VDOT Commissioned Report on Public-Private Mega-Projects Flawed
Coalition for Smarter Growth
PRESS RELEASE
For Immediate Release:
February 3, 2011
Contact:
Stewart Schwartz, CSG, 703-599-6437 (c)
VDOT Commissioned Report on Public-Private Mega-Projects Flawed
Confirms Probable Focus of Governor’s Multi-Billion in Borrowing:
To Subsidize PPTA Mega-Projects
In a press release today, Governor McDonnell trumpeted a report (PDF) by Stephen Fuller of George Mason University which claims major economic benefits from public-private transportation act (PPTA) mega-projects. The report, it turns out, was commissioned by Virginia Secretary of Transportation Sean Connaughton, and its release coincides with key floor debates on the Governor’s transportation plan.
“The timing of the report to coincide with the debate over the Governor’s transportation plan and the report’s focus on 16 mega-PPTA highway projects, tips the Governor’s hand,” said Stewart Schwartz, Executive Director of the Coalition for Smarter Growth. “This transportation bill is about borrowing billions of dollars from our future and from education, health care, and public safety, and channeling it to subsidize the multinational companies that build PPTA projects. We’ve said the bill grants a blank check and it’s very likely most of the money will go into a few PPTA’s.”
Governor McDonnell proposes to use the borrowed money for a $1.5 billion PPTA fund and to establish an infrastructure bank to make very low interest loans, while also granting 75 years of toll revenues to the private companies. Since the entire 900 project list is “illustrative,” even more money could be diverted to PPTA’s.
“We consider the report to be very flawed and are asking national experts to offer a peer review,” said Schwartz. “Contrary to Professor Fuller’s report, there is growing evidence that expanding roadways provides little real net macro-economic benefit. The first interstate connections made a real difference but since then returns on highway investment have been declining.”[i]
Additional highway links and expanded highway capacity (i.e., adding lanes) provide much smaller benefits than was found for the original interstate system, and increase external costs such as downstream congestion, accident damages, fuel import externalities and pollution emissions. It also tends to increase sprawl and associated costs. New and expanded highways simply shift economic development from one location where it might have occurred, to another, not resulting in a net benefit. (see Professor Robert Cervero)
Professor Fuller’s report also fails to accurately account for the state tax dollars which would have to go into a number of the PPTA projects on his list. While Fuller shows no state construction funds for Route 460, Cintra, a Spanish multinational firm, is asking for $782 million or 52 percent of the cost to be paid by taxpayers and for $491 million in loans (33 percent) and to put up only 15 percent of its own money, in return for 75 years or more of toll revenues.
All told, the Fuller study considered nearly $30 billion in PPTA projects for which the public cost could range from 21.5% (Capital Beltway, I-495) to 52% (Route 460) and probably more for the $4 billion Coalfields Expressway. This is simply unaffordable and would prevent the state and localities from building a single new local or primary roadway. Fuller’s study also didn’t identify a single transit project.
“Fuller’s study also didn’t consider the comparative economic benefits of transit investments including intercity passenger and freight rail, revitalization of cities, towns and older suburbs, or improved local street networks, so it is of little value to policymakers in making the critical choices about where we should be investing our scarce tax dollars,” concluded Schwartz. The Coalition for Smarter Growth recently released statistics showing that road maintenance generates 16 percent more jobs than new road construction and transit 31 percent more jobs.[ii]
[i] See in particular, Figure 21 (page 50) of “Evaluating Transportation Economic Development Impacts” (http://www.vtpi.org/econ_dev.pdf), which is based on the study, M.I. Nadri and T.P. Mamuneas (1996), Contribution of Highway Capital to Industry and National Productivity Growth, FHWA, USDOT; at www.fhwa.dot.gov/reports/growth.pdf.
[ii] [ii] Arthur C. Nelson, et al., The Best Stimulus for the Money: Briefing Papers on the Economics of Transportation Spending, University of Utah’s Metropolitan Research Center and Smart Growth America, April 2009, http://metroresearch.utah.edu/products/original/The_Best_Stimulus_for_the_Money.pdf?2010
