Using Public-Private Partnerships to Move More People The Story of HOT Lanes in Northern Virginia January 30, 2017 Morteza Farajian, Ph.D.

Overview of P3s Definition P3 Defined A P3 involves a partnership between the public and private sector to share the risk and rewards of constructing, financing, operating, and/or maintaining what are traditionally publicly-owned assets in order for projects to be completed faster, on budget, and at an enhanced value for money to the owner Why Utilize P3s? Innovation leading to more cost effective delivery and long term operations Flexibility through private financing and funding regimes Integrated services Outcome-based performance Budget certainty over the ‘whole life’ of an asset Accelerated project delivery Risk transfer to the private sector

Ingredients for a successful P3

P3 Guidance Documents Commonwealth’s PPTA Implementation Manual & Guidelines (2014) Increases Transparency Increases Competition Increases Public Engagement P3 Risk Management Guide P3 Value for Money Guide P3 Public Engagement Guide

P3 Project Delivery Framework

P3 Project Screening High-Level Criteria: Detail-Level Criteria: Ability to Transfer Risk Funding Requirement Ability to Raise Capital Complexity of Effectively Leveraging Private Sector Innovation/Expertise Addresses Priorities in State, Regional and/or Local Transportation Plan Project Efficiencies through P3 Delivery Detail-Level Criteria: Public Need and Benefits Economic Development Market Demand for P3 Delivery Stakeholder Support Technical Feasibility Systematic Interface and Compatibility Financial Feasibility Legal/Legislative Feasibility Project Risks

Case Study: Northern Virginia 495 Express Lanes

Northern Virginia Express Lanes Network A 90+ mile seamless network of express lanes will provide faster and more reliable trips for drivers, carpoolers, and transit users in Northern Virginia.

Typical Express Lanes Facility

How Northern Virginia’s Express Lanes Work I-495 Express Lanes: 14 miles of Express Lanes - 2 lanes in each direction I-95 Express Lanes: 29 miles of Express Lanes - reversible according to peak travel directions Dynamic system with variable tolls manages traffic Mandatory E-Z Pass for all users HOV-3, transit and motorcycles ride toll-free with E-ZPass Flex Rules of the road are in effect 24 hours a day, seven days a week

495 Express Lanes Partnership Nearly $2 billion transportation improvement project accelerated due to public-private partnership with Transurban-Fluor Funded by $1.5 billion in private equity and debt and state contribution of $409 million Key risks transferred to private partner, away from taxpayers 80-year partnership agreement shifting long-term operations and maintenance responsibilities Partnership agreement includes key provisions to protect public interest Revenue sharing No non-compete Transparency Long-term performance requirements

Key Benefits: 495 Express Lanes Began construction July 2008, opened Nov. 2012 – ahead of schedule Added 50% capacity to manage congestion Replaced $260M of local aging infrastructure First major improvement to the Capital Beltway in a generation First-time opportunity for ride-sharing, carpooling and use of mass transit Connected four major commuter routes creating seamless HOV and transit network Three new access points to major retail and employment centers

I-66 Outside the Beltway Express Lanes Recently Procured: I-66 Outside the Beltway Express Lanes

Project Scope

Summary of Requirements Maximum amount of Commonwealth contribution is $600M. Other sources of Project financing include: Private equity TIFIA Private Activity Bonds (PABs) Commonwealth receives funding (fixed amounts) for transit elements of Project. Commonwealth receives $350,000,000 in net present value over term of contract from the Developer that can be used for future corridor enhancements. Commonwealth will receive a share of the revenue if Project generates more revenue than expected.

Competitive Procurement Process

Preferred Proposer Best value proposal Express Mobility Partners Equity Investors Cintra Global LTD, Meridiam Infrastructure North American Fund II Design-Build Contractors Ferrovial Agroman US Corp, Allan Myers VA, Inc. $2.3 billion construction project Provides required transit payments and support of corridor improvements Will make concession fee payment ($500M) to Commonwealth Construction design provides innovative solutions to improve the physical quality and operations of the project

Other Benefits to the Commonwealth $500M now available for additional improvements to the I-66 Corridor subject to VA Code requirements (§33.2-1528) $300M will return to the Northern Virginia Transportation Authority for other key regional projects $300M will return to the High Priority Project Program in SMART SCALE for statewide competition

THANK YOU Morteza.Farajian@P3.virginia.gov VirginiaDOT.org