The Road Not Taken 

What has the city really lost by taking the RMA’s money?

After weeks of debate and consternation over the future of the city’s expressway system, the official vote proceeded without questions or discussion. The Richmond Metropolitan Authority voted 11-0 Tuesday to approve a refinancing of the remaining debt on the Downtown Expressway and Powhite Parkway -- and to pay back the city its $62 million.

The vote came despite the fact that Mike Berry, the authority’s general manager, had received two inquiries from companies seeking to privatize the roadway. It came despite a request from a majority of City Council members to hold off until alternatives could be explored.

For all practical purposes, going forward with a refinancing of the authority’s senior debt and repayment of $62 million in subordinate debt -- the deal in essence rolls both onto the authority’s books, a total of about $188 million -- affords the authority freedom to issue future bonds for capital and maintenance needs.

It also ends, for now, the immediate question of whether to privatize the expressway or continue operating the system through the regional authority that is the RMA.

“There’s also been some conversation about privatization and the Public-Private Transportation Act, and us repaying the subordinate debt does not preclude a firm from making a proposal in the future with regard to the RMA,” Berry told the board Tuesday afternoon. “I think we are in a position to carry out the wishes of the board at this point.” Shortly afterward, the board voted to approve the deal.

Whether or not the board carried out the wishes of the public, however, is another matter. For weeks, Mayor Dwight Jones has pressed for the authority to repay the city’s long-lost $62 million, but in doing so the RMA is pushing back the city’s ownership rights to the expressway. The authority has been operating for years with the goal of paying off the expressway’s debt by 2022, at which point the road would revert to city ownership. Because it brings in $35 million in tolls a year, and net revenue of $10 million, many believe the toll road would fetch hundreds of millions in a privatization deal.

With the bond issue that was approved Tuesday, the city wouldn’t gain ownership until 2041.

Having to wait to gain ownership, however, may not be as important as the potential political fallout. At various points over the years, there have been efforts in the General Assembly to strip away some of the city’s seats on the RMA’s board. Richmond’s mayor appoints six of the 11 board members; Chesterfield County appoints two; Henrico County appoints two; and there’s a seat reserved for a state transportation official.

With more than 60 percent of expressway commuters coming from Chesterfield, the argument goes that the county needs more representation on the board. Previous efforts in the Statehouse have largely failed, however, because the city put up all of the land for the expressway system as well as the money in the early years when tolls weren’t enough to cover bond payments.

Now, with the city getting its $62 million, some fear that a new push in the statehouse to strip seats away from the city will gain traction. If that happens, the city’s reversion right could be in jeopardy.

“The minute the city of Richmond receives that subordinate debt [the $62 million], I will bet my last dollar that the General Assembly will change the composition of the board,” says City Councilman Bruce Tyler, who attended Tuesday’s meeting. “The only argument we have is that it’s all in the city of Richmond. I wasn’t born yesterday.”

In the end, whether Tuesday’s vote negates any future debate over privatization is still an open question. After the vote, City Council’s land use committee approved a resolution asking the RMA not to take action on the refinancing deal it had already approved. The resolution, which now goes before the full City Council, also requests the authority conduct an independent analysis of the refinancing and possible alternatives. The resolution, of course, appears to be moot.

Whether the RMA or the city still explores privatization of the toll roads is also unclear. Abertis, a transportation company based in Barcelona, is working on a proposal to present to the RMA, perhaps as early next week. In an interview Monday afternoon, Jordi Graells, president of Abertis USA, told Style that if the current deal went through it wouldn’t automatically negate their proposal. It might mean, however, that the company’s planned proposal to pay $250 million for a 30-year concession deal -- based on minimal toll increases, adjusted only for inflation -- may simply mean less of a payday for the city.

“We could just still go for the deal,” Graells said, adding the caveat: “The more debt that the RMA accumulates, the less value of the concession.”

As for the lack of substantive debate, at least on Tuesday, James Jenkins, chairman of the RMA board, says the authority has been working on the refinancing package for months. He also mentions that the authority puts its toll road patrons first.

“We had a unanimous Chesterfield Board of Supervisors who passed a resolution asking us to wait on a toll increase, and we didn’t do that, because we found it was in the best interest of the RMA to move forward,” Jenkins says, referring to the last time the authority raised tolls, in 2008, from 50 to 70 cents.

The real question, of course, is whether privatization would unleash the demons that the authority and the mayor predict -- rapidly escalating tolls. Graells says the tolls wouldn’t have to be raised significantly in a private deal, and could be structured to allow increases based only on the rate of inflation. In a letter to the authority’s board Tuesday morning, attorney Thomas Wolf, who is representing Abertis, argues that privatization would lead to greater efficiencies -- at less cost to toll-road users.

“Over the last 15 years, the RMA has authorized two toll increases that imply an average annual toll escalation on the Expressway of 4.73%. That rate increase is greater than the rate increase contemplated by many concessions, assuming normal levels of price inflation,” Wolf writes.

Berry, the RMA’s general manager, says he hasn’t received an official proposal from Abertis, or Washington, D.C.-based Carlyle Infrastructure Partners, which submitted a letter of interest that Berry received “during dessert” at Tuesday’s lunch meeting.

Afterward, however, Berry says it’s “unlikely” that Abertis could finance their deal with minimal toll increases.

It’s also just as likely that the city never really finds out.

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