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Legislative witch hunt would scare off private investors in Virginia road projects
By Leonard C. Gilroy, AICP
Misguided opponents of the recent Dulles Greenway toll increase want the Virginia General Assembly to intervene. But a Greenway witch hunt would scare off private investors interested in financing badly needed road projects that the state cannot afford.
Private-sector investment in expanding and modernizing the commonwealth's road system has never been more critical. But a legislative crusade against the privately built and financed Greenway would signal a risky political climate in which private capital is not welcome. With innovative policy-makers in states such as Florida, Georgia and Texas opening their arms to private investment, there are plenty of other options for investors.
Given current efforts to advance private-sector financing for expanding the Capitol Beltway and Interstate 95/I-395 in Northern Virginia, as well as the Third Crossing Bridge-Tunnel and the rebuilding of Route 460 in Hampton Roads, there's a lot at stake for drivers across the commonwealth.
What's often lost in Greenway discussions are the basics. A popular misconception is that the Greenway can charge whatever tolls it chooses. This is false. The State Corporation Commission is responsible for approving or denying proposed Greenway toll rates, and it only does so after a detailed investigation of the operator's finances.
Another popular myth is that the Greenway owner is guaranteed a rate of return. In reality, SCC regulation allows, but does not guarantee, a return on investment. In fact, the Greenway has yet to turn a profit in 12 years of operation.
When the road opened in 1995, projected growth in eastern Loudoun had not yet materialized, and traffic volumes did not match projections. The Greenway defaulted, but a financial restructuring gave the project a new financial base (at considerable cost to the initial private investors). Then Loudoun boomed and since 2000, the operator has spent more than $50 million to add new lanes to accommodate increased demand.
Further, it has spent more than $40 million to upgrade nearby roads and bridges to improve Greenway access and traffic flow. In other words, the private operator has paid to improve non-tolled, public roads that Loudoun citizens benefit from, whether or not they actually use the Greenway.
The Greenway is also the only privately financed U.S. toll road that pays local property taxes, to the tune of more than $2 million annually. It also pays almost $750,000 per year to the State Police to service the road. All tallied, millions of Greenway dollars flow into public coffers every year.
To meet its rapidly rising debt-service obligations, the Greenway has two options: increase the number of daily users or increase tolls on a semi-regular basis. Since rush-hour Greenway traffic levels are limited by choked public feeder roads at either end, toll increases become the only feasible option to raise necessary revenues.
Tolls could be lower if state and local officials were to exempt the Greenway from property taxes and get serious about addressing congestion on its feeder roads, so that's where legislators should focus.
In the final equation, the Greenway would not even exist had private investors not taken on the tremendous financial risks to build it. Imagine traffic on Routes 7 and 28 today if the Greenway didn't exist and its nearly 60,000 daily customers were competing for scarce road space.
This is why private investors are so important — they're getting needed projects built that government cannot. While opponents want to make political hay out of Greenway tolls, the rest of us should understand that privately financed roads benefit everyone by providing new infrastructure to improve mobility and reduce congestion, something the public sector is proving itself increasingly unable to accomplish.
Leonard Gilroy is director of government reform at the Reason Foundation and senior fellow at the Thomas Jefferson Institute for Public Policy. An archive of Gilroy's work is here. Reason's transportation research and commentary is here.
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