Yet, Australian Company TransUrban closes on another toll deal for I-95, while looking for a taxpayer bailout!
By Terri Hall l August 8, 2012
Pocahontas Pkwy in Richmond, Virginia/TIMES-DISPATCH/Joe Mahoney
There’s a gaping disconnect between economic reality and the endless push for tolling all new capacity to our roadways, which is demonstrated most recently by the Australian infrastructure and tolling firm TransUrban that’s losing its shirt on the Pocahontas Parkway toll road in southern Virginia, while closing on another public-private partnership (P3) for added toll lanes on I-95 in northern Virginia.
TransUrban describes Pocahontas 895 as an “8.8 mile cash and fully electronic toll road with an elevated bridge crossing the James River” southeast of Richmond, Virginia linking I-95 at Route 150 with I-295 to create the southern bypass for the city.
Originally built by the state of Virginia and financed with bonds issued by a non-profit corporation in the event it couldn’t pay for itself, the road opened in 2002. The inevitable happened, however, and the state of Virginia awarded the Pocahontas Pkwy to TransUrban in 2006 granting it a 99-year lease. To date, the Pocahontas Pkwy has also become the most expensive toll road in the Richmond area. You guessed it, the taxpayer ends up paying through the nose for toll roads when it would be much cheaper to build these roads on a pay-as-you-go basis, if only the politicians had the courage to ‘index and cap’ the only true transportation user fee that we have and that’s the one we pay for at the gas pump.
Tolls are not user fees, they’re taxes!
On June 30, at the end of its fiscal year, TransUrban wrote down $138.1 million of its $548 million investment in the Pocahontas Pkwy located in Heinrico County. Due to its severe losses on that project, the company’s net profits dropped 51% last year. Yet onward it marches to ink another P3 on I-95 in northern Virginia. Most businesses would cut their losses and run. But we’ve seen this pattern emerge in public infrastructure toll projects time and again, because P3s are NOT free market, they’re government-sanctioned monopolies, where the taxpayer subsidizes the private operator’s losses – in effect, corporate losses are socialized. Yup, you’re absolutely right, that’s SOCIALISM wearing the mask of the FREE MARKET.
On the I-95 deal, TransUrban is looking for a federal TIFIA loan for a bailout of the projected losses using public money. On a similar deal for toll express lanes along I-495, also in northern Virginia, TransUrban only brought 75% of the money to the table, with taxpayers bailing out the other 25% with public money. And that’s just for starters. There are other ways the taxpayers will bailout these P3 toll projects. Though the private companies tout they’re taking all the risk if the traffic doesn’t show up, that’s simply not the case – they get public subsidies on the front end for construction and taxpayer-backed profit guarantees on the back end.
Like several P3s inked in Texas, where this practice got started, non-compete clauses and other provisions in these lengthy, very complex contracts force taxpayers to reimburse the private entities for any losses in toll revenues if the state builds ‘competing’ infrastructure that causes a loss in toll profits. Other times, the private toll operators, with the help of state highway departments, can manipulate the system using electronic signage by lowering speed limits on the free routes and increasing speed limits on the toll lanes in order to drive more traffic to the tollway. In short, there’s a host of contrived ways these private toll operators can ensure they earn a return on their investment at taxpayer expense.
Eminent domain for economic development
The Texas Department of Transportation released a Request for Information on June 22 seeking partners to develop ‘ancillary facilities’ on its SH 130 tollway. Ancillary facilities on this captive audience toll road include “a gas station, garage, store, hotel, restaurant, railroad tracks, utilities and telecommunications facilities and equipment.” This is the same land grab the Trans-Texas Corridor was modeled after and that Texans rejected outright.
So if the state is taking land by using eminent domain in the name of a ‘public use’ and leasing it out to private developers for commercial gain for a public toll road then there’s nothing to stop these private entities from doing the same on a privatized P3 toll project.
There’s not much hope of traditional, commercial economic development alongside these tollways, if the state gets into the land development business and grants a monopoly to a single developer in long-term leases that can range from 50-99 years. This has local government implications, too, since the land alongside our highways won’t be able to be developed since it can’t compete with the state-sanctioned monopoly inside the tollway. So neither property owners nor the local government will see an increase in land values or economic development. P3s already involve many tollway developer tax benefits thanks to the recent passage of the federal highway bill MAP-21, and it’s likely these commercial enterprises inside tollways will be exempted from paying property taxes since they’re still considered ‘public’ roads. So this, too, is a form of a taxpayer subsidy for private profits, as well as eminent domain abuse.
When the government picks the winners and losers of who gets to develop what once was private property, not only do we lose our property rights, these private toll entities gain monopolies on revenue generation through a variety of means to ensure they turn a profit – crony capitalism fast at work.
Ignoring economic reality
So private toll consortiums can defy sound fiscal principles of profit and loss and ignore the lack of financial viability of these P3 toll projects because they can lean on taxpayers to bail out their bad decisions.
TransUrban has made public statements pointing out that the Virginia I-495 toll project may NEVER turn a profit, or so the company says, as if it’s altruistically taking on incredible financial risk by providing these new toll lanes for the public. But no business can stay in business without making a profit, so it appears this is all propaganda to create good will over the coming taxation in the hands of a foreign corporation, not to mention the loss of state sovereignty over public infrastructure.
Since the taxpayers already bailed out one-quarter of the northern Virginia I-495 EZ-Pass toll lane project construction cost, count on all sorts of contractual obligations that ensure TransUrban won’t take all their losses on the chin. For instance, taxpayers will have to pay TransUrban for certain losses in toll revenues if too many carpoolers, who ride for free, use the lanes.
When it comes to P3s, we now know the devil is in the details and these private entities have armies of lawyers to ensure that even on deals they know aren’t financially viable, by getting cozy with government, they’ll always turn a profit thanks to taxpayers.
Terri Hall is the founder of Texans Uniting for Reform and Freedom (TURF), which defends against eminent domain abuse and promotes non-toll transportation solutions. She’s a home school mother of eight turned citizen activist. Ms. Hall is also a contributor to