Attorneys in Ballard Spahr’s Public Finance Department represented the Virginia Department of Transportation in a $925 million public-private partnership to build high-occupancy toll (HOT) lanes and refurbish high occupancy vehicle (HOV) lanes along 29 miles of Interstate 95 in Virginia. The project, which took several years to structure and was hailed as “historic… for transportation and the economy in Virginia” by Virginia Gov. Robert F. McDonnell, closed Tuesday.
The project involves the design, construction, renovation, financing, and operation of HOV/HOT lanes on a heavily traveled I-95 corridor in Northern Virginia. The Ballard Spahr legal team spearheaded the drafting of a comprehensive agreement laying out the rights and obligations of VDOT and the private entity, 95 Express Lanes LLC, a joint venture between affiliates of Transurban Group and Fluor Corporation. Construction will begin this month and is scheduled for completion in 2014.
Brian Walsh, the public finance partner who led the Ballard Spahr team, said: “Federal and state funding for these large, complex transportation projects is limited and risks need to be thoughtfully allocated. The key to putting them together is to combine a variety of funding sources: tax-exempt bonds, private investment, federal loan programs such as the Transportation Infrastructure Finance and Innovation Act (TIFIA), and public funds. Virginia is a national leader in this area and we are delighted to have represented them.”
Construction of the HOV/HOT lanes is estimated at $925 million. The private investors will contribute $292 million. Those funds, along with $263 million in tax-exempt bond proceeds (including investment earnings) and a $71 million contribution from VDOT, will serve as initial financing for the project. In addition, the developers currently expect to receive $300 million in credit assistance through TIFIA. If they do not receive the TIFIA loan, VDOT and the private investors have committed to provide backup funding.
VDOT will own and oversee the new lanes, and 95 Express Lanes will finance, build, operate, and maintain them as part of a 76-year concession. The private partners assume the risk of delivering the project on a performance-based, fixed-price, set-date agreement.
The HOV/HOT Lanes are free of charge for vehicles with three or more occupants. Drivers with fewer occupants also can use the lanes and will pay using a dynamic tolling system that uses an electronic transponder to calculate rates, which vary depending on the time of travel and the portion of the highway. The private investor will collect the tolling revenue.
Said William Rhodes, Chair of Ballard Spahr’s Public Finance Department: “We have a long history of helping states and municipalities build and grow, but as times change, so do the means for funding complex and essential public infrastructure. An increasing number of state governments are establishing P3 offices in light of the successes and leadership in states like Virginia, Colorado, and Alaska. Transactions like this offer an innovative way to procure, fund, develop, and maintain essential infrastructure by leveraging private investment in public infrastructure. More importantly, they provide a tremendous benefit to taxpayers and the governments serving them. We see this as the future of sustainable funding for transportation infrastructure investment.”
The Ballard Spahr legal team was Mr. Walsh and associate Steve T. Park with assistance from partners Charles S. Henck, Alan S. Ritterband, Randall J. Towers, and Glenn L. Unterberger.
