The Virginia Department of Transportation and the Elizabeth River tunnels' private partner are asking the Virginia Supreme Court to reverse a lower court's ruling that planned tolls for the project and provisions of the state's transportation P3 law are unconstitutional.
"[The ruling] calls into question the validity of numerous similar arrangements involving roadway user fees in [the Public-Private Transportation Act of 1995] projects serving other areas of the commonwealth, and casts doubt on the commonwealth's ability to meet the transportation needs of its citizens for decades to come," VDOT said in a brief filed ahead of oral arguments before the high court in September.
"The trial court's ruling jeopardizes numerous P3 projects and conflicts with toll-setting statutes used for the past 167 years," the company, Elizabeth River Crossings OPCO, LLC, wrote in a separate brief.
A Portsmouth circuit court judge in May sided with motorists who sued over the P3 in the populated Hampton Roads area of Virginia, ruling that tolls backing the tunnel project would be unconstitutional taxes and that the PPTA unconstitutionally gives the Virginia Department of Transportation "unfettered power" to set toll rates.
In addition to asking the state supreme court to reverse the lower court's ruling, VDOT and ERC want the commonwealth's supreme court to dismiss the lawsuit.
The Elizabeth River project 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 the project includes $272 in equity from ERC, 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 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 and the freeway connection. Tolling is to begin in February 2014, and the new tunnel is expected to be completed in July 2016.
In court documents, VDOT and ERC said that the tolls are user fees and not taxes that would raise money for unrelated purposes.
The motorists in the lawsuit are arguing that users of the downtown tunnel will be paying for construction of the other segments of the project, and the different components of the project do not warrant being called a "single facility."
The circuit court judge ruled that the project components were bundled solely to produce revenue. Since taxes have to be enacted by the Virginia General Assembly, and the toll rates part of the P3 are set by VDOT, the tolls are unconstitutional, according to the motorists.
But VDOT and ERC are arguing in their briefs that the segments of the project are interrelated, and people who use one segment of the project will benefit from improvements to all three segments. They also told the court that established Virginia law allows for the tolling of existing facilities to fund new and related project segments.
VDOT also argues that the tolls are not taxes because they charge motorists to engage in a voluntary activity, though the motorists dispute that using the tunnels is optional.
Additionally, VDOT and ERC dispute the circuit court's finding that the General Assembly gave VDOT too much free reign to set the amount of tolls under the PPTA. They claim the law sets forth extensive standards and safeguards that provide adequate guidance for VDOT.
The motorists dispute that any statute specifically serves as a guide for the amount of the tolls. They also argue that Virginia's transportation P3 law does not provide enough guidance on the amount of tolls VDOT and that ERC can set and the rate of return on its investment, in part because the tolls are not self-limiting like in traditional revenue bond financing.
If the Virginia Supreme Court affirms the circuit court opinion and upholds its decision that the tolling provisions of the PPTA are unconstitutional, the Elizabeth River tunnel project and other P3s could be at risk, ERC argues. Other laws involving P3s and tolls also could be invalidated.
A friend-of-the-court brief jointly filed by the National Council of State Legislatures and the American Road and Transportation Builders Association noted that Virginia has been a leader in developing transportation projects through P3s. If the state supreme court affirms the lower court's ruling, it could undermine existing P3 laws in other states and provide obstacles for other state legislatures interested in considering P3 use, the brief argues.
Another friend-of-the-court brief, filed by Northern Virginia's Fairfax County, argues that the circuit court's ruling could threaten the ongoing $5.8 billion construction of an extension of the Washington Metrorail system in the Dulles Corridor. The ruling also could call into question the use of revenue from an existing toll road in the Dulles Corridor to pay part of the costs for the rail extension.
The motorists argued in their brief that VDOT and ERC's "'sky will fall' argument is inappropriate and should be disregarded." They asserted that the political and economic consequences of the forthcoming ruling by the state supreme court are not pertinent.
If the Virginia Supreme Court does not affirm the circuit court's opinion for the reasons laid out by the lower court judge, the high court should affirm the ruling because VDOT was unconstitutionally delegated the ability to exact a rate of return on private investment and because VDOT's 58-year contract with ERC violates Virginia's sovereignty and the General Assembly's police power, the motorists argue.
In briefs filed Tuesday that reply to the motorists' briefs, VDOT and ERC argue that these claims by the motorists are procedurally barred and otherwise do not have merit.