U.S. Lending $1.2B to Fund P3 HOV Deal for Capital Beltway

WASHINGTON — The U.S. Department of Transportation will lend about $1.2 billion to Transurban and Fluor Enterprises to help finance a $1.9 billion public-private partnership deal to build 14 miles of high-occupancy toll lanes on the traffic-choked Capital Beltway in Virginia, the DOT said last week. “By embracing the powerful mix of technology and private sector resources and expertise, thousands of drivers currently stuck in traffic every day will enjoy the freedom of free-flowing lanes on one of the nation’s most congested highways,” Transportation Secretary Mary Peters said in statement.Under the DOT financing portion of the deal, Virginia will issue $587 million of tax-exempt private-activity bonds on behalf of the project. The PABs, which are expected to be issued in March, will be part of a program administered by the DOT, under transportation legislation enacted in 2005, that allows private companies building road or freight transfer projects to borrow up to $15 billion of PABs. To date, the department has authorized $3 billion of PABs under the program and expects to green light the issuance of billions more in the coming months.The agency also will provide a $588 million direct loan under a credit assistance program formally known as the Transportation Infrastructure Finance and Innovation Act. TIFIA offers direct loans, loan guarantees, and lines of credit — instead of traditional grants — for as much as 33% of the cost of surface transportation projects with a price tag of at least $50 million.The private firms, which will also operate, maintain, and collect the tolls from the HOT lanes for 75 years after construction, are responsible for repaying the PABs and the TIFIA loan. The firms will also provide $350 million for the project.Another $409 million of the $1.9 billion cost will be provided by the state, according to the Virginia Department of Transportation.Under the plan, Transurban and Fluor will add two lanes on either side of the existing eight-lane beltway — also known as Interstate 495 — between the Dulles Toll Road interchange and Springfield, where I-95 and I-395 connect with the beltway. The center four lanes of the new 12-lane, 14-mile stretch of the highway will be converted to HOT lanes. The other eight lanes will remain free. Construction is expected to start in the spring and last five years.“This is a landmark project in the evolution of public-private partnerships in the U.S.,” said Michael Kulper, Transurban’s executive vice president for North America. Working together, the public and private sectors will deliver one of the most advanced toll roads in the country. Many other cities are considering HOT lanes similar to the Capital Beltway project. Transurban looks forward to the opportunity to work in partnership with other governments on innovative, sustainable solutions to their transportation needs.” VDOT commissioner David S. Ekern said: “With this partnership, we will deliver the first-ever dedicated HOV and transit services to the Capital Beltway and address congestion on Virginia’s busiest highway. Even as the world’s financial markets are struggling with ... uncertainties, financial close [of the deal] has been accomplished with our federal and private funding partners. This agreement will serve as a national model.”