Friday, May 03, 2013

Bob McDonnell's Gift to Virginia - $1 Billion Bill for Tunnel

The antiquated Mid-Town Tunnel

In general rather than raise taxes and revenues for transportation, Governor Bob McDonnell and the Republican Party of Virginia have pursued "public-private partnership" projects which generally equate to private interest being given the right to screw the taxpaying public.  A case in point is the deal for construction of a second Mid-Town Tunnel tube that basically gives taxing powers to VDOT and private interests.  On Wednesday, a circuit court judge ruled that the deal violates the Virginia Constitution.  The result?  Virginia may be on the hook for the $1 billion project.  This disaster, combined with the growing Star Scientific scandal, would seem to make McDonnell's national aspirations about as unsinkable as the Titanic.  An article in the Virginian Pilot looks at the court ruling and possible fall out.  Some of the comments are delicious and would underscore that McDonnell's "legacy" may be tanking fast.  Here are some highlights:

The state would be on the hook for more than a billion dollars of debt if a judge's ruling striking down the Midtown and Downtown tunnel tolls stands, according to a ratings agency.

Portsmouth Circuit Judge James A. Cales Jr. declared the tolls unconstitutional Wednesday, saying the General Assembly exceeded its authority by delegating to the state transportation department "unfettered power" to set the rates "without any real or meaningful parameters."

Gov. Bob McDonnell said the state will appeal the decision to the Supreme Court of Virginia, and representatives from the Virginia Department of Transportation and its private partner said work will continue on the $2.1 billion project.
The plaintiffs in the lawsuit that led to Cales' ruling have maintained since filing their challenge in July that the state was proceeding with the project at its own risk.

Fitch Ratings told investors in an April 9 report that if the litigation stopped Elizabeth River Crossings from collecting tolls, the state would be required by its contract to repay the debt that has been incurred for the project.

That amount includes $663.75 million in private bonds that were issued in April 2012 and a $422 million federal loan, according to the Fitch report. Elizabeth River Crossings bears the risk of repaying that debt under the normal terms of its agreement with the state, with tolling.

Fitch assigned a rating of BBB- on the debt, the lowest rating for investment-grade debt. Ratings lower than that fall into a category that investors consider speculative, said Scott Zuchorski, Fitch's primary analyst on the Elizabeth River Crossings account.
"If it's not resolved by the end of next January, then it could become more interesting," Zuchorski said.  Ratings downgrades cause the price of bonds to fall, potentially leading to losses to investors.

Again, for real fun, read subscriber comments on the piece.

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