Dulles Greenway gets advantageous new concession regulation
The Dulles Greenway is getting advantageous new arrangements for regulation of its concession that are a rebuff to oppoents. Activists have been trying to freeze toll rates and give regulators arbitrary powers. Under a new bill HB1140 the operators of the privately built tollroad in northern Virginia get to increase their tolls up to amounts already approved by regulators through 2012. The Greenway runs 23km (14 miles between Dulles and Leesburg VA.
From Jan 1 2013 the new law guarantees the concessionaire the right to increase tolls annually by the consumer price index plus one percentage point regardless. Previously they had no guarantees.
In addition the State Corporations Commission may approve greater increases in toll rates than CPI+1% if the guaranteed toll rate increases are found to be not sufficient to maintain maintain minimum bond rate covenant coverage. The greater than guaranteed toll rate increases must follow a finding by the SCC that:
- such toll rates are reasonable for users in relation to the benefit obtained
- the toll rates are unlikely to materially discourage use of the road
- provide no more than a reasonable rate of return on the investment
The last three provisions are a continuation of the provisions currently regulating toll rates at the Greenway under Virginia Highway Corporation Act of 1988. This act guaranteed no specific toll rates or toll increases - unlike most concessions - but provided that toll rates be set by the State Corporations Commission (SCC). The SCC is a utilities regulator and sets charges of electricity, telephone and water utilities.
Dulles Greenway is the only tollroad under SCC jurisdiction. Other private tollroads are operated under the Virginia Public Private Transportation Act of 1995, administered by Virginia DOT. The Greenway was fiannced in the early 1990s and opened in August 1995.
The HB1140 amendments also provide that in the event of a change in ownership of the operator accompanied by the issue of securities the SCC must ensure (the law incorrectly uses the word 'assure') that this does not cause toll rate increases.
HB1140 has now passed both houses of the Virginia legislature recently and is likely to be signed into law any day by the state Governor Timothy Kaine.
Defeat for US Rep Wolf, the Hugo Chavez of N Virginia
The HB1140 law is a heavy defeat for some local politicians and protesters especiaily for US Rep Frank Wolf who has been noisily demanding a freeze on toll rates to prevent the SCC approved toll rate increases from proceeding. Although nominally a Republican Wolf has been posing as the Hugo Chavez of Northern Virginia - given his advanced age a better label is Socialist-in-Dementia - out-demagoguing all the Democrats and other radicals in denunciations of the Greenway and the Macquarie group which owns the concession.
Wolf as merely a US Congressman has no jurisdiction over the Greenway but he has obsessively written letters and issued press releases demanding that the state rewrite the terms of the state law to provide that toll rates on the Greenway be "just" and "affordable" - slippery notions that would give regulators unlimited powers.
Any such 'Chavez provision' would likely be held by state courts to be such a radical rewriting of the terms under which investors financed the tollroad as to constitute an unconstitutional breach of contract and an expropriation or 'taking' of property.
Copy of one of many Wolf letters here
Copy of the Greenway's response to Wolf here
On October 1 2007 despite the Wolf protests toll rates went from $3.20 to $3.50 for cars at the mainline plaza for traffic coming to and from the contiguous state's Dulles Toll Road. That includes 50c collected on behalf of the DTR in place of a toll they used to collect at a plaza of their own.
The $3.00 collected by the Greenway operators from October 1 2007 is 13.3c/mile (21.4c/mile) and contrary to Wolf's propaganda is far from the highest toll rate in the country, although it does serve one of the country's most affluent counties. There are offpeak and frequent user bonuses for motorists with transponders that reduce the effective tolls below the caps.
Including the state's 50c, toll rates are presently 15.5c/km (25c/mile) for full trips. Under an application approved by the state regulators last summer toll caps will rise to $4.00 by 2012 except for peak hours in the peak direction when toll rates up to $4.80 for cars will be allowed.
$4,00 is 17.8c/km (28.6c/mile) and $4.80c is 21.3c/km (34.3c/mile).
The toller provided estimates in 2006 in supporting of the toll rate increases that the average user of the tollroad received benefits from using the road in peak hours of $9.76 or 3.7 times the then toll and in off-peak periods $4.04, 1.6 times the toll. The commission staff looked at historic data of toll rates and traffic and calculated very low elasticity of demand, or small likely diversion of traffic from higher toll rates: -0.18 overall, -0.13 in peak hours, and as low as -0.07 for transponder users in peakhours.
Traffic is currently around 53k/day. It however peaked in 2005 at 61k but has dropped neartly 10 percent in the two years since. 2005 was a peak year for improvements on the alternative free route VA28/VA7 so a few thousand were diversions frtom the roadworks since completed. But the improvements helped the competitiveness of the free route with a key grade separation at VA28/VA606. Meanwhile the location of the mainline toll plaza at the eastern end makes the Greenway uncompetitive on short trips west.
Average daily traffic, annual toll revenue with ratios on year-before follow
1997 23.8k 1.366 $8.8m 1.40
1998 27.6k 1.162 $11.3m 1.28
1999 33.9k 1.230 $14.0m 1.24
2000 39.8k 1.173 $19.7m 1.41
2001 44.5k 1.119 $22.9m 1.16
2002 47.8k 1.072 $26.0m 1.14
2003 52.3k 1.086 $32.9m 1.27
2004 60.8k 1.140 $40.2m 1.22
2005 61.2k 1.011 $45.4m 1.13
2006 57.3k 0.936 $55.3m 1.22
2007 55.3k 0.965 $59.0m 1.07est
BACKGROUND: The Dulles Greenway is an extension of the state owned Dulles Toll Road into Loudoun County, one of the most strongly developing fringes of the greater Washington DC/Baltimore metro area (pop 7m). The transition from the DTR and the Greenway occurs at VA28 Sully Rd on the entry to Washington Dulles international Airport. The Greenway goes 23km (14mi) in a slightly north of westerly direction serving developing suburbs on either side and around Leesburg where it ends on US15.
Opening in August 1995 it was financed by TRIP II, a private company with equity held by the local family of Michael Crane, the Italian toll giant Autostrade and Brown & Root the Haliburton subsidiary.
They sold the bulk of their shares to Sydney Australia based international tollroad owner Macquarie for about $625m on the 10th anniversary of the opening of the road in the summer of 2005. Macquarie has since raised substantial capital from US investors.
Maintenance and operations are done by a subsidiary company of Autostrade of Italy.
Initially 2x2 lanes it has since been third laned and interchanges have been added, and the toll plaza widened.
The concession period, originally 40 years was extended by negotiation with the VSCC to 60 years - to 2056. That was part of the deal in which the concessionaire committed to major improvements to the tollroad including completion of third laning, improved connections to Dulles Airport, new interchanges and toll plaza expansion.
The mainline toll plaza - entirely stop-to-pay and gated - is the major deficiency in the Greenway. It slows throughput limiting the competitiveness of the tollroad and makes sensible pricing impossible. The Greenway is likely to move directly to cashless all-electronic highway speed tolling at some point soon. There is unlikely to be any transition via open road tolling through the middle of the plaza.
For most trips on the Greenway there are alternative free routes on modern signalized arterials, though they are slower. VA28 Sully Road and VA7 Leesburg Pike are the major alternative route for those who think the Greenway tolls are too high.
They are high quality access controlled and divided highways with a few grade separations but mostly with signalized intersections at major cross streets ( the Greenway map nearby is in error on two intersctions.) VA7 and VA28 were the only roads to Leesburg and through Loudoun County before investors assembled and bought the land for the road and built the Greenway.
The tollroad was built on land purchased in negotiated sales without any backup power of eminent domain, and the tollroad pays $3m in property taxes on the land. At one point state legislators proposed to cap county property taxes, but that is being handled in negotiation between the tollroad and the county.
HB1140 as passed: http://leg1.state.va.us/cgi-bin/legp504.exe?081+ful+HB1140
TOLLROADSnews 2008-03-16 ADDITIONS 2008-03-17:14:45