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Without New Revenues, Virginia's Transportation Options Limited

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Virginia Gov. Bob McDonnell, third from left, cuts the ribbon for the 495 Express Lane.
Martin Di Caro
Virginia Gov. Bob McDonnell, third from left, cuts the ribbon for the 495 Express Lane.

Heralded as the Beltway's largest expansion, the 495 Express Lanes opened ceremoniously Tuesday morning as Gov. Bob McDonnell (R-Va.) cut the ribbon on the $2 billion project in Tyson's Corner. Lawmakers say the kind of public-private partnership that funded the project will become the norm, unless Virginia can find new ways to raise revenue.

Public-private partnership made 495 Expressway happen

"So many said that expanding the Beltway was just not a possible task given the multiple challenges," said O'Donnell. "And yet the private sector came up with this concept of a high occupancy toll lane."

The high-occupancy toll (HOT) lanes will actually open to traffic Nov. 17, with two new lines in each direction for 14 miles between the Dulles Toll Road and I-95 interchange in Fairfax County. Motorists must pay electronic tolls through EZ Pass that will be dynamically priced: the higher the traffic volume on the Express Lanes, the higher the toll.

As part of the public-private partnership, Virginia gets a $2 billion dollar road; Transurban receives the toll revenues for 75 years, as per its contract with the state. Virginia funded roughly one-fifth of the cost ($409 million); Transurban provided $1.5 billion, with considerable help from a $589 million federal loan through the TIFIA program.

New revenues needed for public financing

The use of public-private partnerships to complete massive transportation projects is raising questions about Virginia's lack of tax revenue and conservative debt capacity to build needed infrastructure. The state's gasoline tax of 17 cents per gallon hasn't been raised in 25 years; 85 percent of gas tax revenues are used for maintenance of existing roadways, according to Secretary of Transportation Sean Connaughton.

"When you look at projects that are growing in cost and complexity it is becoming more difficult for the public sector to be able to design, build, and finance them," Connaughton said.

When pressed on whether the Republican administration of Gov. McDonnell would ask the state legislature to raise the gas tax, Connaughton would not commit to a position. He did say gas tax revenues have been depleted by inflation and more efficient cars.

The gasoline tax's diminishing returns are not a reason to avoid raising it, according to Virginia Congressman Gerry Connolly (D-Va.).

"So long as the current administration in Richmond is unwilling to deal straightforwardly with the issue of declining revenue, we are going to starve the Commonwealth of any new infrastructure except for projects like this which are uniquely funded with massive amounts of federal aid," Connolly said, referring to the large federal loan secured by Fluor-Transurban.

Connolly said both Virginia and the federal government should raise their gas taxes and index them to inflation. The federal gas tax has remained at 18 cents per gallon since 1993.

If an attempt were to attempt to finance such a project by floating bonds without leveraging private equity, Connaughton said the state's debt capacity would not allow it.

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