During this – his last year in office – Governor Terry McAuliffe has been boasting about a deal his administration cut with an international group called Express Mobility Partners. The deal sounds too good to be true, and some critics say it is.
That firm says it will build new lanes on I-66 outside the beltway in Northern Virginia in exchange for the right to collect tolls for the next 50 years. It will also give the state millions of dollars for mass transit, parking lots and improvements to existing roads. The deal sounds too good to be true, and some critics say it is.
Public-private partnerships or P3s are a fairly new approach to building roads and bridges. The idea is that private companies put money up to do the construction and earn their profits over time, collecting tolls and other revenue. The reality is that companies rarely put up much of their own money. Instead, some borrow heavily, take advantage of complex tax laws and then declare bankruptcy. When Governor McAuliffe announced a partnership that would add express lanes to I-66, he bragged Virginia would pay an international consortium nothing.
“Not one cent of taxpayer money. The partners will pay all upfront and all maintenance costs on this project over the next fifty years,” he said.
Former Congressional candidate and Democrat Jack Trammel is skeptical, noting public private partnerships usually depend on federal loans.
“When the governor says that taxpayer dollars are not at risk, I don’t think he’s taking into account the fact that the federal government is on the hook for these bonds," Trammel explains. "That can be as much as 33% of the money that’s paid out to these P3 projects.”
We spoke with Patrick Rhode – an executive with Cintra – one of the partners awarded the I-66 contract, and asked if the private partners would be applying for federal money through the Transportation Infrastructure Finance and Innovation Act or TIFIA?
“That is anticipated," he said. "Certainly the TIFIA program has been very instrumental in assisting projects like this.”
Some years ago, Cintra got federal funds to build a by-pass around Austin, but it went bankrupt after just three years. Cintra charged $12 for cars and $24 for trucks, but most drivers opted to avoid the bypass.
Cintra’s Patrick Rhode admits the road is not performing as well as his company had hoped, but he adds that the state of Texas is not obligated to repay any of the debt and the road will continue to operate under new ownership."
We asked if there any federal loans involved in that project? “There is a federal loan,” Rhode said, “and that loan is anticipated to be restructured.”
So state tax dollars are safe, but Terri Hall, Founder of Texans for Toll-Free Highways, says federal tax dollars will likely be used to pay off investors.
“The bankruptcy court proceeding are still going on. We don’t know how much of a loss the taxpayers are going to take," she explains. "If it’s anything like the South Bay Expressway in San Diego, California – which was the first public-private toll project that went bankrupt and had a TIFIA loan on it, taxpayers lost nearly $60 million.”
And, she says, P3s are taking a political toll. The failed partnership may have cost former Texas governor Rick Perry his job, and a similar deal helped undo North Carolina’s governor Pat McCrory.
“And John Mica in Florida – same thing," she adds. " He was on the House Transportation Sub-Committee in Congress, and his district is surrounded by toll roads.”
We asked Patrick Rhode why he was confident his company -- one of Virginia’s private partners on the I-66 deal -- would not declare bankruptcy.
“We’re putting up a significant portion of our own money -- 35-40%,” he said.
But that’s for Cintra and three other partners, so Rhode’s firm might be investing far less. Cintra, by the way, spent nearly $400,000 over the last six years on federal lobbyists. When we phoned the U.S. Department of Transportation to ask why it had been lending TIFIA dollars to companies with a track record of bankruptcy, a spokesperson told us that was done by a previous administration, and no one there now could discuss it.