Yes, Virginia is Santa Claus

Virginia Governor Bob McDonald will finance 83% of a $1.4 billion to build a new U.S. 460 from Suffolk to Petersburg. The remaining 17% will have the benefit of a tax free bond designation

The state will contribute $903 million, the Virginia Port Authority $250 million and the rest will be tax exempt bonds from the Route 460 Funding Corporation of Virginia.  Earlier financing reports mentioned possible federal loan funding for the project. 

Private companies behind the deal include Ferrovial Agroman, S.A. and American Infrastructure. 

Private equity underwriters wanted in on the deal, but their expected 20% annual returns made the project too expensive. 

State officials ditched plans to use private equity when it became apparent that such a financing model would produce tolls that were twice as high or higher than the current rates, Layne said.

“If we did attract equity, it was going to be very expensive,” he said.

Rather, the state now plans to create a special nonprofit corporation, controlled by appointed board members, that will issue debt for the work. Layne said he will serve as chairman of the corporation. The state will own the road and maintain it.

The mostly public equity project involves interest costs.

The public contribution will come from a transportation fund that McDonnell established with bonds intended for public-private partnerships and “mega” transportation projects.

Who carries the burden of this interest expense? Please tell me, Governor.  The only role for US 460 Mobility Partners is designing and building the road.

"The private-sector team will design and build the project at a fixed cost by a fixed date and will take significant risks associated with delivering the project.

Given America's longtime experience with road building, I find it hard to believe there are significant risks in the Governor's contract.  What's 460 Mobility Partner's fee for building the new 460?  Is it 3% of the project, $42 million?  Might it be more?

It's an odd public-private partnership. 

VDOT, in coordination with the Office of Transportation Public-Private Partnerships, procured the project under Virginia's Public-Private Transportation Act, which allows the Commonwealth to partner with the private sector to finance, design and build transportation improvements. 

The Commonwealth brings the lion's share of funding.  One could view Virginia as Santa Claus in this deal.