Case Studies

Location: Greater Richmond, Virginia

P3 Option: Lease Develop Operate

Mode: Toll Road

Description: The Pocahontas Parkway (Route 895) is an 8.8-mile tolled highway seven miles south of Richmond, Virginia. The four-lane road connects Chippenham Parkway at I-95 in Chesterfield County with Interstate 295 south of the Richmond International Airport in Henrico County. Construction began in the fall of 1998 and the Parkway was opened to traffic in stages beginning in May 2002. The facility includes high-level bridge over the James River and an interchange at Laburnum Avenue.

After 18 months of negotiation between the Virginia Department of Transportation (VDOT) and Transurban (USA), a private Australian toll road operator with subsidiaries in the U.S., Transurban executed an Asset Purchase Agreement with the Pocahontas Parkway Association (PPA) and entered into the Amended and Restated Comprehensive Agreement ("ARCA") with VDOT on June 29, 2006. Under the terms of those agreements, Transurban has acquired the sole rights to enhance, manage, operate, maintain and collect tolls on the Parkway for a period of 99 years. Transurban has also defeased all of PPA's underlying debt.

Sponsor: VDOT and 63-20 corporation Pocahontas Parkway Association (PPA), established to finance the Pocahontas Parkway project.

Cost: Original construction: $381 million

2006 Long Term Lease: $548 million and the construction of a 1.58-mile, four-lane extension to Richmond International Airport.

Type of Finance: Financing for Transurban's long term lease is comprised of:

The TIFIA funds refinanced approximately $95 million of the long-term senior bank debt, and paid for the $7 million needed to upgrade the electronic tolling systems and approximately $48 million towards the construction of the airport connector.

The original financing package was comprised of:

Revenue Sources: Tolls

Project Delivery / Contract Method: Design Build

Private Design Build Partner: Built by a joint venture of Fluor Enterprise and Morrison Knudsen (now URS) with oversight from VDOT.

Underwriters: Bear Stearns / Lehman Bros.

Project Advisors:
Nossaman, Guthner, Knox & Elliott, LLP
Christian Barton
Public Resources Advisory Group

Lenders: Bondholders

Physical Status: Partial opening, May 2002. Complete opening, September 2002.

Financial Status: Closed

Innovations: First construction project implemented under Virginia's Public-Private Transportation Act of 1995 (PPTA).The Pocahontas Parkway was only the second transportation project nationwide to be financed through a 63-20 corporation.

This creative financing approach is why the Pocahontas Parkway could be built without a 15-year delay to assemble financing. Only $27 million of the Parkway's total $381 million price tag came from public funds. The vast majority of the original funding was raised through the sale of private bonds, which minimized the risk to both the localities and the taxpayers.

The TIFIA loan represents the first time that eligible TIFIA projects costs include the cost of refunding long-term project debt.

Related Links / Articles:
Pocahontas Parkway Website
The Pocahontas Parkway's website is maintained by Transurban and provides information on its use, project updates, and other customer service functions.
VDOT PPTA Documentation on the Pocahontas Parkway
VDOT's Business Center coverage of the state's Public-Private Transportation Act (PPTA) provides a wealth of documentation related to the Pocahontas Parkway. Included are 28 project documents (agreements and contracts) that help illustrate the process of executing a P3.
Coverage of the Original 63-20 Financing
The summer 2000 issue of FHWA's Innovative Finance Quarterly contained an article summarizing the Pocahontas Parkway's original use of 63-20 financing.
SEP-15 Application [pdf 4.80 MB]
A SEP-15 process was used for the TIFIA loan to deviate from "eligible project costs" and allow a portion of it to finance the construction of the Richmond Airport Connector.