DALLAS — Virginia will use the $78 million it saved by terminating a public-private partnership for a $1.4 billion toll road to eliminate tolls on part of a privately built tunnel project in the Hampton Roads area when it opens to traffic in 2017.
Gov. Terry McAuliffe said the state will transfer the $78 million that had been set aside by Virginia Department of Transportation for the 55-mile Commonwealth Connector project in southeastern Virginia to Elizabeth River Crossings OPCO LLC, which is building the $2.1 billion P3 project.
The Hampton Roads project includes a new two-lane midtown tunnel, rehabilitation of the existing midtown and downtown tunnels beneath the Elizabeth River and an extension of the Martin Luther King Freeway to provide access to I-264. The tunnels link the cities of Portsmouth and Norfolk.
The $78 million transfer will buy out the tolls on the highway link, McAuliffe said. The MLK extension is slated for completion in December 2016.
Tolls on the extension were to be 50 cents for vehicles using the tunnels and $1 for others. The extension revenue was expected to make up about 5% of the project's annual tolls.
The private partners also agreed to pay $500,000 per year for 10 years to a nonprofit organization that will issue $5 million of rebates for the tolls paid by low-income residents who must use the tunnels to get to work.
"After a great deal of work, we now have a plan in place to ease the financial pressure of tolling," McAuliffe said.
"We have worked with our private sector partner to ensure there will be no tolls on the MLK extension," he said. "Imposing a toll to finance the improvements would have placed an unfair burden on the citizens of Portsmouth."
The agreement includes a $2,200 limit on fees and civil penalties for first-time toll violators, similar to what was recently negotiated by the state with operators of the I-495 express lanes in northern Virginia. State law allows fines of up to $21,300 for toll scofflaws.
ERC is financing and building the highway extension as well as the work on the tunnels. They will operate and maintain the tunnels and roadway under a concession agreement signed in 2012 that extends to 2070. The state will maintain ownership of the infrastructure and will oversee the P3's activities.
The private partnership includes Skanska Infrastructure Development and Macquarie Group.
The $78 million transfer brings the state's total contribution to $582 million for the project, including two earlier toll-reducing efforts.
Former Gov. Bob McDonnell gave $113 million to the project sponsors in 2012 to delay proposed higher tolls on the existing tunnels by 18 months.
The state has paid $391 million to reduce tolls, including $82.5 million promised by McAuliffe shortly after taking office, or lower tolls while the new, larger tunnel is under construction.
The reduced tolls will expire in 2017, when the tunnel fee can return to $1.84 per trip during peak hours for motorists with electronic tags. Annual toll increases of up to 3.5% are allowed under the concession agreement.
Funding for the Elizabeth River Crossings project also includes $675 million of private-activity bonds issued by the Virginia Small Business Finance Authority, a $463 million federal loan under the Transportation Infrastructure Finance and Innovation Act that was approved in 2012, $272 million in equity from the private partners, and $169 million of toll revenue during construction.
The 50-year-old midtown tunnel that is being replaced by the project is the most heavily traveled two-lane road east of the Mississippi, according to the private investors. Traffic through the tunnel has increased 600% since it was opened, they said.
