Photo by VaDOT on Flickr.
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.