They took a pass. After a week of talking tough and lobbing a litany of questions about Mayor Dwight Jones’ planned $60 million deal with the Richmond Metropolitan Authority, City Council whiffed.
No one opted to explore the possibility of forgoing the $60 million now for a potential payoff down the road worth hundreds of millions of dollars.
To recap, Jones seeks the full repayment of the city’s early loans to the authority, which owns and operates the Downtown Expressway and Powhite Parkway. Initially, the mayor needed council approval to strike the deal because it involved forgoing $1.3 million in interest. The new deal includes that interest, bringing the city’s payback to $62 million. And City Council approval isn’t needed.
To get the money by the end of the year, the city is agreeing to delay taking ownership of the expressway system. The deal caused so much consternation because the existing plan is for the road to revert to the city in 2022, when the debt on the toll road system is paid off. The $62 million is part of a planned 30-year, $200 million bond issue the authority is seeking, which means the city won’t take ownership of the road until at least 2040.
Is this a lost opportunity? Some financial experts say the toll road system could net more than $500 million on the open market if the city were to lease it to private investors. The market is ripe for such deals, which has led to a rash of toll roads being leased to private operators across the country. Cash-strapped states such as Indiana and Illinois, seeking to leverage whatever revenue-generating assets they own, have pulled in billions of dollars on such deals.
But Richmond decided against exploring that option. Jones has said publicly that the city’s taking ownership of the Downtown Expressway and Powhite Parkway would damage regional cooperation for generations. Others, however, say the potential payoff is too large to simply brush aside as politically unfeasible.
“Richmond is sitting on a gold mine,” says a New York lawyer who’s worked on several government toll-road deals. “It’s just blown my mind that this hasn’t happened sooner.”
The attorney, who spoke on the condition of anonymity, says such a deal could be struck even now. The expressway’s authority, which is controlled by the city, likely could draw up a 30-year concession deal with private investors — the same length of the authority’s 30-year bond issue — and net in the neighborhood of $150 million. The city still would get the road back in 2040, when it could operate the expressway system or lease again for hundreds of millions of dollars more.
To appease the surrounding jurisdictions, including Chesterfield County, some of the money could be distributed to their government coffers.
But Jones, along with City Council, is content to take the $62 million now. The mayor has yet to explain how the money would be used, but council members spent a few minutes discussing how to spend the windfall.
Councilwoman Reva Trammell suggested to Chief Administrative Officer Byron Marshall that the money be divvied up among the nine council members. “We could all take maybe $7 million dollars,” she told Marshall. “That would be fair. What you think?”
He replied that those decisions would be made later.
During last week’s meeting, the idea of leasing the road came up only briefly, but was quickly dismissed. City Attorney Allen Jackson reviewed the state law that created the authority, and concluded it was unclear whether the city could lease or sell the road to private investors.
“The statute, it says: ‘After the transfer, the highway, the limited access highway, shall become part of the city’s road system. And thereafter it shall be maintained and operated by the city,’ Jackson told Style Weekly after the meeting. “It’s pretty direct language.”
The city could seek a change from the state if necessary. After all, in 2004 two private companies seeking to take over the expressway system and the Powhite extension for $586 million — using the tolls to fund another Powhite extension deep into Chesterfield County — didn’t consider state law a major obstacle.
“It’s not unusual for a project of the magnitude like this, for the plans to be very long-term and recognize that adjustments to state law are necessary,” Jackson says.
Marshall, however, says the issue is moot. “I’ve never been to the General Assembly. The legislature is so unpredictable,” he says. “I don’t know that we could guarantee that we could do that.”
So they went with the easiest option — take the $62 million and run. S