BRADENTON, Fla. — A massive overhaul of Virginia’s transportation program will enable the state over the next three years to fund $4 billion of road, rail, and transit projects supported by increased bonding capacity and new financing programs.
The funding will also enable the state to advance major public-private partnership initiatives such as a new tunnel and related roadway improvements to relieve severe congestion in the Hampton Roads region.
In a ceremonial bill signing Monday, Gov. Bob McDonnell praised lawmakers for passing his package of bills that were designed to make the first major investment in the state’s transportation system in 20 years without raising taxes.
“For far too long, Virginians sat stuck in traffic while partisan politics put the brakes on progress. This year we put partisanship aside,” McDonnell said. “This common-sense legislation takes advantage of previously authorized and innovative new financing mechanisms at a time when interest rates and construction costs are at near historic lows and Virginians are in dire need of jobs.”
The legislation, which goes into effect July 1, will double the Virginia Department of Transportation’s budget over the next three years, said Jeffrey Southard, executive vice president of the Virginia Transportation Construction Alliance and a former VDOT assistant commissioner.
Southard called the funding component a critical step toward alleviating the 20% unemployment rate in the state’s construction industry.
“This is going to put a lot of people back to work,” he said. “It will be a huge boost to economic development, and it’s a great thing for the traveling public because there will be improved connectivity and safety.”
The bills make numerous changes in transportation laws and include four main components to the new funding strategies the state will employ.
The Commonwealth Transportation Board is now authorized to issue up to $1.1 billion of federal grant anticipation revenue vehicle bonds, or Garvees. Previously, the CTB could only issue federal reimbursement anticipation notes.
The General Assembly authorized the accelerated issuance of capital-project revenue bonds secured by a tax on vehicle insurance premiums, bringing the total amount that can be sold over the next three years to $1.8 billion.
A transportation infrastructure bank was created with an initial capitalization of about $283 million to be used for grants and low-interest loans for projects such as P3s. The governor’s ultimate goal is to provide $1 billion for the TIB.
Lawmakers also removed a $1 million cap on an existing program that allows municipalities to leverage their funds with a matching amount from VDOT. Lifting the cap will enable bigger projects to be completed.
Though there are ongoing discussions in Congress about budget cuts, Southard said he is not concerned about cuts that might impact the state’s ability to issue Garvees. “Obviously, if Congress took some drastic steps and VDOT’s federal funds were cut significantly, it could make a difference, but I don’t think anybody anticipates that happening,” he said.
According to state officials, more than 900 projects have been delayed due to the lack of transportation funding, including P3s such as the new tunnel between Norfolk and Portsmouth under the Elizabeth River, and related improvements in the Hampton Roads region.
VDOT has already selected a consortium called Elizabeth River Crossings to finance, design, construct, operate, and maintain the multi-modal project using a concession contract.
The consortium is headed by Skanska Infrastructure Development and the Macquarie Group and financial close on the project is anticipated in the coming months now that VDOT has funding to contribute.
The project includes a new two-lane tunnel under the Elizabeth River parallel to the existing Midtown Tunnel, which will provide increased capacity with two lanes of one-way traffic in each tunnel.
The project also calls for maintenance and safety upgrades on the existing Midtown and Downtown tunnels as well as nearby road and interchange improvements.
A VDOT official said the project is estimated to cost between $1.5 billion and $2 billion, and the length of the concession contract has yet to be negotiated though a 50-year term is being considered.
The plan of finance includes tolling the existing and new tunnels as well as potentially using private-activity bonds and a low-interest loan through the federal Transportation Infrastructure Finance Innovation Act.
Though this particular project has been planned for many years, Southard said the high cost of the proposed tolls necessary to support the financing plan has delayed its implementation. With passage of the legislation this year, VDOT can now provide a subsidy and lower the tolls, he added.
“It’s a project for which there hasn’t been [state] funding,” Southard said. “It’s a great example of the kind of projects that will be moving forward in the governor’s transportation plan.”
The Commonwealth Transportation Board plans to competitively price $600 million of capital project revenue bonds in May as part of the capacity available before the new legislation was approved.