Rising Costs Strain Private Partners
By Eric M. Weiss
Washington Post Staff Writer
Monday, October 23, 2006
A privately backed plan to build express toll lanes on the Virginia portion of the Capital Beltway, which was promoted as a way to ease traffic without using taxpayer money, has become so expensive that the firms behind the project could require more than $100 million in public funds to make it work, according to state transportation officials.
The 14-mile Beltway project would be the first section of what is expected to be a network of express toll lanes in the Washington region, and Virginia transportation officials said they are committed to it, although it is unclear where they would find the money.
Virginia's willingness to contribute money to the project is a change of position. The project was designed in 2003 as a public-private partnership, with the state providing some of the funds. But because money for state transportation projects is tight, officials then said they couldn't help. A second private partner signed on to the project, and 18 months ago the firms and state officials announced a plan to widen the highway without public funds.
Virginia transportation officials say the Beltway project, which would add four high-occupancy toll lanes between Springfield and Georgetown Pike, is a good deal even if it requires a considerable amount of public money.
"We are fully committed to building and funding the HOT lanes through a combination of state, federal and private resources," said Pierce R. Homer, Virginia's transportation secretary. "We'll find a way to make this project work. It's too important to the region to do anything less.
"We have an opportunity to obtain a billion-dollar facility with a fraction of that put in by the public sector," Homer added.
Virginia and Maryland leaders have been counting on privately funded highways as a quick, cheap way to ease congestion when there is little public money to build big projects. Now the changes in the Beltway plan, as well as delays in a similar project on Interstates 95 and 395, have politicians and transportation officials wary.
"I think it demonstrates the risks involved in seeing privatization as a panacea," said Gerald E. Connolly (D), chairman of the Fairfax County Board of Supervisors. "We can't simply hope that the tooth fairy, in the form of the private sector, will make all of our problems go away."
Public investment in the project would call into question the state's control over its spending priorities. The Beltway proposal was not in the state's plans until it was proposed by Fluor Enterprises Inc. in 2003, and any public financing would divert money from projects that have gone unfunded for years.
"These projects come out of the blue, and then they jump to the front of the line," said Stewart Schwartz, executive director of the Coalition for Smarter Growth. "We need to ask a lot more questions."
It is unclear where Virginia transportation officials will come up with the money to make the Beltway project a go. All year, state lawmakers have argued over how to provide additional funding for transportation, and a special session of the General Assembly ended last month without a solution.
Virginia officials said possibilities include using surplus money from the general fund or from a continuing state subsidy, although no plans have been formulated.
Fluor and its partner, Transurban Inc., have a separate plan to create 55 miles of toll lanes on I-95 and I-395 between the 14th Street bridge and Spotsylvania County, but the estimated completion date has been pushed back three years, to 2014. Local officials have expressed concern that the project could be delayed further or not be built at all.
Virginia officials also hope to build toll lanes on other major commuter routes, including the Dulles Toll Road and Interstate 66.
Last week, Maryland officials asked the private sector for ideas on creating express toll lanes along Interstate 270 and sections of the Beltway. They are also exploring similar projects on I-95 and around Baltimore.
The lanes in Virginia would be free for vehicles with three or more people; other drivers would pay a toll that would increase with traffic volume. Backers of the plans say "congestion pricing" would virtually guarantee that the lanes won't become congested.
Ronald F. Kirby, transportation planning director for the Washington Council of Governments, said the inclusion of state money would be a major change in the Beltway project and would likely require additional hearings and action by the National Capital Region Transportation Planning Board, as required by federal law. The region's transportation plan currently describes the project as entirely privately financed.
"This is a big change, and people are going to want to comment on it," Kirby said.
State and private officials say projected construction costs have increased by 30 percent since the project was proposed.
"Just because this is a public-private project doesn't mean they are exempted from the normal economic rules," said Malcolm T. Kerley, chief engineer for the Virginia Department of Transportation.
In addition to requiring public dollars, Transurban officials say, the scope of the project could shrink, with some interchanges being phased in later.
Ken Daly, vice president of Transurban, said that the project remains viable but that hard decisions have to be made. "It was an incredibly good project when we first proposed it," Daly said. "Time and events have moved against it."
Homer also said the state is committed to the I-95 HOT lane project. Virginia and company officials say the completion date has been pushed back because of negotiating delays and environmental studies. Under the original schedule, the state and contractors were to sign a comprehensive agreement by February. Both sides are still trying to come to terms on an interim agreement.
The problems with the two projects have made state officials antsy.
"What I'd like to see is to get some dirt moved," Kerley said.
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