I-95 HOV/HOT Lanes, Northern Virginia
The I-95 HOV/HOT Lanes project will create approximately 29 miles of reversible high occupancy toll (HOT) lanes along the I-95/I-395 corridor between Fairfax and Stafford Counties in the northern Virginia suburbs of Washington, DC. The project will convert 20 miles of existing HOV lanes to HOT lanes; widen 14 miles of the existing reversible HOV lanes from two lanes to three lanes; and construct a nine-mile extension of the lanes to the south of their current terminus. The project also includes the addition of new direct access points to the managed lanes and improvements of existing access points.
The $969 million project is being implemented as a design-build-finance-operate-maintain (DBFOM) public-private partnership (P3) between the Virginia Department of Transportation (VDOT) and 95 Express Lanes LLC (95 Express), a private consortium owned by the Australian toll road operator Transurban Group (90 percent) and Fluor Enterprises (10 percent). 95 Express will assume construction and operations risks on the project and receive all toll revenues over a 76-year concession period.
The partners in 95 Express also lead the private consortium that developed and now operates the I-495 Capital Beltway Express Lanes. The two facilities will have a direct connection at the I-495/95/395 Springfield Interchange, and will have common tolling operations and policies, with toll rates adjusted dynamically based on real-time traffic conditions and free access provided to transit vehicles and carpools with three or more occupants (HOV-3).
The existing reversible lanes on I-95/395 in northern Virginia are among the oldest HOV lanes in the U.S. The 11-mile segment of the lanes inside the Capital Beltway, originally designed as an exclusive busway, was opened to carpools with four or more occupants (HOV-4) in 1973 (changed to HOV-3 in 1989). In 1997, VDOT completed a 19-mile extension of the lanes to their current terminus at Route 234 in Prince William County. Since that time, local and intercity passenger and freight travel on I-95 and I-395 has continued to grow, leading to ongoing efforts to address traffic concerns in the corridor.
In 1995, the Virginia state legislature passed the Public-Private Transportation Act (PPTA), which authorized VDOT and other public agencies to enter into long term concession agreements with private firms to develop and/or operate transportation facilities, and laid out a framework for evaluating proposals and developing such agreements.
In September 2003, a group led by Clark Construction and Shirley Contracting submitted an unsolicited P3 proposal to VDOT to convert the existing I-95 HOV lanes to HOT lanes, while also widening the existing lanes and extending them to the south. Consistent with the PPTA, VDOT then invited requests for competing proposals from developers, and received one response, from Fluor and Transurban (which were then negotiating a P3 agreement with VDOT for the Capital Beltway HOT Lanes). Following an internal review and the submission of detailed proposals by both teams, an advisory panel recommended that VDOT proceed with the Fluor-Transurban (FTU) offer in November 2005. VDOT and FTU then signed an interim agreement in October 2006 to move forward with preliminary engineering and detailed planning and operations studies for the project, with the costs of those studies to be shared between VDOT and FTU.
Under the FTU proposal, the entire existing HOV facility on I-95/395 from would be widened to three lanes and converted to HOT lanes. The lanes would also be extended by 25 miles southward to Spotsylvania County, and include the creation of an integrated Bus Rapid Transit system throughout the length of the 56-mile corridor. Under the financial projections in the proposal, toll revenues were expected to be sufficient to fund a $250 million upfront payment to VDOT that could be applied toward the costs of operating transit service in the corridor, in addition to covering other capital and operating costs of the project.
In January 2009, FHWA issued an environmental clearance for the northern section of the project covering improvements to the existing lanes; this action became the subject of a lawsuit filed by Arlington County claiming that the environmental analysis did not satisfy federal requirements. In February 2011, with the lawsuit pending, VDOT made the decision to scrap the final six miles of the project through Arlington County and Alexandria and terminate the HOT lanes just inside the Capital Beltway. FHWA cleared a new environmental assessment for the re-scoped proposal in December 2011.
VDOT and 95 Express executed a concession agreement in July 2012 to develop the first phase of the project, including improvements to the new lanes and the initial nine-mile extension (the remaining 16 miles of the extension will be developed under a separate project at a later date). The developer also reached financial close on an issue of private activity bonds (PABs) at that same time, and subsequently closed on a TIFIA loan for the project in November 2012.
Construction on the project began in August 2012, and the entire 29-mile HOT lane facility is expected to be operational in early 2015.
Project Financing and Delivery
The concessionaire’s long-term financing sources for the I-95 HOV/HOT Lanes project include a $253 million PABs issue; a $300 million subordinated TIFIA loan; and $280 million in private equity. The PABs, which are the senior debt on the project, were issued in two tranches with terms of 22 and 28 years. All financing sources for the project are backed by tolls and other project revenues.
VDOT also directly contributed $83 million toward the costs of the project at financial close, using a combination of Federal and state funds. This represented a significant departure from the developer’s original proposal for the project in 2005, which had anticipated a payment to VDOT as part of the concession. The elimination of the segment inside the Beltway from the project (which had been expected to produce significant net revenues from toll-paying users of the lanes), due to the Arlington lawsuit, played a key role in this shift in the cost burden for the project. VDOT also incurred an additional $46 million in costs for preliminary engineering on the project under the 2006 interim agreement.