A Tolling Experience: Insight into the Controversial Agreement

HAMPTON ROADS, Va. (WAVY) — For years, 10 On Your Side has been tracking your toll troubles.

Now, Only On 10, key players behind the 58-year deal between the State of Virginia and Elizabeth River Crossings talked with Andy Fox to give insight into the controversial deal.

In 2011, former Gov. Bob McDonnell claimed the ERC Public-Private Partnership was the best deal available to fix what was considered the most congested two-lane road east of the Mississippi.

When Governor Bob McDonnell was elected the 71st Governor of Virginia, he wanted to make a mark. Not since 1986 had Virginia made transportation funding a priority. The new governor was going to do something about that.

The problem, it was early in his administration, and he did not have many options to take on what many considered the top road project in Hampton Roads, and that was building a new Midtown Tunnel tube.

Special Coverage: Tolls in Hampton Roads

McDonnell's critics will argue there was not enough money for the Midtown tube because his top priority was to make a four-lane US 460 to Petersburg, a project later abandoned by current Governor Terry McAuliffe. US 460 died on the vine after the McDonnell Administration spent $300 million in tax dollars on failed attempts to get Environmental Permits. The McAuliffe Administration would eventually get a permit for a revised 460 project, but when entreated into the Smart Scale System that prioritizes road projects it did not rank high enough to build, and McAuliffe walked away from the project.

On the Midtown Tunnel project, McDonnell decided to use his executive authority to negotiate a deal through The Public-Private Transportation Act. The Act was approved by the General Assembly to give a Governor flexibility to negotiate in private, and turns out little oversight, to "deliver major transportation improvements now instead of several years or even decades later" as the website reads.

What happened next Governor McAuliffe calls the worst transportation deal ever negotiated in Virginia history. One of the sharpest critics of how McDonnell's team, including then Secretary of Transportation Sean Connaughton, negotiated the deal is the current Secretary of Transportation Aubrey Layne.

Current and past political leaders in Portsmouth and Norfolk also opposed the deal. Portsmouth Mayor John Rowe, when asked if he thinks former Governor Bob McDonnell failed the city of Portsmouth with what many consider to be a crippling toll deal, he immediately responded, "It is a very bad deal.”

The deal has escalating tolls on the Downtown and Midtown Tunnels for 58 years.

10 On Your Side asked Bob McDonnell about that toll deal. "Look, something had to be done. It was unsafe. It caused tremendous backups," he told us in an exclusive one-on-one interview.

Critics argue McDonnell, so desperate for a deal, became blinded, "I'm not going to let this go and not get done. The best we could do was come up with a Public-Private Partnership. Our Secretary (of Transportation) negotiated the best arrangement he could."

Current Secretary of Transportation Aubrey Layne sums up the deal this way, "It was a great project and a terrible deal.”

Layne disagrees with McDonnell on how the deal came to be, "When you have a Chief Executive standing up and saying that this is very important 'and I am going to get this done no matter what' what kind of leverage does that give you in negotiating with the other party?"

McDonnell had just re-appointed Layne to another term on the Commonwealth Transportation Board (CTB) and he remembers how McDonnell and his negotiators were outmaneuvered by Elizabeth River Crossings, "There was no financial expertise in the Administration."

In contrast, Layne says he is the first Transportation Secretary who is a CPA, MBA, and the first to have served on the CTB, "There was this overriding belief that privatization was the answer. It wasn't just the roads, it was (how he tried to privatize) the Port and the ABC." Layne says McDonnell created a culture that favored the private sector over the state on big projects and operations like the Port and ABC.

McDonnell is quick to counter thoughts like that, "They all supported it initially, or we would not have gone forward." It is true even Layne supported the ERC deal. He said on November 29, 2011, "To me, it's a fair deal in today's world because they're (ERC) is willing to take the risk."

We asked Layne about that quote. He explained, "That's when we thought they (ERC) was taking the risk, but as it turned out they aren't taking it. If they build another facility they get automatic increases."

McDonnell says everyone was asked to participate, “The local government, CTB, and local authorities. They all supported it at one time." Mayor Rowe flatly disagrees with that assertion, "There should have been more people sitting at the table; certainly the city of Portsmouth should have been sitting at the table."

Our investigation found Portsmouth leaders supported the project, but not the financial deal. Layne and Rowe say Team McDonnell and ERC did not communicate terms and conditions early enough to get meaningful input or even to kill the deal. McDonnell stands by his decisions at the time, "It was a problem that had to be solved, and we did it. We didn't have the money in 2010 and 2011 when we did this deal."

When Suffolk Delegate Chris Jones started asking Connaughton questions about financial information back in November 2011, Connaughton said the deal had no noncompetes, but then said "there is a provision that allows...ERC...to seek money from the state if a competing facility draws away too many paying customers." That is a noncompete.

Layne goes further saying that McDonnell was using his executive privilege through the Public Private Partnership Act to cut a deal that required no oversight from the General Assembly or from the Commonwealth Transportation Board, "They had this belief that they didn't have money, and privatization was the only answer. I don't think they got good information from others. We could finance it another way, and I believe that is where (and how) we ended up where we are."

Layne says you find out how much it would cost the state to build the project then you go to the private sector and ask ‘can you beat this?’ You then find companies competing for the job. That did not happen with the tunnel deal. ERC was the only partner.

Layne offers what happened on the Interstate 66 deal in Northern Virginia as the way to carry out a Public-Private Partnership. Layne figured out how much it would cost the state to do the project then went to the private sector and sought out bids. Two groups came to the table and in the end Virginia got $500 million upfront for corridor improvements, $800 million in public transit improvements, $350 million in other transportation projects in the I-66 Corridor, and there are free alternatives around the tolls. It should be noted there are no free, convenient alternatives around the ERC tolls.

The following is what the state has contributed to the ERC project according to the McAuliffe Administration:

  • $308.6 million initial state contribution from the McDonnell Administration
  • $112.5 million from the McDonnell Administration to delay tolls through his administration.
  • $82.5 million from the McAuliffe Administration to buy down tolls through construction
  • $78 million from the McAuliffe Administration to buy out the tolls on the MLK Extension.
  • Total State Contribution is $581.6 million dollars

Layne argues had VDOT developed the project, figured the cost and risk, and then shopped it to the private sector the state would have had more bargaining power. "Had we done it the way we are doing it now I believe one of two things would have happened, we would have gotten a better deal or the state would have done it itself. I give him credit for pushing deals to get something done. I do believe he let ideology and maybe not having the best counsel on how some of these deals got done," said Layne. He also notes, looking at the numbers above, "When you consider we have spent $581.6 million, it is clear we should have done this project ourselves or struck a better deal than the one we got."

Because of this deal and the US 460 deal Secretary Layne and the McAuliffe Administration worked with the General Assembly and reformed the Public-Private Transportation Act. Today Public-Private deals cannot happen without check and balance oversight from the General Assembly and the Commonwealth Transportation Board.

Ironically, in 2013, it was McDonnell's Landmark Transportation Bill that came after the ERC deal that could have re-written history. We asked McDonnell what if he had his Transportation Bill, which pumped billions into roads at the time of the ERC deal, "Then we might not need to do the tolls, or to do it at that level. There might have been some other solutions, but I did not have that tool available in 2010 and 2011, but I was going to solve the problem."

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