Download The Pocahontas Parkway Concession 15 months After the Ink is Dry

The Pocahontas Parkway
Concession
15 months After the Ink is Dry
Barbara W. Reese
Deputy Secretary of Transportation
Commonwealth of Virginia
October 2007
Background
• The Pocahontas Parkway was constructed as Virginia’s
first P3 (non-utility) in the late 1990’s
• The original P3 was financed using a IRS 63-20
structure, well before the breath of financial tools today
were available
• Actual traffic performance about 50% below projections
– Revenue would likely be insufficient to meet growing debt
service obligation – tolls had been increased twice to mitigate
this risk but problems continued
– Requirement to draw from the debt service reserve account
– Two of the three main rating agencies have downgraded the
project’s senior bonds to non investment grade status
– The Commonwealth was paying the Parkway’s O&M expenses
with those expenses growing over time
• 8.8 miles long
• Connects I-95 to I-295
southeast of Richmond
• Major structure is a
bridge that crosses the
James River
• Provides 10 to 15
minutes travel time
savings for average
user
Transaction History
Timeline:
•
October 2004 - Transurban and DEPFA made an unsolicited proposal to
VDOT to acquire the rights to operate the Parkway
•
June 2005 - The offer led to the execution of the exclusive Memorandum of
Understanding between the parties
•
May 2006 - Transurban & VDOT finalized the ARCA that governs their
rights and obligations during the 99 year term; Transurban established a
special purpose company (“T895”) for the Parkway
•
June 2006 – VDOT repaid all existing “loans” to the 63-20 entity and
Commonwealth Transportation Board used payoff to finance other critical
transportation projects that benefit the toll payers
•
Summer 2007 – TIFIA refinancing closed; design-build process to build the
Richmond Airport Connector begins
ARCA Summary
Basic Rights:
•
99-year concession from VDOT
•
T895 subject to tolling ceilings and conservative rate
escalation
•
Revenue Share based on reaching a predefined Pretax IRR
•
Projects under the PPTA will be exempt from any
State or local property tax
ARCA Summary
T895’s Duties:
• Operate, maintain and repair the Project at its cost
• Maintain certain reserves or letters of credit for O&M
and major maintenance
• Comply with local laws and regulations generally
applicable to parties to construction and service
contracts with VDOT
VDOT’s Duties:
• Provide (at T895’s cost) requested O&M services
during 6-month transitional period
• Cause police and emergency services to be provided
to the Project
• Cost of management & clean-up of pre-existing
environmental contamination on the Right of Way
ARCA Summary – Risk Sharing
Obligations
assumed by VDOT
Obligations (risks)
assumed by T895
Financing
Text
None
Yes
Traffic and Revenue
None
Yes
Oversight
Yes
Risk
O&M and Major Maintenance
Insurance
Change in Law (discriminatory)
Operating Standards
Permitting & Licensing
Hand-back
Toll Rate Setting
Yes
Yes
Oversight
Yes
Reasonable assistance
Yes
Oversight
Yes
Based on a toll escalation
formula
ARCA Summary – Risk Sharing
Risk
Police and Emergency Services
Environmental
Construction of the RAC
Competitive Transportation
Facilities
Obligations assumed
by VDOT
Obligations (risks)
assumed by T895
Base service provided
Additional services at cost
Shared
Shared
Oversight & Excess of
cap
Yes – if TIFIA loan
Within defined
parameters
Federal Requirements
Reasonable assistance
Yes
Force Majeure
Shared for uninsurable
events (bridge)
Shared
Yes
Risk Sharing to be
negotiated
Shared
Shared
Property & Receipts Taxes
Revenue over an agreed return on
total investment
ARCA Summary - Toll Schedule
•
The maximum toll charged by the operator is not to exceed the following for the
periods shown.
Period
Main Toll Plaza
Laburnum Ave.
1 January 2006 up to and including 31 December 2007
$2.25
$0.75
1 January 2008 up to and including 31 December 2010
$2.75
$1.00
1 January 2011 up to and including 31 December 2012
$3.00
$1.25
1 January 2013 up to and including 31 December 2013
$3.25
$1.50
1 January 2014 up to and including 31 December 2014
$3.50
$1.75
1 January 2015 up to and including 31 December 2015
$3.75
$2.00
1 January 2016 up to and including 31 December 2016
$4.00
$2.25
Note: Toll levels are for 2 axle vehicles only. Multi axle vehicles are tolled on the basis
of an additional $1.00 for each axle above 2.
•
The maximum toll increase in any year thereafter will be the greater of the increase
in Real Gross Domestic Product per Capita from the preceding year, the increase
in the Consumer Price Index from the preceding year, or 2.8%.
Concession Performance –
15 months later
• Successful transition from public to private operation
• First TIFIA Refinancing – Richmond Airport Connector
Will be Built
– Richmond International Airport – 11.5% ridership growth in last
year
• Traffic on Pocahontas is Growing – 7% last quarter
• Two major economic development announcements in
Corridor will benefit the Project
• Solid Working Relationship with the public and private
partners – very few issues
The Pocahontas Parkway
Concession
15 months After the Ink is Dry
Barbara W. Reese
Deputy Secretary of Transportation
Commonwealth of Virginia
October 2007