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Virginia picks new partner to build I-66 HOT lanes

Virginia Gov. Terry McAuliffe listens this summer as Transportation Secretary Aubrey Layne answers a question at the groundbreaking for the inside the Beltway portion of the state’s I-66 HOT lanes program. (Robert Thomson/The Washington Post)

Virginia Gov. Terry McAuliffe announced Thursday that the state has picked a private partner to construct and operate HOT lanes on Interstate 66 outside the Capital Beltway, and for the first time in Northern Virginia, the Transurban company is not part of the deal.

The winning group is called I-66 Express Mobility Partners, which consists of the Cintra, Meridiam, Ferrovial and Allan Myers companies. The unsuccessful bidder was Express Partners, formed by the Transurban and Skanska companies.

The state’s decision continues Virginia’s aggressive expansion of its HOT lanes network, with public-private partnerships as the primary tool for creating new highway infrastructure. But it expands the number of players involved in building and operating the system.

Transurban was part of the consortium that built the 495 Express Lanes, the first high-occupancy toll lanes in the Washington region, as well as the 95 Express Lanes. It’s preparing to extend the I-95 HOT lanes both north and south. Meanwhile, the state itself is setting up the inside-the-Beltway portion of the I-66 HOT lanes, scheduled to begin operating next summer.

After the governor’s announcement, Transurban issued a statement: “While disappointed with the outcome, Transurban remains committed to its partnership with the Virginia Department of Transportation and to travelers in the Commonwealth. We look forward to continuing our work together on improving transportation infrastructure in Virginia and to serving our joint customers.”

Virginia launches latest HOT lanes project on I-66 inside the Beltway

Despite the selection of a different team for the I-66 HOT lanes, the style of operation will be familiar to commuters. The express lanes, scheduled to start construction in 2017, will use all-electronic tolling. Tolls will rise or fall with the level of traffic in the lanes to maintain a reliable speed of 55 mph.

The McAuliffe administration used a different approach in setting up the requirements for this contract, designed to correct what administration officials saw as a flawed process on some of the state’s other public-private transportation projects, including the 95 Express Lanes.

Officials under the direction of Transportation Secretary Aubrey Layne first established what it would cost to have the state take responsibility for the entire project, relying on public financing. Having set that benchmark, the administration then asked private companies if they could do better.

The two private consortia submitted proposals Oct. 11 to design, build, finance, operate and maintain the express lanes outside the Beltway. Both proposals were deemed compliant with the specifications for the project. The state then began separate examinations of each bid’s technical proposals and their financial plans.

“Both teams that submitted bids for this project met the criteria the Commonwealth set for it,” McAuliffe said in a statement announcing the selection, “but Express Mobility Partners’ proposal was the best for Virginia from both a technical and financial standpoint.”

Layne said the most striking difference in the bids was on the financial side. Mobility Partners offered to pay the state transportation fund a $500 million upfront concession fee that could be spent on other transportation programs in the corridor.

“We could get to zero,” Layne said, referring to the potential for reducing state investment in the project, “but we could never write ourselves a check.”

There is no upfront public funding involved in the winning bid. Layne said the other bid would have required a public subsidy as part of the finance plan. Mobility Partners will put up $1.5 billion in private equity in exchange for a long-term lease that will allow it to collect the toll revenue during the 50-year lease.

Layne said an important part of the deal is the $800 million in financing that will become available over the next half century to support travel options such as carpooling and commuter buses that allow travelers to leave their cars behind for the trip on I-66. Also included are improvements for bikers and walkers. In addition, Express Mobility Partners is to provide $350 million over the same term to the Northern Virginia Transportation Authority in support of other projects to reduce congestion in the I-66 corridor.

Of the overall plan, Layne said: “I can look in the taxpayer’s eye and say we’ve gotten the best deal possible.”

But he acknowledged that aspects of the express lanes plan, particularly the choice of a new private partner, is likely to lead to debate. “There’s going to be lots of screaming and yelling over the next few weeks,” he said. “The apple cart has been upset.”

Layne said Cintra has international experience operating express lanes, including systems in the United States and Canada. He expressed pride in the results of the I-66 deal, but also said he believed the state had now created a better model for future public-private partnership deals by making the planning more transparent for the public and by assessing the value of the private bids in comparison to the option of having the state do the whole job itself.

“I don’t expect every deal will be like this,” he said, “but this is how you can make decisions.”

Layne and other administration officials are unhappy with the results of some earlier infrastructure deals, particularly those for tunnel tolling in Hampton Roads and the 95 Express Lanes projects. They do not criticize the private partners, but rather the state’s process, which they say did not result in the best deals for taxpayers and highway users. Also, they said, the deals limited the state’s flexibility to make other transportation plans in those corridors.

Some Northern Virginians who supported the 95 Express Lanes concept in its early previews were disappointed that the final product did not include financing for a robust system of commuter buses, which would have moved more people while providing another travel option that did not include paying tolls. The McAuliffe administration officials have made alternative travel options a key part of their plans for I-66, both inside and outside the Beltway, and for the northern extension of the 95 Express lanes up I-395 to the D.C. line.

The I-66 project between the Beltway and Gainesville will create two HOT lanes and three regular lanes in each direction. The state expects the work to be done by mid-2022, according to the governor’s announcement. In the next steps before construction, the Virginia Department of Transportation plans to sign a comprehensive agreement with Mobility Partners in early December, and reach a final closing of the financial arrangements in mid-2017. Until the deal is final, Layne said, the state will retain the option of publicly financing the project.