Behind the deal flow in Dixie

As governor of Virginia, current Senate candidate Tim Kaine was a keen backer of privatisation. Generally not to his enormous benefit.

“I took a black eye,” he admitted.

Kaine in October was a featured guest speaker for the CG/LA North America Strategic Infrastructure Leadership Forum in Washington, D.C. His term in office lasted from 2006 to 2010, and his administration was pivotal in establishing the state of Virginia as a premier public-private partnership (PPP) adopter in the US.

But Kaine, a Democrat, was not bitter. Partnering with the private sector paid off, in his opinion. In particular, he considered privatising certain transportation infrastructure especially economically effective.

“Infrastructure spending is kind of double-plus spending because, in the short term, infrastructure spending is a job creator, but in the long term, a platform for economic success,” he told the audience.

And anyway, despite taking the occasional shiner, Kaine, a long-time practicing lawyer, managed to duck more than a few.

That was the case with the Downtown Tunnel /Midtown Tunnel/Martin Luther King (MLK) Freeway Extension PPP. The $2.1 billion project called for a newly constructed two-lane 10-mile tunnel as well as a renovation of the existing Midtown Tunnel and a lengthening of the MLK Freeway. The contract, which carried a 58-year concession agreement, was awarded to East River Crossing, a consortium teaming Sydney, Australia-headquartered Macquarie Group and Skanska Infrastructure Development from Sweden.       

Conceived when Kaine was governor as the Midtown Tunnel Corridor Project in 2007, the PPP reached financial close in April of this year – a year when, according to a recent estimate from the Virginia Department of Transportation (VDOT), Old Dominion will reach financial close on $5 billion worth of business.

‘THE LIST’

With that figure, Virginia, in a banner year for Stateside PPPs, will far outstrip any other US municipality as the top deal-closer in 2012.

The runner-up is probably Puerto Rico, pitting consortia led by Macquarie Infrastructure and Real Assets (MIRA) and $5.5 billion fund manager Highstar Capital in the competition for a likely multi-billion lease of the Luis Munoz International Airport – a bidding war overseen by the Puerto Rico Public-Private Partnerships Authority (PPPA). Next is California, where the $1.1 billion Presidio Parkway project in San Francisco hit financial close June 15, with Hochtief PPP Solutions North America and Meridiam Infrastructure North America winning a design, build, finance, operate and maintain contract and 30-year concession.

All told, a little more than $10 billion in PPPs are expected to achieve financial close this year – and Virginia, for one, has more on the horizon.

In addition to the closed Downtown Tunnel /Midtown Tunnel/MLK Freeway Extension and its $940 million Interstate 95 High Occupancy Vehicle (HOV)/High Occupancy Toll Lanes (HOT) Project and $1.7 billion US Route 460 road extension – both expected to close soon – VDOT last month unveiled a tentative 22-project pipeline.

A full list of each project is available on the Website of the Office of Transportation Public-Private Partnerships (OTP3), which Virginia created in 2011 to manage the Public-Private Transportation Act of 1995 and which is headed by Tony Kinn. The OTP3 is asking for private sector feedback on its possible transportation PPPs, a list covering mostly road work, such as corridor improvement, as well as the recent request for proposals (RFP) issued in May after the state received an unsolicited bid for the Port of Virginia. 

The OTP3 was created by current governor Bob McDonnell who, like his predecessor Kaine (whose own predecessor, Democrat Mark Warner, did not support PPPs), is pro-privatisation.

COMMITTED CURRENT LEADERSHIP

McDonnell is a Republican who became governor in 2010, and his administration made relieving traffic congestion and supporting commerce a priority. Shortly after his term began, McDonnell issued a $3 billion transportation bond package, then applied to the Federal Highway Administration (FHA) to give Virginia permission to toll.   

While VDOT Secretary Sean Connaughton, former head of the US Maritime Administration, has talked about the June spate of draft PPPs as part of a more comprehensive approach, McDonnell has publicly stated he has no intention of suspending his use of the Public-Private Transportation Act.