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Virginia Legislature Mulls P3 Oversight

JAN 9, 2013 4:45pm ET
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WASHINGTON — The Virginia General Assembly will decide whether to grant itself more oversight over privatizing the state’s port facilities, as well as several other bond-related questions, during the short legislative session that convened this week.

Delegate Bob Purkey, R-Virginia Beach, has filed bills addressing public-private partnerships for four sessions, but the topic has gained attention from other lawmakers now that the commonwealth appears poised to approve a P3 for the Port of Virginia sometime in the spring.

Port officials will select between proposals submitted by APM Terminals and a group headed by JPMorgan.

Under either proposal, the new private partner would pay the commonwealth for the right to operate the port and collect a share of the revenues generated from user fees.

The upfront concession payments to the port authority would help to cover debt service on more than $400 million of commonwealth port fund bonds and revenue bonds, though the JPMorgan plan explicitly denies that defeasing the outstanding debt would bring any meaningful benefit.

Purkey has said long-term privatization deals approaching 50 years in length, as the commonwealth is contemplating, do not provide fair value for the public assets.

Purkey’s House Bill 1334 would require the legislature to approve any change in port ownership, instead of allowing the governor and the Virginia Port Authority to make the decision, as is the case now.

If the bill becomes law, it would also require the governor to alert the General Assembly within 60 days of any unsolicited private-sector bids or proposals to lease the port.

Sen. Richard Black, a Republican from Leesburg in Northern Virginia, has filed an identical bill in the state Senate.

Black has said part of his motivation to support the legislation stems from watching the Dulles Toll Road, operated by the Metropolitan Washington Airports Authority, turn into a lightning rod for controversy.

Jackie Cromwell, program manager at the Virginia Office of Transportation Public-Private Partnerships, expressed support for legislative involvement in the public-private partnership process and said the commonwealth already makes extensive efforts to involve all stakeholders.

“We believe legislative involvement is an important element in the recipe for P3 success,” she said. “This is borne out by Virginia’s robust PPTA [Public-Private Transportation Act] legislation, political sponsorship, low political risk, a transparent procurement process, a predictable pipeline of deals and public sector capacity.”

But Cromwell also warned that creating obstacles to private investment could undermine Virginia’s ability to compete with other governments looking for private partners.

“We’re cognizant that Virginia is competing for business with 49 other states and numerous other countries,” she said. “We understand the private sector will evaluate potential risks and the likelihood projects will be awarded. Virginia is also aware that if political risk is too great, private sector investment in transportation will go elsewhere.”

If either bill becomes law, it would not take effect until July, after the the commonwealth is scheduled to make its decision on the current port proposals. Purkey’s bill has been referred to the House of Delegates Committee on Appropriations.

The Port of Virginia will not be the only major revenue and bonding question before the legislature this session.

Del. Roslyn Tyler, D-Jarratt, has filed a bill that would similarly grant the General Assembly oversight on another controversial issue: the tolling of Interstate 95.

Virginia was granted preliminary approval last year to toll I-95 as part of a federal pilot program, but the announcement generated immediate pushback from a variety of citizen advocates, industry lobbyists and local groups.

The toll revenues collected from a tolling plaza south of Petersburg could raise $155 million over five years, the Virginia Department of Transportation estimated.

That money would not affect any of the commonwealth’s existing bonds, but would free up some of its federal highway trust fund revenue to be spent on other highways in the state.

A group called No Toll Virginia I-95 has been outspoken in opposing the plan entirely.

The American Trucking Association has come out in opposition to the plan, as has the Mid-Atlantic branch of the American Automobile Association.

In October, several Virginia municipalities announced they had retained the law firm Kutak Rock LLP to represent them in fighting the tolls.

Those municipalities said they are concerned that the tolls would hurt local economies and disproportionately burden low-income minority populations near the toll plaza.

Tyler’s HB 1460 is awaiting referral to a committee.

Two other bills take differing approaches to boosting funding and bonding ability for the state’s roads.

One, filed by Sen. Kenneth Alexander, a Norfolk Democrat, would make gas subject to the commonwealth’s general 5% retail sales tax. The bill, SB 700, would also reduce the current fuels tax on gas and diesel to 12.5 cents per gallon from 17.5 cents per gallon.

The bill would also authorize $5 billion of bonds for use in highway construction and maintenance, specifying that about 70% of the revenue would benefit the heavily congested Northern Virginia and Hampton Roads areas, with around 30% of the new fuel revenue going for highway projects in the rest of the state.

HB 1677, filed by Del. Tim Hugo, R-Centreville, would repeal the fuel tax on regular gasoline and boost transportation with a 0.75% increase in the general sales tax.

That extra money would be dedicated to transportation, and current revenues transferred to the state transportation trust fund would double under Hugo’s legislation.

Gov. Bob McDonnell has also supported a similar plan.

McDonnell’s plan, revealed during the rollout of his budget amendment proposals and legislative agenda over the previous several weeks, would shift 0.25% of the sales tax to transportation while repealing the gas tax. It would also phase in a boost in the sales and use tax and an increase in the vehicle registration fee.

McDonnell and his secretary of transportation, Sean Connaughton, have worked actively to position Virginia at the forefront of P3 activity and tolling innovation.

Many transportation finance experts conside Virginia to be among the “big three” in P3 leadership, along with Florida and Texas.

The Republican Party controls the House of Delegates, while the parties split Senate control. Lieut. Gov. Bill Bolling, a Republican like McDonnell, can cast tiebreaking votes in the upper chamber.

The 2013 Virginia General Assembly is scheduled to be in session for only a month, since it is an odd-numbered year.

The assembly convenes for two months in even-numbered years, though shorter sessions can be extended if necessary. If the 2013 session is not extended, it will adjourn on Feb. 23.

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