WASHINGTON — Virginia's new rules for public-private partnerships in transportation projects will remove the mystery from the selection process and foster more competition in the state, the state's Transportation Secretary Aubrey Layne said in a keynote speech Sunday at The Bond Buyer's Transportation and P3 Conference.
The new P3 implementation guidelines adopted last week increase the oversight authority of the Commonwealth Transportation Board and create a steering panel of board members and key legislative leaders to review P3 proposals and applications.
"These rules will remove some of the political whim out of transportation decision-making," Layne said. "We don't have and never will have enough money to do everything, so picking the right projects will be important."
The biggest factor in picking the right projects is an accurate assessment and understanding of the risks involved and how those risks are managed and allocated between the public and private partners, he said.
"We have transportation challenges in all parts of the Commonwealth," Layne said. "Transportation is a means to an end, and all modes must be considered in searching for a solution."
Layne said he would like to see the state's Office of Transportation Public-Private Partnerships expanded to include the use of P3s in public buildings and other applications.
"I'm going to recommend that to Gov. [Terry] McAuliffe," he said. "Our P3 agency should not be restricted to just transportation."
There is some discussion of providing annual availability payments to private partners in transportation projects rather than the conventional revenue-based arrangements, Layne said.
"In light of the political atmosphere in Virginia that is likely not going to happen for a few years, but maybe someday," he said.
J. Douglas Koelemay, director of Virginia's P3 office, said the new rules were developed over six months. The P3 manual was last revised in 2012, he said.
"I think they are going to work very well," Koelemay said. "It will give our citizens a clear understanding of the risks involved and how these projects will deliver a public benefit."
The review panel will include chairmen of the state House and Senate transportation committees and a representative from the Office of State Finance.
"We want to engage the General Assembly early in the process, but the lawmakers told us they don't want to have the final 'go-no go' decision," Koelemay said. "They felt that would add at least the perception of a political dimension to the selection process."
Transportation spending in Virginia is up due to a 2013 law that eliminated the state's motor fuels tax of 17.5 cents a gallon in favor of a 3.5% sales tax on the wholesale price of gasoline and 6% on diesel fuel, Layne said. Additional taxes, including an extra 0.7% general sales tax, are levied in northern Virginia and the Hampton Roads area to fund projects in those areas.
Funding is not as robust as expected because of falling gasoline prices, he noted, requiring some belt-tightening.
"We've had to cut $1.2 billion out of our six-year transportation program since January," Layne said.
The state will issue $300 million of capital project revenue bonds by the end of 2014, Layne said. The 2007 General Assembly authorized up to $3.28 billion of the bonds, of which $1.2 billion remain unissued.
