DALLAS — Work has been halted on a $1.4 billion Virginia toll road until the state completes another environmental review.
Virginia Transportation Secretary Aubrey Layne on March 14 put a stop to work by US 460 Mobility Partners, the design-build firm hired to build the new highway that would parallel the existing U.S. Route 460 between Suffolk and Petersburg.
Funding for the 55-mile Commonwealth Connector project includes $294 million of toll-backed tax-exempt private-activity bonds issued in late 2012 by the Route 460 Funding Corp. of Virginia, a non-stock, nonprofit IRS 63-20 corporation.
The toll road was procured under Virginia's Public-Private Transportation Act.
Delays and uncertainties over the future of the Route 460 project are credit negatives for the funding corporation's debt, Moody's Investors Service said in a recent report.
The funding corporation in December 2012 issued $231.7 million of 40-year senior lien bonds and $62 million of 40-year capital appreciation bonds, both supported by toll revenues.
The bonds are rated BBB-minus by Standard & Poor's and Baa3 by Moody's.
The project debt benefits from an $80 million revolving credit facility from the Virginia Transportation Infrastructure Bank dedicated to debt service, Moody's said. The line of credit is sufficient to service the debt for six to seven years if the toll road is delayed longer than anticipated, the report said.
Debt service will be paid from a capitalized interest account until January 2018. The toll road has been expected to open in 2017.
But now work has been stopped until Virginia completes a supplemental environmental impact statement for the toll road project and obtains a permit from the U.S. Army Corps of Engineers, Layne said.
The review is to be completed by fall with a decision from the Corps of Engineers by December, he said.
"Suspending contract and permit work is a prudent and practical move to cut spending while the focus is 100% on securing environmental approvals," said Layne.
"Services are not needed now from US 460 Mobility Partners," he said. "This will limit costs to only what is absolutely necessary to conduct environmental work, which will be led and managed by VDOT."
Layne ordered the Virginia Transportation Department in mid-January to stop its spending on the project.
Gov. Terry McAuliffe said the state should not have gone ahead with the Route 460 project before obtaining environmental clearance from the Corps of Engineers.
"The secretary [Layne] and I have been very concerned that we have spent millions of dollars on a project that doesn't have all of its final permitting done," McAuliffe said.
The state remains committed to improving Route 460, Layne said, but the scope of the project could change.
"It is too early to determine the final outcome of the project at this time," he said. "The environmental review process, which will include public input, will help to decide what's best for the region. We have to let that process unfold."
VDOT initially estimated the construction project would affect 129 acres of wetlands, but now says it could impact almost 500 acres filled with cypress and tupelo trees.
The Federal Highway Administration and Corps of Engineers asked Virginia to review the environmental impact of the project and consider alternatives to the project.
The environmental review was sought by the nonprofit Southern Environmental Law Center.
Trip Pollard, senior attorney at the SELC, called the Route 460 project "a $1.4 billion boondoggle" and "a wasteful and destructive project heading nowhere fast."
Pollard criticized former Gov. Bob McDonnell for going ahead with the project before it had been certified.
US 460 Mobility Partners, a joint venture of Ferrovial Agroman of Spain and American Infrastructure, was awarded the design-build contract for the project in 2012.
"Despite continuous warnings from the Corps of Engineers that it may not be able to issue necessary environmental permits in light of the project's severe environmental impacts and the availability of less-damaging alternatives, the McDonnell Administration recklessly pushed this project forward, signing a contract and lavishing roughly $200 million in taxpayer money on a project that may never come to fruition," Pollard said.
The funding will include up to $930 million from the state and $200 million to $250 million from the Virginia Port Authority.
