Traffic

Corporate welfare and the Beltway HOT lanes, part 3: Don't worry until it's too late

by Steve Kattula   •   November 18, 2009 3:05 pm

Virginia's contract for the Beltway HOT lanes are not just far from free to taxpayers and even worse if people carpool. The structure of the deal ultimately minimizes public outrage until it's too late, saddling taxpayers with a high bill and no voice.

The contract gives Fluor/Transurban a "first right" monopolization on expansion of the Beltway if congestion dictates. This clause not only ensures room for further profit, but if the project renderings are correct, much room at the center of the beltway will be left for HOT lane expansion at the expense of the left shoulder of the regular beltway lanes.

Image from Virginia HOT Lanes.

However, the project benefits list ROW for emergency vehicles as an important amenity. With one less shoulder for vehicle break-downs, tow trucks & ambulances will certainly need that access.

But most troubling of all has been the lack of citizen involvement, particularly in response to these covert subsidies. The most apparent reaction to the entire project was against the destruction of trees (required for the widening) and how this would affect the local bird sanctuaries. Everyone should be concerned about wildlife habitats, but it's troubling for local democracy that something so obvious (trees will be cut down along the beltway to widen it) came as a complete surprise to locals. Most Northern Virginians were completely unaware of the VDOT "Megaproject" prior to construction, and this illustrates the problematic nature of complex contracts that promise free stuff.

When taxpayer dollars are (supposedly) not involved, citizens (and even politicians) retract from the process, especially from boring contractual details. "Why should I care, it's not my money?" Whereas the costly Silver Line extension, Mixing Bowl project, and Wilson Bridge brought about citizen involvement in droves, the supposedly free and complex, "black-box" nature of the HOT lanes deal served to discourage input and criticism. Despite VDOT following legally-mandated procedures for public input, the result was an opaque deal-making process, and a bad deal for Virginians.

Of the total $1.9 billion (and rising), Fluor-Transurban is contributing only $349 million in private equity. Meanwhile, the state is paying $409 million and the Federal Highway Administration is lending Fluor $585 million in low-interest loans and $586 million in subsidized bonds. Taxpayers are also on the hook every year for the next 40 years for the carpool fees charged to the state account.

When users complain about the tolls as they have in Maryland, state officials can largely avoid the blame for high toll rates as Fluor/Transurban will set them, not state officials. It's also a large public works project with lots of visible "shovels in the ground" that politicians can tack on their resumes. But beyond that, it's a financially risky proposition with pennies of savings for a transportation solution that citizens are not enthusiastic about.

The up-front and back-door subsidies, beyond providing the right-of-way for free, reveals a fundamental problem with the business model. The idea that the private company would build a toll road on donated land at no construction cost to the state did not work, and probably cannot work. The deal was proposed as a public/private partnership, but it ended up as corporate welfare (regardless of how the VDOT website describes it). And in a weird, probably unintentional way, the community outrage over the high tolls has served as a red herring to distract citizens from hidden fees they have paid and will pay, regardless of if they use the road or not. The public dole that private industry requires for this deal to make a profit should serve as a proverbial canary in the coal mine for other proposed HOT lane projects.

With regards to elected officials, the deal points to the extreme imbalance of what Northern Virginians pay compared to tax dollars received back. Local politicians have been ever more tempted to take what they can get, even if the deal isn't great. The evolving nature of the HOT lanes deal was at first too good to be true. And the temptation of this free bacon to deliver to the local constituency was too much.

It remains to be seen if there will be any further welfare requests. But with the cards now on the table, one must ask what was wrong with the original estimates? Why the promise they could do the project on a totally private basis, followed by the late-in-the-game change? Why did politicians, VDOT, The Washington Post, and the public believe the almost magic promises, and why was there so little reaction when the nature of the project funding changed, but the reward mechanism to the private contractor did not?

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