could do more projects. Here’s the money you’ve given us and here’s what we can fund and do with it. And I think that’s the best way to justify getting additional dollars: use what you have. The taxpayers see the benefit and you make the conversation about ‘here’s what we didn’t do.’”

On Virginia’s emphasis on public-private partnerships and why changes in the P3 process were necessary…

“We can’t provide our transportation infrastructure plan in the commonwealth without the help of the private partners. We have been a leader in public-private partnerships. Our legislation was first (approved) in 1996. … What had happened (was) we had gotten away from what was originally intended with our P3s. … We’ve had a lot of successful projects. … And I wish I could stand up here and say ‘everything worked out just great’ but that is not the case and we had to learn from some of our experiences.”

On the risks involved with public-private partnerships…

“Public-private partnerships … are really about sharing risks and if you take risks, how you’re going to be compensated. And those risks can be construction risk, operation risk and financial risk. There are lots of other derivatives but that’s really what they fall under. And quite frankly in Virginia, we don’t build anything anymore so most all construction risk we pass on through fixed-price contracts or design-build contracts and we can have a contract for operations and maintenance so we can pass those (risks) on. And I generally think the private sector does better than government at those. Not always, but that’s where my prejudice is. But one thing the private sector cannot do better … is finance the projects. Nobody can compete with tax exempt financing—we’re a triple-A rated state.”

On the changes that were needed in Virginia’s P3 process…

“Governor McAuliffe made it clear we were going to be good fiduciary, responsible parties. We do believe strongly in public-private partnerships. They’re a great procurement tool but they’re not a substitute for public financing. … We felt that we needed to be accountable and transparent and most importantly we should consider all options until a contract was signed. … And then we did codify the reforms that require this transparency and up front legislative engagement. … We talked to the private sector … and we heard clearly the number one risk was political risk and they wanted that taken care of early in the process. So that’s what we did. We now have a committee made up of some of our legislators—about 140 people voting that are on the committee with others—that I have to stand in front of and say ‘if we use this procurement, these are the risks I’m passing on … and this is why it’s in the public’s benefit.’ And they have to sign off on that before I start.”

On the first project procured under the new P3 process…

“We are now going to deliver our first project here in Northern Virginia under this new reformed P3 procurement. We call it Transform 66 Outside the Beltway. It’s a 23-mile, $2.1 billion (project) to improve (one of) the most congested areas … in the country. It will create two express lanes and keep the general purpose lanes in place. We have private teams that are bidding (on) this and this is where we tested some of those assumptions: that the private sector is more efficient than our department of transportation in construction and operations and we believe every procurement has different risks. Also, we believe the private sector can leverage more resources that are available and tap things that we can’t. But this only makes sense if it’s in the best interests of our taxpayers.”

Further Reading