november | 2016 | Bacon’s rebellion

Location of the Transform 66 project outside the ring road. Card credit: Virginia Department of Transportation

Transportation Secretary Aubrey Layne has argued forcefully that Virginia’s overhaul of the Public-Private Partnerships Act has saved $ 2.5 billion on Interstate 66.

On November 3, Gov. Terry McAuliffe boldly claimed his administration saved taxpayers $ 2.5 billion on the Interstate 66-outside-the-Beltway project thanks to 2015 reforms to the Public Partnerships Act -private (P3).

The original proposal presented to the Commonwealth by the former Office of Transportation Public-Private Partnerships said the state should subsidize the construction of 25 miles of general-purpose and expressways between $ 900 million and $ 1 billion – and the concessionaire would not contribute anything towards bus transit or future corridor improvements.

At the end of a revised 16-month procurement process, the state entered into a 50-year agreement with a consortium of Cintra, Meridiam, Ferrovial Agroman US and Allan Myers VA, Inc. Express Mobility Partners agreed to pay Virginie $ 500 million in advance, invest $ 800 million in transit operations and carry out $ 350 million in future corridor upgrades.

Improvements to the I-66 corridor, both inside and outside the ring road, are the McAuliffe administration’s signature transportation projects. After cleaning up the fallout from the Norfolk-Portsmouth Midtown-Downtown tunnel project and the botched US 460 connector, the pressure was on Transport Secretary Aubrey Layne, to get the correct I-66. While some aspects of the projects inside and outside the Beltway have been controversial, Layne can reasonably say one thing: He saved the state $ 2.5 billion.

PPP projects have not always worked well in Virginia, as Layne knows better than anyone. I wondered how it was possible to negotiate a deal that, on the surface at least, was so vastly superior to what the state had envisioned. I recently sat down with Layne and Assistant Transportation Secretary Nick Donohue to hear their story.

The starting point for understanding the McAuliffe administration’s approach to P3s is the continuum of risks associated with highway megaprojects. One approach, as the Virginia Department of Transportation (VDOT) has done for decades, is to assume the risk of everything: cost overruns, construction delays, operation and maintenance, and funding risk, in particular, that the toll revenues will be enough to pay. bond bonds.

During the previous administration’s flirtation with PPPs, a craze for the concept of “privatization” prompted the state to rid itself of all risks to the private sector. (Layne, a Republican, rarely mentions the McDonnell administration by name.) But Layne found that no more acceptable than keeping a project in-house with VDOT regardless of the cost. Instead, Layne started out with no preconceptions about how best to structure a deal. Getting the best deal depended on the situation, on knowing what risks the state was comfortable taking and what risks it was comfortable taking.

Back to the drawing board. At the start of administration in 2014, the former P3 office presented a proposal for the I-66 to be submitted to the Commonwealth Transportation Board (CTB) for approval. “The P3 office had no idea what they were doing,” says Layne. “It was embarrassing.”

At the risk of delaying a high-priority project, Layne boosted the deal. He did not present it to the CTB. Rather, he waited for the General Assembly to enact major reforms to the P3 process so that he could start over. The problem with the old process, he says, was that after soliciting proposals, VDOT selected a private consortium to negotiate with. Under the pretext of protecting the partner’s proprietary information, VDOT conducted the negotiations out of the public eye. When a product emerged, the CTB had no choice but to vote for or against it without amendment. “I don’t know how anyone could have set up the process to be more biased,” says Layne.

Before soliciting proposals from the private sector, Layne determined the essential public policy elements that the project should have. In other PPPs, the state has allowed the private party to undermine public interest protections, by refusing to fund public transport in the transport corridor, for example, or by penalizing the state for investing in projects that could drain traffic from toll revenues.

Layne then wrote a condition sheet based on the “must have” attributes and then asked VDOT to determine how much it would cost to deliver the project in-house. Just taking this obvious step would have saved $ 1.5 billion. The 2015 “public option” cost about $ 500 million less than the previous private sector proposal, in large part due to the state’s ability to leverage tax-exempt public funding. continue reading

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