Virginia Court Rules in Favor of Private Road Deal

The ruling means that Virginia -- a national leader on public-private partnerships -- will likely continue its tolling push.

Advocates are hailing a Virginia court ruling for public-private partnerships as a step forward following fears that a legal challenge could have threatened the future of the deals in a state nationally known as a leader on road privatization.

Critics of a toll road project alleged in a lawsuit that Virginia's state legislature unconstitutionally delegated its taxation powers to the state department of transportation and private companies via  the state's 1995 P3 law.

But in a Thursday ruling, the state's supreme court ruled that the tolls couldn't be considered taxes, and the state legislature hadn't illegally delegated its powers.

The case focused on the $2 billion Elizabeth River Tunnels Project in Virginia. The undertaking includes a slew of projects including a new two-lane tunnel connecting the cities of Portsmouth and Norfolk, as well as improvements and maintenance to two existing the tunnels.

Residents of the area had opposed the move, since the work would be paid for by imposing tolls on all three tunnels. The existing Midtown and Downtown tunnels hadn't been tolled until now.

Groups that advocate for public-private partnership roads (P3s) warned that a lower court ruling, which sided with the residents, could have had huge implications, threatening current projects and effectively banning P3s in the state going forward.

Moreover, many other states have crafted P3 legislation similar to that of Virginia, according to the American Road and Transportation Builders Association. If Virginia's supreme court hadn't overturned the ruling of the lower courts, P3 opponents in other states might have been inspired to pursue similar challenges.

"Today’s ruling thankfully allows officials in the Commonwealth of Virginia to continue to embrace tolling as a proven, reliable funding method that is already delivering results in 34 states across the country," said Patrick D. Jones, CEO of the International Bridge, Tunnel and Turnpike Association, in a statement.

In a lawsuit, those plaintiffs had said the new tolls should be considered taxes -- not user-fees -- since there is no other way for them to move about the region that's bisected by the Elizabeth River. They argued that the state had essentially allowed the private-sector to tax residents, since the company building the tunnel would get to set those tolls.

A lower court agreed with that line of reasoning, but the state supreme court disagreed. In its ruling, justices said the tolls are, in fact, user-fees -- not taxes -- since drivers get access to an improved transportation network directly as a result of paying them.

The court also emphasized that they are considered user-fees, since the revenue goes directly back into the project -- not into the general fund. Justices emphasized that drivers aren't compelled to pay those tolls if they avoid the tunnel, pointing out "reasonable alternative routes" between Portsmouth and Norfolk besides the tunnels, including two bridges that aren't tolled.

According to the Virginia Pilot, the region's High-Ridge Bridge is 12 miles from the Downtown Tunnel by interstate; congestion there and at another crossing, the Gilmerton Bridge, is expected to worsen since trucks will try to avoid the tunnel tolls.

Construction began in June 2012. The ruling means that the new tolls will begin starting in February as planned.

"While we understand the financial impact this toll will have on local commuters, the Elizabeth River Tunnel project is a necessity to ensuring ongoing safety and economic development in the region," Gov. Bob McDonnell said in a statement following the ruling.

Officials with the company building the bridge says the ruling will allow them to re-focus on the work since its future is more certain.

Tolls for light vehicles in the tunnels will be $1.59 during off-peak hours and $1.84 during peak hours.  Tolls will rise at the same rate at 3.5 percent or the rate of inflation -- whichever is higher. The company building the project says the average user of the facilities will save about 30 minutes a day on their commutes.

Norfolk Mayor Paul Fraim said in a statement that the projects are critical to the region's economic growth, bu the tolls are "excessive." He called on the governor and legislature to try to amend the financing of the project  to reduce the burden on residents of the region.

Communications manager for the Texas Medical Center Health Policy Institute