Book closes on U.S. 460 project at $260 million cost to state

7/2/2015

The final bill has come due on the abortive U.S. 460 toll expressway pushed by the administration of then-Gov. Bob McDonnell — $260 million, most of it to a private contractor paid by the state without a federal permit to build the road through hundreds of acres of wetlands.

Under a settlement announced Thursday by Gov. Terry McAuliffe — who halted the project more than a year ago — the state will recover $46 million already paid to US 460 Mobility Partners and avoid paying $103 million in additional claims submitted by the developer under the terms of a contract that critics say shifted all the project’s risks to the state.

The road, initially estimated to cost $1.4 billion, would have cost $1.8 billion to finish, according to a draft environmental impact statement last fall that said the now-abandoned project would have destroyed more than 600 acres of wetlands.

“I’m not suggesting it’s a great day for the commonwealth, but it’s a whole lot better than it could have been,” Secretary of Transportation Aubrey L. Layne Jr. said in an interview Thursday.

Now, state officials have to decide whether to build a scaled-back alternative along the existing U.S. 460 and how to ensure that Virginia never makes the same mistake again.

“The settlement brings to a close at least this chapter in a long, sad story about a project that was pushed forward that should not have been pushed forward,” said Trip Pollard, an attorney for the Southern Environmental Law Center and opponent of the plan for a four-lane, 75-mph toll expressway between Suffolk and Petersburg.

“A lot of mistakes were made, and taxpayers are going to pay dearly,” Pollard said.

McAuliffe and state legislators say they already have protected the state from repeating those mistakes by passing legislation, which the governor has signed, to require more public transparency in public-private transportation deals and more accountability from state officials who make them.

The new law was sponsored by House Appropriations Chairman S. Chris Jones, R-Suffolk, a fierce critic of the U.S. 460 deal who said he also was motivated by a public-private transportation agreement to expand and renovate the tunnels between Norfolk and Portsmouth.

The 58-year concession with the private partnership in the tunnel project will impose escalating tolls that the state already has paid $200 million to lower, as well as penalties if the state and region build other transportation projects that reduce tunnel traffic and toll revenues.

“I’m pleased the commonwealth got money back, but I’m still extremely unhappy about the deal that was signed by the previous administration,” Jones said of the U.S. 460 settlement on Thursday.

The new law creates a committee that will include General Assembly representation to ensure that proposed deals under the Public-Private Transportation Act serve the public interest; require the mitigation of potential risks such as federal permitting; and force the secretary of transportation to attest in writing that a project delivers what was promised before a final agreement is signed.

“I regret that the contract did not allow for greater steps to mitigate the impact of this failed project,” McAuliffe said in a statement Thursday, “but I am proud of the bipartisan reforms we worked with leaders like … Jones to prevent disasters like this from occurring in the future.”

A special review by the Virginia Department of Transportation and the Office of the State Inspector General a year ago described the procurement process for the project as “either very aggressive or extremely aggressive” and “driven by the secretary of transportation,” then Sean T. Connaughton.

Connaughton, former chairman of the Prince William County Board of Supervisors, now serves as president and CEO of the Virginia Hospital & Healthcare Association. He declined to comment Thursday through a spokesman.

But Layne and current VDOT Commissioner Charles Kilpatrick also were involved deeply in the U.S. 460 project — Layne as former chairman of the Route 460 Funding Corp. and Kilpatrick as chief deputy commissioner under McDonnell.

In addition to losing $210 million of the money already paid to the project developer, the state will pay $50 million to the holders of bonds sold by the funding corporation.

Layne said Thursday that he did not know the extent of the risks assumed by the state in the project. “The only person who really sees everything is the secretary,” he said.

The contract front-loaded the cost of the project to save money in the long run, he said. “It all made sense if you had a guarantee you could build the road.”

But the state already had received strong signals from the U.S. Army Corps of Engineers that the agency had problems with issuing a permit under the Clean Water Act to destroy hundreds of acres of wetlands more than originally estimated for the project.

The contract also made it difficult to get money back from the developer or avoid paying additional claims that Layne acknowledged as valid under the deal.

“Quite frankly, we had a very poor legal position and negotiating position from the start,” he said.

The state still faces opposition and potential regulatory hurdles for the scaled-back project to improve a 5-mile stretch of existing U.S. 460 while building a new 12-mile road from its scrambled eastern terminus in Suffolk; bypass the town of Windsor; and build a new bridge over the flood-prone Blackwater River in Zuni.

Windsor officials and farmers strongly oppose the new project, which is estimated to cost $350 million to $400 million, as do environmentalists who say it would damage valuable farmland and wetlands unnecessarily.

“I think what is needed is improving the existing 460,” said Pollard, who grew up in Petersburg.

The Army Corps of Engineers is part of the state and federal collaboration to develop a new environmental impact statement for the revised U.S. 460 project, which the federal agency concluded in January is “permittable,” but Layne said the state will not know until the end of the year whether a permit will be approved.

The Commonwealth Transportation Board approved the new route in February, but the project has to be ranked under a process mandated last year by the state to determine how best to spend money raised under a comprehensive transportation funding law approved in 2013.

Jones said that law, along with this year’s reforms to the Public-Private Transportation Act and overhaul of transportation funding formulas, “severely limit the discretion that exists at the executive level and the administrative level with road projects.”

Pollard supported Jones’ legislation to reform the Public-Private Transportation Act, but he is not as confident that the new laws will eliminate politically driven road projects.

“It wouldn’t prevent something like 460 from happening again,” he said, “but it would make it more difficult.”

By MICHAEL MARTZ AND JIM NOLAN Richmond Times-Dispatch