WASHINGTON — The Virginia Supreme Court
The court's decision overturned a Portsmouth circuit court ruling from earlier this year that found that the tolls for the project would be unconstitutional taxes and that Virginia's Public-Private Transportation Act gives VDOT "unfettered power" to set the tolls.
The Elizabeth River public-private partnership is designed to ease congestion in the Hampton Roads area of Virginia. It includes construction of a new tube for the midtown tunnel between Portsmouth and Norfolk, improvements to the existing tube of the midtown tunnel and the nearby downtown tunnel, and the creation of a freeway connection that links the access routes to the tunnels.
The project is estimated to cost a total of about $2.04 billion. Financing for it includes $272 million in equity from a private partner, Elizabeth River Crossings OPCO, LLC; about $420 million from VDOT; $664 million in private-activity bonds from the Virginia Small Business Finance Authority; and a $422 million federal loan under the Transportation Infrastructure Finance and Innovation Act. Debt is to be repaid, and ERC is expected to get a return on its investment, through revenue from tolls on the midtown and downtown tunnels as well as the freeway connection. Tolling is to begin in February 2014, and the new tunnel is expected to be completed in July 2016.
Lead plaintiff Danny Meeks and other Portsmouth residents and downtown tunnel users filed a lawsuit against VDOT and ERC in July 2012. In May, a Portsmouth circuit court judge sided with the motorists.
The Virginia Supreme Court, however, found the lower court made a mistake by determining the tolls were taxes. Instead, it said, the tolls are user fees because: the users pay the tolls in exchanges for a benefit not shared by the general public; the government is not forcing motorists to pay the tolls or accept the benefits of the facilities part of the project, and; the tolls will be used to fund the project and not to raise general revenues.
The court also determined the General Assembly's delegation of power to VDOT to impose and set the rate of the tolls under the PPTA was done with "constitutionally sufficient policies and standards." ERC's role in setting the tolls under its agreement with VDOT is also constitutional because VDOT only empowered ERC to assist it in setting the tolls rather than delegating legislative power to the private partner, the high court judges said.
The motorists argued that if the state Supreme Court did not affirm the circuit court's opinion for the reasons laid out by that judge, it should do so because the 58-year agreement between VDOT and ERC violates the state's police power. However, the state Supreme Court disagreed with this claim.
"I'm very disappointed," said Patrick McSweeney, a lawyer for the motorists. He said the decision did not address the motorists' argument that authorizing a rate of return for a private company can only be done by the state corporation commission. He also thought there were contradictions in the court's argument about the tolls not being taxes.
The motorists cannot appeal the state Supreme Court decision to another court, McSweeney said.
Virginia's governor and a lawyer for ERC said in statements that they viewed Thursday's ruling as a victory for P3s.
"Today's ruling confirms what my administration has been saying from the beginning: Virginia's Public-Private Transportation Act (PPTA) is a critical tool in addressing some of our toughest transportation challenges," Virginia Gov. Bob McDonnell said in a statement. "By attracting private sector capital and innovation and ensuring projects are completed in a timely, efficient, and cost-effective manner, our ability to partner with the private sector makes otherwise impossible projects doable."
"A win for the Meeks plaintiffs would have deprived state and municipal governments of a key financing mechanism, hobbled Virginia's P3 law, and spawned copy-cat challenges to P3 laws in other states," said Stuart Raphael, lead counsel for ERC. "The Supreme Court of Virginia got it right on the law and also avoided the very bad consequences that would have resulted if the trial court's ruling had not been reversed."
