Category: Public Private Partnerships
Seventeen years ago, Virginia passed what was said to be one of most progressive pieces of legislation in the country. The Public-Private Transportation Act would help build road in the tax-averse state by shifting some of the cost and management to the private sector.
The result has been 14 miles of adjusted-toll HOT lanes on Interstate 495 in Northern Virginia, proposed extensions to tunnels in Hampton Roads, superhighway connectors in the Richmond area and a planned $1.4 billion road linking Suffolk to Petersburg.
But just how much oversight is there in such public-private partnerships? Hardly any, argues James J. Regimbal Jr., a transportation analyst in a new report published by the nonprofit Southern Environmental Law Center.
Regimbal paints a disturbing, if not scary, picture of how the Old Dominion operates something like a dictatorship when it comes to deciding to move forward on road projects involving public-private partnerships.
As public funds grow short, traditional oversight bodies are being sidestepped. In their place, decision-making is being concentrated “into fewer people — and, ultimately, the Governor,” he writes.
Traditionally, state road planning was the sphere of metropolitan planning organizations and the Commonwealth Transportation Board, which serves at the pleasure of the governor. They, however, are pretty much out of the picture when it comes to roads funded by public-private partnerships, as is the General Assembly.
Consequently, Virginia is getting roads without sufficient public input, transparency on bidding and attention to federal environmental laws, Regimbal writes.
The public-private partnership idea “has evolved and grown substantially beyond the General Assembly’s original intent,” he concludes. “The question is whether the PPTA process is good at producing public benefits with as low a price as possible, that is fair to the traveling public, that adequately considers external factors such as environmental impacts and that is consistent with Virginia’s long-term transportation goals.”
Among the legislative fixes Regimbal recommends are making sure that public hearings are held at least 30 days before a major PPTA deal is approved, that environmental reviews are done before, not after, such approval and that at least two bidders compete for PPTA work. The General Assembly should also have the power to appoint some members of the Commonwealth Transportation Board besides just the governor.
So far, the McDonnell administration, which has throttled through the Hampton Roads tunnel projects, as well as the new superhighway near U.S. 460 in Southeastern Virginia, has been quiet about Regimbal’s report. It would be unfair to place all of the problems on McDonnell’s lap, however. Democratic Govs. Tim Kaine and Mark Warner have been equally enthusiastic about public-private partnerships.
What’s more, the Big Brother approach doesn’t always work in a practical sense. The Pocahontas Parkway linking Interstate 94 with I-64 and I-295 east of Richmond was hustled off to a public-private partnership arrangement after ridership proved so anemic the state’s bond rating was jeopardized. Now the private firm involved, an Australian company, wants to unload its share of the project because it is still a money-loser. There are similar worries about the new road planned next to U.S. 460.
The PPTA has always been pushed as Virginia’s innovative silver bullet so it doesn’t have to face up to its serious road-funding problems. Regimbal’s crucially-important study shows how democratic values are also being trampled in the process.
Link to article here.
By Roger Chesley
November 29, 2012
Jim Regimbal, who penned a new report about the state's increasing use of public-private partnerships to build roads, says the process is riddled with shortcomings.
For people in South Hampton Roads, he's preaching not just to the choir - but to the chafed.
Local residents have been fighting upcoming tolls at the Downtown/Midtown/MLK project, which is moving ahead under the state's Public-Private Transportation Act of 1995.
Regimbal is a former state Senate Finance Committee staffer who now analyzes finance policies. His 28-page report, commissioned by the nonprofit Southern Environmental Law Center, lists a slew of problems with the PPTA.
Too much power sits with the executive branch, and the General Assembly has too little input. The governor's office controls the flow of information. It's difficult to assess whether the public benefits at the cheapest possible price.
Regimbal, who runs Richmond-based Fiscal Analytics, told me by phone Wednesday, "The system is not democratic anymore."
Since fiscal year 2009, no state money by formula has been available for urban, secondary or primary construction, the report says. The bulk of the funding now comes from borrowed money and federal dollars.
The state relies more and more on tolls to pay for major transportation projects. That pushes the burden onto individual regions with desperate needs. Meanwhile, many Virginians skate on what should be a shared responsibility.
This new reality is as pretty as a pothole.
Legislators have refused to increase the state's gas tax since 1986, even though the rate of 17.5 cents a gallon is one of the lowest in the country. Attempts to allow Northern Virginia and Hampton Roads to raise transportation money regionally have failed over the past decade.
That means public-private partnerships have become the main vehicle for road-building, "and it probably isn't the best game in town," Regimbal says.
The governor's office, in comments to The Pilot's Dave Forster, counters that the PPTA has led to "almost $7 billion in much-needed transportation projects recently getting under way in Virginia."
That's true, but there's a heavy, looming cost to residents. And we simply don't know whether we're getting the best pavement for the money.
Late Wednesday evening, the governor's office told me, by email, that the McDonnell administration wants to ensure "that the PPTA process is as transparent and accountable as possible, while still protecting the Commonwealth's ability to negotiate these complex business transactions."
It said the administration has established a work group chaired by Del. Jimmie Massie, R-Richmond, to identify additional opportunities for public outreach.
That's a start, because the issues covered in Regimbal's report are too big to ignore.
The state probably should've delayed granting a contract to Elizabeth River Crossings on the Norfolk-Portsmouth project because it offered the only detailed proposal.
Without multiple bidders, the report says, the state had no way to know whether it was getting the best deal.
Unlike the Interstate 495 project in Northern Virginia, the Downtown-Midtown project doesn't have an alternative free road for motorists.
Also, it's unclear why the Downtown-Midtown project will receive fewer state dollars than a new U.S. 460 from Suffolk to Petersburg, even though the tunnel project is a higher regional priority.
Legislators and municipal officials should push Gov. Bob McDonnell to modify the law on public-private partnerships.
Maybe then, residents won't have to swallow another bitter transportation deal.
Link to article here.
Time to overhaul Virginia's Public-Private Transportation Act
by Trip Pollard • November 28, 2012 1:35 pm
Greater Greater Washington blog
Virginia's Public-Private Transportation Act (PPTA) lacks adequate safeguards to protect the public interest as the state spends billions of taxpayer dollars and imposes decades of substantial tolls imposed, according to a new analysis.
The PPTA can be an innovative tool, allowing private entities to partner with the state or localities on transportation projects, and Virginia has been a national leader in pursuing public-private partnerships. Yet the report details how the PPTA has centralized decision-making, limited information given to the public, and often resulted in deals that allow private entities to earn high returns with little risks.
The report was prepared for the Southern Environmental Law Center by Jim Regimbal, a consultant with Fiscal Analytics, Ltd. and a former staff member to Virginia's Senate Finance Committee who has over 30 years of experience in state policy analysis.
It examines the PPTA's history and process, and highlights two recent projects for in-depth analysis: the I-495 Express Lanes in Northern Virginia and the Downtown Tunnel/Midtown Tunnel/MLK Extension in Hampton Roads. The study also analyzes the substantial policy issues the Act raises and offers recommendations for reform.
The PPTA authorizes private entities to build, maintain and/or operate "qualifying transportation facilities" under an agreement with state or local entities such as the Virginia Department of Transportation (VDOT). The intent was to reduce the up-front costs to government by attracting private sources of funding and to tap into private sector creativity and efficiency through competitive bidding to speed and improve building projects.
Since it was enacted in 1995, only four PPTA projects have been completed (Route 288 and Route 895/Pocahontas Parkway around Richmond, Route 199 around Williamsburg, and the new Beltway express lanes). Another 17 projects are partially completed or currently under construction, under contract, or under consideration.
The PPTA has expanded far beyond the General Assembly's original intent to supplement the traditional transportation improvements process. It is now the major method for constructing large new projects, and it concentrates decision-making in the Governor's office with little effective oversight.
Moreover, as the report notes, it "has evolved into a process in which large private-sector construction consortiums propose design/build/operate projects funded using as much state/federal funding and taxpayer-subsidized debt as can be negotiated with the state, coupled with toll revenues that are as secure and protected as possible."
There are significant differences between the PPTA agreements made between the Commonwealth and private entities. The I-495 Express Lanes project, for example, increases transportation capacity while still leaving existing toll-free transportation choices in place for the public. This agreement does not contain any "non-compete" clauses that limit future transportation improvements, although it does have a troubling provision that could increase taxpayer liability or dissuade high occupancy vehicle (HOV) use. The private partner is taking on true demand risk in return for its investment.
In contrast, the Downtown Tunnel/Midtown Tunnel/MLK project expands an existing free facility already once paid for and currently maintained by the state, but with no viable travel alternative for the public. There is little rationale for the amount of state subsidy provided and the contract allows for automatic toll escalation and penalties for creating competing transportation alternatives.
In another project, the proposed $1.4 billion new Route 460 between Petersburg and Suffolk, the state plans to provide $1.1 billion public in direct subsidies (tolls will cover the rest) to build a destructive highway that will parallel an existing, relatively uncongested route. This project is a much lower transportation priority than many others throughout the state, yet it is slated to receive the highest subsidy.
The report recommends a number of reforms to the PPTA, including:
- Providing more information to the public (including the cost-benefit analysis), and requiring a public hearing at least 30 days prior to signing a comprehensive agreement;
- Increasing the role of the Commonwealth Transportation Board, and other oversight boards, by requiring it to evaluate and approve a proposed comprehensive agreement before it can be approved, and giving the Board greater independence by limiting the ability of the Governor to remove members without cause;
- Creating a greater role for the legislature in the process, such as requiring the findings of the cost-benefit analysis to be provided to the General Assembly prior to initiating a PPTA procurement process to ensure that the assumptions contained in the analysis can stand up to public scrutiny, and by requiring the Assembly to approve subsidy levels (particularly debt) and the use of toll facilities;
- Ensuring greater competition by requiring more bidders; and
- Adding conditions for prioritizing state PPTA subsidies.
These solutions will help ensure that the PPTA process is good at producing public benefits for as low a price as possible.
Recent PPTA deals show why the current debate over transportation funding needs to focus on ensuring that taxpayer funds are spent wisely—and not just on raising more revenues for transportation. The legislature needs to improve the PPTA before the state signs additional agreements or authorizes any additional funds for public-private transportation projects if we are to promote smarter transportation investments and adequately protect our communities and environment.
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