McAuliffe: New highway partnership is a $2.5B swing in state transportation finances

Travis Fain
Contact Reportertfain@dailypress.com

RICHMOND — Virginia jumped back into the public-private-partnership game in a major way Thursday, announcing the expansion of a key commuter route just outside of Washington, D.C.

Domino effects from the deal could free up funding for transportation projects around the state, including Hampton Roads, using a reworked "P3" model that resulted in financially disastrous deals for taxpayers and toll payers in recent years.

The plan is for private financing and construction groups to widen I-66 outside the beltway in D.C. from six lanes to 10 and charge tolls, uncapped by the state, on the new lanes for 50 years.

In return, the consortium will pay all construction and maintenance costs on the project, make hundreds of millions in other upgrades along the corridor and cut the state a check next year for $500 million, Gov. Terry McAuliffe said. Altogether, the governor pitched it as a $2.5 billion swing in state transportation finances and a new national example for road financing.

"Not one single cent of taxpayer money will be used," McAuliffe said. "Clearly one of the best deals ever done in the country."

This proposal beat out options put together by other teams of international construction groups, and was better at the bottom line than what the state believed it could do by financing the project itself, McAuliffe said.

Among the partners selected: Ferrovial, a Spanish company that was a key partner in the U.S. 460 project through Isle of Wight County, a deal from Gov. Bob McDonnell's tenure that was canceled after hundreds of millions were spent without construction beginning. That deal and a 58-year tolling agreement on the Downtown and Midtown tunnels between Norfolk and Portsmouth led the Virginia Department of Transportation and the General Assembly to rework the rules public-private partnerships live by.

The I-66 project is the first to emerge from that new process. Virginia Secretary of Transportation Aubrey Layne brought the project before a state oversight committee Thursday, part of a new protocol that requires him to certify that the state will do better ceding tolling rights and financing risks to the private sector than it would if it financed the project itself.

As state officials unwound the 460 deal, they said key leaders failed to understand how much risk the state bore in that deal, and how little fell on private partners, who spent nothing.

McAuliffe has said he never blamed those partners, though, or the separate companies involved in the Midtown and Downtown tunnels project. U.S. 460 Mobility Partners, a partnership between Ferrovial and American Infrastructure, returned $45.7 million to the state after the 460 deal fell apart.

They also agreed to forgo, potentially, hundreds of millions more they could have been owed under the contract. McAuliffe has said he made it clear that the companies' ability to bid on future Virginia projects was at stake in those negotiations, and he praised them Thursday, saying, "They never walked away from their obligations to the commonwealth."

The 460 deal still cost taxpayers $250 million, though. Some $40 million of that went to investors who bought bonds for the project through a corporation created by the state. Those bonds, meant to be paid off with tolls, were supposed to further shield the state from risk by bringing in new investors, but the state paid them off in the end.

McAuliffe promised Thursday that would not happen on the I-66 project.

The plan is to close on this deal next year. Construction would begin soon after and be complete in 2022. The $500 million that the consortium, which will go by the name Express Mobility Partners, plans to pay the state when the deal closes must be used along the I-66 corridor, the administration said. But that money, and other financing included in the deal, will free up potential transportation dollars for projects in Hampton Roads or around the state.

The figures involved will likely set off battles as local leaders strive to rake some of the money their region's way.

Between the $500 million payment, the nearly $1 billion the state expected to spend on new I-66 lanes if it financed this project itself, $800 million the group has agreed to spend on transit projects and $350 million to otherwise reduce congestion, McAuliffe said the deal represents a roughly $2.5 billion swing in state transportation finances.

The governor said at least $300 million will be plowed back into the state's Smart Scale program, which is a prioritization process the state uses to determine what road projects it will help fund.

Express Mobility is a consortium of Cintra, Meridiam, Ferrovial Agroman US and Allan Myers VA Inc.

Cintra is a subsidiary of Ferrovial, and this will be the group's first major project in Virginia. They operate toll roads now in Texas and Toronto.

Meridiam is an equity fund, and this will be its infrastructure division's first project in Virginia, but it's a partner now on a light rail project in Maryland. The group also has worked with Cintra in Texas.

Allan Myers is a construction company with offices in Pennsylvania, Maryland and Virginia.

Fain can be reached by phone at 757-525-1759.

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