Dulles Greenway traffic has stopped falling - and that's the first time since 2005

September 19, 2012

2012-09-18: Based on the first eight months' numbers traffic on the Dulles Greenway is up just a tad - about one percent - over 2011. That's good news since 2012 might be the first year in which total traffic matched the year before since the pike peaked in 2005. The last six years have all seen traffic decline from the previous year. And this on the supposedly developing fringe of the Washington DC metro area.

Average daily traffic on the Greenway this year is around 46,900 versus 46,400 in 2011, up about 1% but still 23% below the 2005 peak.

Traffic and revenue forecasters have got their numbers scandalously wrong every time they've produced forecasts here. When the road opened in 1996 Vollmer (now Stantec) over-estimated  traffic by a huge margin. Errors in travel time savings and local value of time saved led them to recommend tolls that were much too high.

And six years ago when Macquarie took over the broke pike Maunsell did nearly as badly as Vollmer in forecasting. They forecast annual growth from 61k to the low 70ks now, an overshoot of about 50%.

Of course few saw the extent of the havoc wrought by the housing bubble fueled by the US Congress via Freddie and Fanny Mae.

2011 was down 12% from 2008 the year in which the real estate bubble burst.

Maybe you need to go back another year to 2007.

2011 was down 16% on 2007 the last full bubble year.

In 2005 Maunsell managed to get things wrong straight off, just like Vollmer had. They got the immediately following boom years of 2006 and 2007 wrong.

Forecasting solid single digit growth, the road saw solid single digit declines in traffic - 6% the first year and 4% the next.

With 70k to 80k daily traffic in mind Macquarie invested heavily in third laning - which has proved unnecessary with less than 50k.  Maunsell's major mistake appears to have been in completely under-rating how much traffic would be lost by the Greenway to tax-financed improvements in competing free routes.

VA28 Sully Road was widened to 2x3 lanes and with interchanges upgraded from a surface arterial to an expressway.

VA7 Leesburg Pike previously entirely a surface arterial got its worst intersections replaced by interchanges, others got improved signals.

VA640 Waxpool Rd an arterial parallel with the Greenway was widened. (see map nearby)

Together this amounted to a major improvement in the level of service provided by competing tax-funded roads 2005 to 2008, so the decline in traffic before the housing bubble burst is quite explicable.

Five years ago Macquarie pitched the Greenway to investors with the line that the improvements to the untolled competitors was finished. Increased corridor traffic would cause levels of service on the free roads to deteriorate and the Greenway was well placed to capture the excess demand.

But apparently corridor traffic has stagnated. There has been no excess demand to be captured.

Tom Sines, the general manager at the Greenway tells us he sees a few small positive signs - a couple of new developments - but he doesn't see anything happening in the immediate future that would really improve their financial situation.

Their latest annual financial report for the holding company Toll Roads Investors Partnership II LLP for 2011 showed tolls of $66.6m, up 4.5% on two years back. They do toll increases more or less in line with inflation.

They've squeezed operating expenses slightly so their net operating income after operating expenses and depreciation is up to $41.7m.

But that is more than consumed by interest on debt of $66.2m, so they are running an annual loss of around $25m.

Their balance sheet shows as of end-2011 their tollroad valued at $278m and total assets $528m (they're flush with $159m in cash) but this is ovewhelmed by their debt of around a billion dollars ($1,018m.) Most of that debt is longterm so they don't face any immediate solvency issue.

But their liabilities exceed their assets by $490m.

They are half a billion underwater.

Why is traffic so weak?

Traffic we've seen was bashed first by forecasting mistakes on the tollroad's time savings, then by the Freddie/Fanny financial crisis, and third by tax-funding of competing free routes.

A fourth likely factor is more universal and probably more sustained - working at home (WAH) also called telecommuting or telework.

Jeff Khau of the University of Southern California has piece on newgeography.com citing a 61% increase in the work-at-home population 2005 to 2009. He cites estimates from the US Government's American Community Survey.

People who work from home travel a lot less than commuters. Absolute numbers are still small but the rate of increase is rapid and could be affecting traffic growth.

The WAH numbers for federal workers - important in the DC metro area - have gone from 0.7% of the total workforce in 2005 to 3.2% in 2009.

Business workforces, not-for-profits and local government are doing more work-from-home too, starting from a higher percentage in 2005. Overall WAH was 2.3% of the workforce in 2009 versus 1.5% in 2005. Three years later it could now well be over 3%.

Khau: "In the longrun telecommuting could generate massive changes in urban geography.... Some industries will stay clustered around the city center but more jobs, especially service-oriented ones, will continue to migrate towards the suburbs."

Purchases online could be diminishing shopping trips. Online education and other uses of advanced web-based communications could have broader impacts on travel.


TOLLROADSnews 2012-09-18

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