DALLAS -- Virginia officials would have to notify lawmakers and the public of potential risks to the state from any new transportation public-private partnership under revised procurement guidelines proposed Tuesday by the director of the commonwealth's transportation P3 office.
J. Douglas Koelemay, director of the Virginia Office of Public-Private Partnerships, told the Commonwealth Transportation Board that the proposals provide a decision matrix that requires the panel's review and approval at three major crossroads of a P3 project's development.
The transportation board will have the responsibility to review the financial risks involved before any state money is spent on a P3 project, before it goes into the procurement process, and before a final contract is signed, he said.
"There will be no quiet decisions made," Koelemay said.
The state's P3 steering committee authorized by the Public-Private Transportation Act of 1995 will be expanded to include members of the transportation board, leaders of the state House and Senate transportation committees, and a financial expert from a non-transportation state agency, he added.
There will be regular briefings on proposed projects to legislative leaders as well as additional public communications and a more comprehensive web site, Koelemay said.
The CTB is expected to adopt the P3 guidelines at its November meeting.
The review and update of the existing P3 guidelines were prompted when Virginia Transportation Secretary Aubrey Layne Jr., halted further state spending on the controversial $1.4 billion Commonwealth Connector P3 project in January to await further environmental studies. Gov. Terry McAuliffe in March ordered the private partner-contractor to halt its work on the toll road project until environmental reviews are completed in early 2015 of four proposed routes and a no-build option.
A preliminary draft of an environmental study released last month said building the project along the original route through sensitive environmental areas could cost as much as $1.8 billion.
Layne, who chairs the transportation board, said the new P3 procedures would better identify how risks will be allocated between the state and its private partner, how the selected partner will be compensated, and the benefits to the taxpayer of the risk shift.
"With guidelines like this in place, we would have never gotten to the point we did and spend the money we did on the Route 460 P3 project," he said. "We fully understand the need for more accountability and transparency in the process and we believe it should be a more competitive process, too."
Former Gov. Bob McDonnell awarded the design-build contract for the Commonwealth Connector project to US 460 Mobility Partners, a joint venture of Ferrovial Agroman of Spain and American Infrastructure, in 2012. The U.S. Army Corps of Engineers cautioned the state against going ahead with construction of the road project before it received final environmental clearance.
The problem with the US 460 project is that the state took all the risk that the environmental permit can be obtained, Layne said.
"The attention was not on the P3, the attention was on how the state evaluated the risk," he said. "It was not because it was a P3. It could have been any project."
Funding for the 55-mile Commonwealth Connector project, which would parallel the existing U.S. 460, includes $294 million of toll-backed tax-exempt private-activity bonds issued in late 2012 by the Route 460 Funding Corp. of Virginia, a non-stock, nonprofit IRS 63-20 corporation.
The funding corporation in December 2012 sold $231.7 million of 40-year senior lien bonds and $62 million of 40-year capital appreciation bonds, both supported by toll revenues.
Layne told a legislative committee in April that Virginia may not be able to recover the $400 million to $500 million of state money already spent on the project if it is canceled over environmental concerns.
