Earlier this month Infrastructure Investor, a magazine covering global transportation investment, recognized Governor Bob McDonnell as its fifth “Public Infrastructure Official of the Year.” It was the first time the publication had bequeathed the honor to an American, and the first time to a public figure who ranked less than a national transportation minister.
‘Having delivered more [public-private partnership] projects than any state in the last five years, Virginia clearly stands out as a leader in utilizing public-private partnerships to improve transportation infrastructure,” stated the magazine. “Virginia currently has 22 public-private partnerships projects in the pipeline, more than all other states combined.”
Tony Kinn, the man whom McDonnell appointed to run the Office of Transportation Public Private Partnerships (OTP3) is doing everything he can to build that project backlog. The Commonwealth has already branched out from traditional toll-backed bridge and highway projects to leasing “air rights” over state highway right-of-way and outsourcing operation of the state’s five regional traffic control centers.
Now the McDonnell administration is preparing to introduce legislation in 2014 that would enable Virginia to devise new funding structures for infrastructure projects and tap new sources of private investment capital not now available in the United States. The use of so-called “availability payments” would apply to situations in which the state has insufficient cash to build a project right now but the economic benefits are tangible and immediate.
In the meantime, expect to see more mega-projects on the scale of the Capital Beltway and Interstate 95 express lanes in Northern Virginia, the Midtown-Downtown Tunnel project in Norfolk and the U.S. 460 Connector between Petersburg and Suffolk. The state has solicited proposals for upgrading Interstate 66 in Northern Virginia and several credible groups are expected to submit ideas. Kinn wants to see if the private sector can come up with options that the Virginia Department of Transportation (VDOT) has not considered. Whoever wins that bid, look for something multimodal and vast in scope. Kinn foresees proposals for I-66 that include tolls, elevated lanes, dedicated Bus Rapid Transit lanes, even reversible lanes that run east toward Washington in the morning and west to the bedroom communities in the evening.
To Kinn’s way of thinking, the overhaul of I-66 can’t come too soon. Texas Governor Rick Perry has already begun poaching Maryland for corporate investment, and the OTP3 chief is convinced that it’s just a matter of time before he hits Virginia, too. The Commonwealth must address the high cost of traffic congestion in Northern Virginia, he says. It is an economic-development imperative to get traffic moving.
Appointed in 2011, Kinn has lost no time — OTP3’s nine-man team has churned out public-private partnership deals at an extraordinary rate. A man lavish with praise for others, Kinn credits the skill and dedication of his staff and unstinting support from Governor McDonnell, Virginia Highway Administrator Greg Whirley and his boss, Transportation Secretary Sean Connaughton. Other states have tried to put together P3 deals but not all have succeeded. “You could not get this stuff done without the proactive leadership of Sean Connaughton,” Kinn says. “He is a leader’s leader.”
While there is no denying OTP3’s ability to get deals done, questions do arise about the long-term results.
Trip Pollard, a senior attorney with the Southern Environmental Law Center, gives the administration credit for closing the financing on big projects but wonders if OTP3 is funding the right projects. “We’ve signed a lot of projects. That doesn’t say whether they were wise deals or not.”
The Beltway Express Lanes project in Northern Virginia was a pretty good project, Pollard says. The private-sector concessionaire put a lot of skin in the game. But the U.S. 460 upgrade between Petersburg and Suffolk is based upon a highly speculative forecast of increasing port traffic, while the Midtown-Downtown Tunnels deal creates powerful, decades-long disincentives for the state to undertake improvements that might divert traffic from the two tunnels.
“I think [OTP3] is doing a really good job of thinking of possible applications of this aproach,” says Pollard, whom Kinn has tapped to serve on his advisory committee. “But their job is to deliver projects,” not to think of the big picture. OTP3 doesn’t ask, for instance, whether a new highway project will open up part of the state to sprawl-style development that will impose costs –such as like the need for utilities, school buildings and local roads — not included in project spreadsheets.
Another problem Pollard sees is that P3 deals have a way of jumping to the front of the line. They’re big, they’re highly visible and they have the allure of leverage public resources with private capital. He’s concerned that they might be crowding out smaller projects that offer a better return on public investment.
While Infrastructure Investor magazine may be impressed by the fact that Virginia has 22 projects in the pipeline, Pollard does not find that reassuring at all. “Virginia closed on $6 billion in deals in the last year alone — no wonder infrastructure investors are giving [the governor] an award! But it doesn’t answer the question, are these good projects?”
Kinn concedes that not every deal has worked out perfectly. The Midtown-Downtown Tunnels project, which Hampton Roads residents vehemently protested when they found out how high the tolls would be, was particularly illuminating. “A lady come up to me on my very first day on the job,” recalls Kinn. “She said I was taking $1,000 out of her pocket.”
There had been numerous public hearings where citizens and local government officials could have kept informed about the progress of the project and its toll financing. The lesson that Kinn derived from the controversy is that VDOT needs to be more proactive in getting its message out. “A ton of people find change abhorrent,” he says. “Unless you educate them, they are skeptical.” The state needs to spend more time talking to politicians, publishing op-eds in local newspapers and explaining the benefits in a way people can understand.
That lady may be spending $1,000 a year on tolls now, Kinn says, but she is spending less time stuck in miles-long traffic back-ups at the tunnnels. There is a value to the gasoline she burns. There is a value to her time. “You have to get the politics and the publicity piece,” says Kinn.”You have to translate the lingo so Joe-on-the-Street can understand it.”
( Part Two of this article will run in the next issue of the Jefferson Policy Journal.)