State planning more carefully for public-private toll roads

By Ariel Hart

The Atlanta Journal-Constitution

It’s a meeting in late fall of Georgia Department of Transportation board members who deal with public-private partnerships, and from all appearances the world is about to change.

After years of stumbles, the state at last has a workable plan to make multibillion-dollar toll roads happen with the help of private investors. The packed room pulses with determination, excitement and the presence of executives with deep pockets.

And yet it seems as if Georgia has been down this road before, although DOT officials are sure the lessons they have learned will help them reach their destination this time.

The scene above played out earlier this month, as the DOT rolled out its project proposals, including a new toll road in Gwinnett County and a system of optional HOV toll lanes in metro Atlanta, starting with I-75 and I-575 in Cobb and Cherokee counties and the western quadrant of I-285.

But it was also the scene in 2005, when the DOT signed its first partnership, to develop those toll lanes along I-75 and I-575 — a partnership that the DOT has just sundered.

And with a few tweaks, it could describe the day in 2007 when the DOT stopped letting contractors call the shots and launched a proposal of its own, for I-20 — which then withered.

When state law in 2003 first allowed private investment in public toll roads, some state leaders saw it as the key to addressing Atlanta’s congestion. But Georgia’s program has sputtered so badly since then that even the DOT board member leading policy for the program, David Doss, admitted this month, “We’ve got a pretty big hole to dig out of.”

However, he and other state officials say that after the latest rewrite of the legislation this year, the state really does have it right this time. They say their stumbles trod a straight path from a mistaken philosophy — allowing companies to cherry-pick projects and set the state’s agenda — to a workable one where the state holds the reins.

Whether that’s true remains to be seen. But two things are clear: Georgia’s approach has indeed changed. And even so, that doesn’t mean success will come easy.

On the bright side, the state is not only picking its own projects now, it’s picking them as part of a holistic plan, which DOT officials and the governor’s office say is driven by well-thought-out, objective measures. Failed ideas have run their course, such as truck-only toll lanes or tolling all lanes of a road that’s already built and free.

Unfortunately, while state officials were learning their lessons, the world outside changed. The sour economy hurt project financing. Grand visions for privatization such as the proposed 4,000-mile Trans Texas Corridor took a dive. Georgia’s governor got six years closer to leaving office, meaning commitment at the top to project plans here could change before any construction begins.

Earl Mahfuz, the staff director of the DOT’s public-private toll program, acknowledged the challenges. But he noted shriveling gas tax revenues and said the need for private dollars would convince policy-makers they had to make it work.

In addition, new leaders in Washington don’t like privately funded toll roads as much as their predecessors did.

When Transportation Secretary Ray LaHood came to Atlanta in September, he said he wasn’t aware of a project under way in the northeast metro area to launch optional HOV toll lanes, which may form the bedrock of the Atlanta toll system. The tolls will be charged by electronic sensors without tollbooth stops, and the price will rise and fall with congestion in order to keep traffic flowing. Funded with a $110 million federal grant, that first project on I-85 in Gwinnett County was part of the signature transportation initiative of the Bush administration. The idea is to get a foot in the door for a larger system, which could then draw private investors.

LaHood didn’t much like it.

“How do you tell taxpayers that their hard-earned money was used to build a highway, and oh, by the way, now we’re going to toll it?” he told The Atlanta Journal-Constitution. He said he favors using tolls to build new roads, though, and in any case Congress would weigh in on the big decisions.

Even if the policy-makers stay behind Georgia’s optional toll-lane proposal, which would include both tolling existing HOV lanes and building new lanes, it is going to take more than spare change. The whole system could cost $16 billion, though DOT Planning Director Todd Long emphasized the state could build only the most important parts. If such expensive projects are to win private dollars, they had better be good.

“The way it was four years ago is not the way it is today,” said Chee Me Hu, senior vice president at Moody’s Investor Service. “There are fewer private-sector partners. By necessity they’re being a lot more selective. ... The projects have to have really good value.” Still, Hu praised Georgia’s new systematic approach at a recent conference, saying it could set an example.

In the past, Doss said Georgia’s history of killing proposals or letting them stall made private investors shy away. Now, he says they’re still interested.

If anyone might be scared off by Georgia’s history, it’s Bill Berry. He used to represent the group that launched Georgia’s maiden public-private toll proposal, to rebuild Ga. 316 and toll all its lanes. The public rebelled, the project was shelved, and the DOT adopted a policy against tolling existing regular-traffic lanes. Berry once described those events as a “nightmare.”

But Berry, now vice president for market development at the Australian firm Transurban, said he is still interested in competing for DOT business. He sees big differences now, including a better planning process.

That will help, but challenges remain.

“It’s going to take a couple, three or four years to really get this program moving, get projects procured, get them closed, financing closed,” Geoffrey Yarema, chairman of the infrastructure practice group at the Nossaman law firm, told DOT board members. “So that political support over time is going to be crucial.”

Gov. Sonny Perdue leaves office in January 2011.

“We’re on the same page as far as putting the process in place,” Perdue spokesman Bert Brantley said. “The rub will be in the details. ... You won’t know until you start seeing what the financing plans look like, what is the public portion to be contributed and how the state is able to afford that.”