Greater Greater Washington

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

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?

Steve Kattula is an architecture graduate student at Virginia Tech in Old Town Alexandria, and lives and works in Fairfax City. 

Comments

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very frustrating that VDOT never learned the old saying, "If it sounds too good to be true, it probably is..."

Just sad. I hope that Virginia doesn't lose too much money on the deal. However, my optimism is quite low at this point. Perhaps Virginia needs to learn its lesson the hard way. Just sad. Just like Maryland and the ICC, except with a much worse downside.

by Cavan on Nov 18, 2009 4:09 pm • linkreport

I wrote a letter to the Governor complaining strongly of the HOT lanes project scheduled for 95/395, as I had for the Beltway HOT project and got a letter back from Secretary of Transportation Pierce Homer full of fluff/canned response of how the HOT lanes would help Virginians etc, etc... He ignored every point I made, which has been brought up so well in this series. I can easily imagine him being on the take with Fluor.

by NikolasM on Nov 18, 2009 4:35 pm • linkreport

FAVORING additional highway capacity, I am again amazed how Virginia chooses a design maximizing expense and tree removal, rather then simply having added an additional GPU lane per direction to the far right, avoiding the wholesale Beltway reconstruction.

Alas, too many take the simplistic stance against ANY added highway capacity hence stunting the developement of highway design that is actualy better:

http://wwwtripwithinthebeltway.blogspot.com/search/label/Alexandria%20Orb

http://wwwtripwithinthebeltway.blogspot.com/2007/11/i-395-extension-superior-option.html

by Douglas A. Willinger on Nov 18, 2009 7:50 pm • linkreport

The Alexandria Orb, I think would have been very beneficial if it had been approved.

by Zac on Nov 18, 2009 10:35 pm • linkreport

Thanks!

Alas, it was the Alexandria City government that was the worst offender, with every "commission" -- except for the Route 1 interchange-Washington Street Urban Deck Stakeholder's Panel -- rubber stamping the 11th hour decision to reduce that deck from 1,100 to 200 feet.

Something very bad runs that town.

by Douglas A. Willinger on Nov 19, 2009 12:50 am • linkreport

Once the Beltway HOT lanes are open for business, I predict mass citizen outrage (particularly if there are additional cost overruns). But the larger question is, will the 95/395, I-66, Maryland Beltway, and I-270 "private" HOT lanes projects already be under construction by then? Will it be too late to re-write similarly bad contracts?

The 95/395 HOT lanes will be a huge test. If the public can actually be made aware, in a clear and concise way, of the realities of that contract, chances are the project will never happen. If public input dictates a fair, true "free market" contract and not corporatism, my guess is those lanes will not be profitable. That is my advise to those that are against them - for whatever reason. Particularly with McDonnell in Richmond, this to me seems to be a strong angle.

by stevek_fairfax on Nov 19, 2009 1:21 am • linkreport

Much of our infrastructure ... highways, mass transit, water works, sewers...has traditionally been a "loss leader" to enable either
a. the functioning of the economy of a city or nation
b. a means to an ends - such as building a streetcar line to the properties where developers were selling houses (where they would make there money).

When these companies propose to turn conventional wisdom on its head, the public should be FAR more suspicious than we were with this contract.

by stevek_fairfax on Nov 19, 2009 1:35 am • linkreport

One of my least favorite aspects of the Beltway project is rarely (ever?) mentioned in news: That is that Fluor has it in the contract that VDOT are forbidden from making improvements to other roads that could then "compete" for customers with the HOT Lanes. So, that means roads like Braddock, Columbia Pk, Route 50, Fairfax County Pkwy etc. cannot be improved without paying Fluor compensation

by shaun on Nov 19, 2009 2:47 pm • linkreport

Yep, same with the 95/395 agreement. Something like an 80 year noncompete clause. I hope that doesn't pertain to rail improvements...

by NikolasM on Nov 19, 2009 4:32 pm • linkreport

No rail, and no Fairfax County 'Parkway' grade seperation perhaps?!

Virgina has crappy government!

Such would be a further continuation of my experiances with the pathetically subserviant Alexandria City Council regarding the Alexandria Orn proposals and their plausible response of eliminating most of the then proposed Washington Street Urban Deck via outright lying akin to that of the WP's anti DC I-95 reactionaries as the Leveys):

http://wwwtripwithinthebeltway.blogspot.com/2007/02/what-happened-at-alexandria-city-hall.html

http://wwwtripwithinthebeltway.blogspot.com/2007/03/how-things-went-at-us-nati_117295465376800441.html

http://wwwtripwithinthebeltway.blogspot.com/2007/03/anti-freeway-dogmas-indifference.html

http://wwwtripwithinthebeltway.blogspot.com/2007/01/washington-post-lies-about-inside.html

by Douglas A. Willinger on Nov 19, 2009 5:23 pm • linkreport

Although I agree with most everything in this article, I don't agree that most Northern Virginians were unaware of the HOT Lanes project before it was built, and if they were, they obviously don't care enough about local issues to have much of a voice, in my opinion. This project has been in the works for almost a decade, which is far shorter than the Dulles Rail or ICC, but long enough that if it was going to be built anyway (something needs to happen...even if you hate car drivers, as many people who frequent these types of boards do), it might as well not be continually bogged down in citizen complaints in the way that ICC was. The ICC will be built now for a much higher price than it would have originally been, but I'm not sure the added benefits outweigh the cost. Of course in Maryland, infinite environmental reviews, citizen input, and labor practices make most large-scale construction projects terribly expensive. This works great in a small community like Arlington County, but is much harder at a regional level. Thank God the Interstate Highway System and Metro were built in years past, because both would be impossible to build now. At some point, the decision on these "mega projects" has to be left up to elected officials who have some balls because no one will ever be 100% happy with a project that they don't have complete control over.

I agree however, that there is a GREAT chance that the HOT Lanes will not work. What happens when there is an accident in the HOT Lanes. Refund??? What happens when the lights at the end of the HOT Lanes ramps cause backups onto the HOT Lanes or cause backups on Rt. 7, Rt. 29, etc.? If you save 2 minutes off your trip in the HOT Lanes but then have to sit at a light at the end of the HOT Lanes ramps to get on to Rt. 7, Rt. 29, Gallows Rd., etc., will you really end up saving time? I just think the Beltway in VA is too short for this project to really work well and this project will NEVER be expanded to Maryland. I am very pessimistic about it all, but yet, since VDOT has no money, they have no choice but to put it out to a private firm. If people hate toll roads they will have to accept a tax increase...which I think would end up costing most people less.

by xtr657 on Nov 20, 2009 8:07 am • linkreport

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