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transportation
FINANCE
Deal for D.C. New HOT Lanes Is Turning Out To Be Hot Stuff
 
By Aileen Cho and Debra K. Rubin
Planned HOV corridor will ease Virginia congestion.
Planned HOV corridor will ease Virginia congestion.
After years of negotiations, the final financial deal last month between Australian toll road operator Transurban Group, Fluor Corp. and the Virginia Dept. of Transportation to jointly fund a $1.35-billion expansion of four high-occupancy toll lanes (HOT) on that state’s portion of the Capital Beltway is setting precedents and turning heads in transportation and financial arenas. The total $1.93 billion in public-private financing includes $350 million from equity investors, the most ever for a U.S. greenfield toll road project, and the first use of government-enabled tax-exempt private activity bonds (PABS).

The 80-year concession agreement, signed Dec. 20, caps pursuit of the deal that began in 2002 with Irving, Texas-based Fluor’s unsolicited proposal for a 14-mile expansion. Later partnered with Transurban, it reached an interim deal with the state in 2005 and pursued environmental permits. Fluor also holds the design-build contract with partner Lane Construction Corp., Cheshire, Conn.

Design, led by HNTB Corp., is now at 30%, says Herb Morgan, Fluor vice president of operations. “We’ll take the next several months and get the design advanced enough so construction doesn’t catch up,” he says. “We’re targeting early utility work in April and will hold public hearings on the final design look.”

The job entails building two new general purpose lanes on the roadway’s outside edges and turning two inside lanes into toll lanes. Work will include direct connections to lanes from arterial roads, new sound walls and bridge repairs, says Morgan. The team faces potential late fines up to $200,000 a day after spring 2013. Construction costs are not to exceed $1.4 billion. Some 200,000 daily vehicles now travel the Beltway around Washington, D.C. Proponents claim the HOT lane section is the only major northern Virginia corridor without dedicated transit or HOV lanes.

The concessionaire will operate the lanes for 75 years after construction, but VDOT will retain ownership and oversight and share in project revenue and refinance gains when they exceed a total return on investment of 8.1%, a first in the U.S. concession market. The firms “will be required to certify to us, and be subject to audits,” says Ronaldo Nicholson, VDOT regional transportation program director.

Financial closing will occur in 2009 after actual sale of PABS this spring, says a concessionaire official. About $88 million in equity contributions from Fluor and Transurban will help fund work until then. “The initial public reaction was extremely negative,” says Richard Norment, executive director of The National Council for Public-Private Partnerships, a Washington, D.C., advocacy group. “There’s been an enormous shift.”

 

 

 


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