Va. Gov.: Midtown Tunnel Project Financing in Place

Virginia Gov. Bob McDonnell announced recently that the Virginia Department of Transportation (VDOT) and Elizabeth River Crossings (ERC) reached financial close to begin construction on a new Midtown Tunnel. Financial close releases all funding needed to build the $2.1 billion project, which also includes extending the Martin Luther King (MLK) Boulevard and rehabilitating the existing Midtown and Downtown tunnels, providing a network of transportation improvements and congestion relief to motorists in the Hampton Roads region. Construction will begin as early as summer 2012.

Toll collection, originally scheduled to begin in late summer, may be delayed until January 2014 pending action by the Commonwealth Transportation Board (CTB) to allocate funding. The governor is requesting the CTB allocate funds for this purpose. The project will be financed through tolls, initially ranging from $1.59 to $1.84 per car for the tunnels and $.50 for the MLK Extension for tunnel users and $1 for non-tunnel users. This is approximately 40 percent lower than the $2.89 toll rate originally estimated. The interim agreement was signed in January 2010 before the McDonnell administration took office.

“I am requesting the Commonwealth Transportation Board (CTB) allocate up to $100 million to cover the costs of delaying tolls until January 2014. This is in addition to the significant funding VDOT has already contributed to the project to the lower tolls,” said Governor McDonnell. “VDOT has also implemented a second toll relief measure. The parties have agreed to limit toll charges for High Street ramps to be built on the new MLK Extension. Vehicles entering or exiting the new extension from the High Street or London Boulevard ramps and taking a local trip in Portsmouth will not be required to pay tolls.”

Anticipated funding for the toll delay will largely come from funds set aside for the state’s contribution at financial close that were not needed due to current low interest rates. VDOT was scheduled to present the governor’s request to the CTB at its April 18 board meeting in Richmond.

Under the Public-Private Transportation Act (PPTA), VDOT continues ownership of the infrastructure and oversees ERC’s activities. ERC will finance, build, operate and maintain the facilities for a 58-year concession period. ERC also assumes risk of delivering the project on a performance-based, fixed-price, fixed-date contract, protecting users and taxpayers from cost overruns and delays. In addition, ERC will be responsible for long-term routine and life-cycle maintenance of the project for the term of the concession.

“Financial close marks a significant step forward for transportation improvements in Hampton Roads,” added the governor. “We would like to thank the U.S. Department of Transportation for approving a $422 million Transportation Infrastructure Finance Innovation Act (TIFIA) loan to help pay for construction, making financial close possible and lowering the projected tolls. Once this project is completed, motorists will save about a half-hour round trip every day plus benefit from a much improved transportation network that will better connect the region, stimulate the local economy and create jobs.”

Because of the low interest rates and flexible repayment terms, demand for loans made under the TIFIA is strong among states across the country. Due to the importance of the project and the firm commitment of the public and private partners, ERC was granted $422 million to build the Midtown project. ERC will pay off the TIFIA loan through toll collection.