Private Interest In Rail To Dulles
Monday, January 28, 2008
Private equity investors are drawing up proposals to partner with Virginia for a rail line to Dulles International Airport as hope fades that the federal government will help fund the 23-mile Metrorail extension.
State officials said several equity groups have expressed interest in investing in a rail since Thursday, when U.S. transportation officials declared the project unfit for federal funding. The $5 billion project had been counting on a $900 million grant from the Federal Transit Administration.
Private purchase of the rail line or the Dulles Toll Road to fund the extension would attract strong opposition from those who believe such public infrastructure is far too valuable to hand over to for-profit corporations. But with the outlook for keeping the rail project alive bleak, regional business and political leaders who are adamant that the rail line must not die are increasingly of the mind that private partnership must be considered.
"You gotta build this thing," said William D. Lecos, president of the Fairfax County Chamber of Commerce. "So whatever contingency is fastest, bestest and quickest is good with us. We've always been supportive of the public-private concept. If that turns out now to be the contingency we can pursue, provided we can get on that course quickly and with some level of certainty, then that's what we should do."
Robert W. Dove, co-head of the Carlyle Infrastructure Fund, said yesterday that his company is looking at the possibility of investing in a Dulles rail. Carlyle has not contacted Virginia officials but is reviewing the idea internally, Dove said.
"It does have the characteristics of a project that we would like to be involved with," he said, noting that the infrastructure fund, with assets exceeding $1 billion, looks for such public works as highways, bridges and tunnels in which to invest.
The attraction for Carlyle is the steady revenue from tolls, he said. One possible scenario would be a long-term lease arrangement in which Carlyle owned both the toll road and the rail line, with Metro still in charge of the transit operation.
"Metro would run it, but someone would make a payment to us for making it available every day," he said.
Giving tolling power to a private company is of deep concern to some politicians, who worry that rates would rise unacceptably in private hands.
U.S. Rep. Frank R. Wolf (R-Va.) is among the region's more vocal opponents of private investment in public roads. Wolf declined to be interviewed yesterday, but he has said repeatedly that selling the toll road would be shortsighted.
All agreed that options to keep the project alive are narrowing. Gov. Timothy M. Kaine (D) is expected to deliver a response today to the FTA's announcement that the project is too costly and carries management risks. But the governor conceded that he is not optimistic that federal regulators will change their minds.
That leaves the private sector. It also raises suspicions among rail boosters -- including Wolf, U.S. Rep. James P. Moran Jr. (D-Va.) and others -- about the federal government's motives in rejecting the project. Numerous federal transportation officials, notably Transportation Secretary Mary Peters, are on record as overwhelmingly supporting the philosophy of financing public transportation infrastructure with private capital.
It's hard not to wonder, Moran said, whether there's a connection between the FTA's rejection of the project and the equity companies' quick reaction to it.
Wolf "said last week they're trying to force us to sell that road," Moran said. "And he's right. He's absolutely right."
That possibility frustrates some rail supporters, who note that one of the FTA's concerns about the project was the uncertainty of Dulles Toll Road revenue to pay for construction. The current proposal calls for the Metropolitan Washington Airports Authority, which is managing the project and also controls the toll road, to use toll receipts to pay for the bulk of the project's second phase, from Reston to the airport.
If toll road revenue isn't reliable under the airports authority's control, why would it be any better in private hands, wondered Virginia Transportation Secretary Pierce R. Homer.
"We continue to receive expressions of interest from the private sector about this corridor," Homer said. "They underscore the financial strength of the Dulles Toll Road and this corridor. However, we received four private-sector proposals in 2005. At the time, the airports authority had a lower cost of capital, which meant lower toll rates, as well as the management expertise to bring the rail project to completion. You simply can't take $900 million in federal funds out of this equation without causing somebody else to pay more."