VDOT and Transurban - Part 2

So, I have my doubts about how viable this toll road is (8.8 mi, $2.75 one-way) given that it connects together two Interstate highways, and not much else. But they may have an actual, real solution. The Airport Connector.

The original agreement with Transurban requires them to build a 1.6 mile connector to the south end of the Richmond airport. This $50M connector will save travelers up to 10 minutes of travel time!

I guess they've done a sophisticated analysis of airport user patterns to determine how all of this will work. From their advertising though, travelers going east onto I-295 will pay $1.25, and the travelers going west will pay the full $2.75.

How much does this make for them? Well, that's where you need that sophisticated analysis.

Right now RIC gets about 3.5M passengers per year. Unfortunately, the April 2009 statistics show travel was down 2.6% from the year before. Well, it's the economy again.

Yeah, and in April 2008 the travel was down 4.0% from 2007. And in April 2007 it was up 4.0% from 2006. So, I guess about the best we can say is that their passenger traffic is flat.

Even so, if half the passengers use the connector (1.75M/yr), and 50% each go east and west, then the roundtrip cost of $4.00 (average) comes out to an increase in tolls of $7M per year. Not bad! An increase of over 50% from what they're collecting now.

Except...did you notice the problem? The assumption that 50% of travelers arrive via the connector? Via the Parkway?

Why would anyone coming from east of the airport arrive that way? They wouldn't.

Why would anyone coming from the north in Henrico or Hanover come that way? They wouldn't.

Why would anyone coming from the West End come that way? They wouldn't.

Why would anyone coming from Richmond come that way? Maybe a few would, but most wouldn't.

That leaves the south end, Chesterfield, Petersburg, and the surrounding areas. Convenient for them, so they'll use it. But is it enough to pay another $50M in loans plus operating and maintenance expenses?

VDOT and Transurban - Part 1

In May 2006 the Virginia Department of Transportation (VDOT) and a consortium including the Australian corporation Transurban signed an agreement under which Transurban will operate the Pocahontas Parkway (State Route 895) as a toll road. This route connects Interstate 95 to Interstate 295 just south of Richmond.

In the agreement, Transurban agreed to pay the Commonwealth an estimated $552 million plus a percentage of the toll revenues above Transurban's operating and maintenance expenses. Transurban agrees to operate the toll road for 99 years, and will be required to build a 1.6 mile connector road to Richmond International Airport.

So, how's that working out? Click on the the picture.

Traffic in the last year is down 14.6%. Revenue, despite an increase in the toll, is down 2.8% to a total of about $13M per year.

Their annual report notes that traffic grew during the first half of the year, and then dropped in part due to the toll increase, and of course the mandatory "economic conditions".

I think they should elaborate a bit on these economic conditions that are affecting them.

Are they talking about high gas prices affecting overall driven mileage? If so, that hardly explains the drop in traffic compared to the same time last year. The first quarter of 2009 had gas prices that were about $1 per gallon lower than a year ago.

A decrease in commercial traffic? Well, maybe. It certainly can't all be a decrease in just non-commercial travel. People still need to get home every night.

Right now the real problem is that this road doesn't go anywhere. It connects together two roads that intersect both north and south of this location. They are also connected by several other free roads. So why use the toll road?

In any case, revenue of only $13M per year is going to be a problem in trying to pay off a $552M debt while paying for operations and maintenance as well. Do you suppose that their financing is as cheap as 2%? If so, their interest payments alone are $11M per year.

Overall, it doesn't appear from their corporate financial statements that toll roads are doing that well. Through the end of FY2008 they lost $140M. Still, that was better than the preceding year when they lost $152M.

So how long, at this rate, until they come back and want to revise the terms of the deal?