Letting the Market Drive Transportation

"This is all about making money," said Frank Busalacchi, the Wisconsin transportation secretary and a member of a congressionally chartered commission that last year studied transportation funding and supported raising the gas tax. "The financiers, bankers, people coming in -- the foreign dollars coming in and buying infrastructure in this country that American people put down."

For Macquarie, the Dulles Toll Road has enormous appeal. The company approached Virginia in 2005 about leasing the road, pocketing motorist fees and financing the rail extension to the airport. But Virginia officials had other ideas. They wanted to keep the road in the hands of a public entity -- the Metropolitan Washington Airports Authority -- and let it build the rail line.

According to four former senior DOT officials, Virginia's decision upset Duvall and then-DOT chief of staff John A. Flaherty. "They went ballistic," one of the officials said. "[They] wanted that to be their pet project in the nation's capital. Tyler would mention that frequently . . . that it would be better for the project to go to Macquarie."

Duvall said the DOT is not trying to steer Virginia toward a public-private partnership for Dulles rail and that Flaherty was angered because the state did not notify the department, not by the substance of its decision. "My interest in this was solely to make sure the taxpayer was getting the right deal," he said.

When the DOT said in January that it would not fund the rail project, Macquarie repeated its interest to Virginia officials, as did another private equity firm, the Carlyle Group, which created a $1.5 billion fund to invest in U.S. infrastructure and has hired Flaherty to head it.

A final decision on the Dulles extension is on hold. But Duvall and his colleagues have ignited a national argument -- the first real debate about how to fund transportation in 50 years.

"This is as big as it gets in terms of policy changes in America," Duvall said. "It's clear that we've ruffled feathers -- right, left and center -- in talking about new approaches. That said, I think the public is really dying for new ways to do things. . . . The genie is somewhat out of the bottle."