To the editors:
The Post’s recent article on the Midtown Tunnel project is one-sided, and wrong on several counts. The increase in Virginia’s contribution to the $2.1 billion project from $308 million to $581 million was done at the state’s behest in order to reduce the tolls on users. There has been no cost overrun, and the $2.1 billion project is on schedule to open in 2017.
While it is true that Virginia’s contribution is more than twice the $220 million equity contribution from Macquarie and Skanska, the funds at risk for the project are $1.41 billion. This includes $675 million in bonds and $463 million in federal loans that were premised on careful review of the project, as well as an additional $51 million required from Macquarie and Skanska if needed (the contingent equity). The funds at risk are 240% of the state’s contribution. Moreover, the state bears zero risk if the project fails – no risk of paying for cost overruns, and no risk if toll revenues fall short of expectations.
The article states incorrectly that Skanska and Macquarie are “entitled to large government payouts if Virginia builds or expands other bridges and tunnels nearby.” First, it is not an entitlement. Second, it is not a payout to Macquarie and Skanska. If the government builds a competing facility, the project company, Elizabeth River Crossings OpCo LLC, has the right on behalf of the U.S. Department of Transportation and the bondholders (the lenders to the project), as well as Macquarie and Skanska, to demonstrate that their revenues have been impaired by the competing project. There is compensation only if harm can be proved – no harm, no compensation.
Think about it. Would you lend money or invest in a toll project if the government had the right to build a competing free facility right next door?
Public-private partnerships (PPPs) such as this are not a panacea. Every government has a right – and indeed a responsibility – to look hard at its contractual agreements to find where the public interest can be served most effectively and efficiently. That includes infrastructure contracts.
PPPs have the potential to improve the value America gets for our limited infrastructure dollars. The benefits of PPPs include on-time, on-budget delivery along with high standards of maintenance and operation extending over decades. Since 2011, more than $10 billion in highway and transit projects in Virginia and across the country have been delivered on time and on budget by using PPPs.
Our Center for Transportation Public-Private Partnership Policy at George Mason University is dedicated to advancing objective consideration of PPPs for infrastructure renewal and development. We are supported by contributions from private industry and the Commonwealth of Virginia.
Thank you,
Jonathan Gifford, Professor
Director, Center for Transportation Public-Private Partnership Policy
School of Policy, Government, and International Affairs
George Mason University
To view the original article in its entirety, please click here https://www.washingtonpost.com/local/trafficandcommuting/agreement-for-new-submerged-tunnel-in-norfolk-leaves-virginia-underwater/2015/10/17/f03b68f4-566b-11e5-8bb1-b488d231bba2_story.html