Pocahontas 895 is likely to have a new operator soon, as creditors prepare to take control of the underperforming, state-owned toll road that crosses the James River between Chesterfield and Henrico counties.
Transurban, the publicly traded Australian company that began operating the highway for Virginia in 2006, confirmed Thursday that it will transfer the toll-road agreement with the state to a consortium of European banks that hold more than $300 million in debt on the toll project. The project also must repay a $150 million federal loan.
“Pocahontas 895 is not generating enough revenue to cover its debt payments,” said Pierce Coffee, marketing director for Transurban’s North American operations, based in Alexandria.
The company board of directors voted Thursday in Australia to approve the transfer, but Coffee said the timing and new structure of the operation, including who will operate the toll road, remain unknown.
Coffee said the move will not affect service for people who use the toll road, formerly known as Pocahontas Parkway or Interstate 895, and will not expose Virginia to any financial loss under a 99-year operating agreement with the state, which still owns the road.
“With this transfer, there is no financial obligation or risk to Virginia or taxpayers,” she said.
Coffee said that whoever operates the toll road for the creditors will be subject to oversight by the Virginia Department of Transportation and be bound by current schedules for levying tolls. Currently, the toll for a two-axle vehicle is $3.25 each way during peak commuter hours and $3 on non-peak hours on weekdays. The toll drops to $2.75 on weekends.
“It’s not going to be any different for the state and the customer,” she said.
Pocahontas 895 was the first project approved under the Public-Private Partnership Transportation Act, a 1995 state law that has come under greater scrutiny after a Portsmouth judge ruled recently that the state had unconstitutionally ceded its taxing authority to a private entity to levy tolls for a controversial tunnel project in Hampton Roads.
Virginia Secretary of Transportation Sean T. Connaughton is scheduled to appear Monday before the House Appropriations Committee, which called for the secretary to answer questions about the potential effect of the court ruling on the state.
Connaughton said Thursday that the problems faced by the Pocahontas project validate “the intent and expectations” of the law, which shifted the financial risk of operating the road from Virginia to private investors.
“While we are disappointed about the outcome, the taxpayers are protected and the road will still be there to serve the citizens and businesses that use it,” Connaughton said in an email message to the Richmond Times-Dispatch.
The reason for the impending transfer is an economic challenge that has faced the project since its conception in the mid-1990s by a joint venture of Fluor Daniel and Morrison Knudsen.
The Henrico County Industrial Development Authority, as it was known then, refused to issue $325 million in tax-exempt bonds for the project in 1996 because it questioned whether the toll road would generate enough revenue to pay them off.
Ultimately, a nonprofit corporation called the Pocahontas Parkway Association issued more than $350 million in tax-exempt revenue bonds to build the 8.8-mile road, linking Interstate 95 at Chippenham Parkway with Interstate 295 in eastern Henrico.
Subsequently, Transurban financed the construction of a $50-million, 1.6-mile connector road that opened in 2011 to link Pocahontas 895 to Richmond International Airport.
But the revenue to support the project debt didn’t measure up to projections, largely because of downturns in air traffic at the airport and the collapse of the housing market for new communities such as Wilton-on-the-James and Tree Hill Farm, both planned in eastern Henrico.
“We’re certainly disappointed that the growth didn’t come,” Coffee said.
Transurban wrote off the $138 million in equity it had in the road a year ago. Subsequently, it attempted to restructure the financing of the project but could not because of the difficulties facing the European banks that own the debt, she said.
Henrico and Chesterfield officials said they are aware of the possible transfer of the toll road to the creditors, but say they don’t know the details or expect the change to affect the localities.
“We obviously have an interest in what occurs with the road,” said Henrico County Manager John A. Vithoulkas. “But ultimately, the road is a state road.”
Chesterfield County James J.L. Stegmaier said he had gotten “a heads-up that something was coming,” but he’s not concerned about the outcome.
“If the ownership is flipped, it doesn’t really change the operation of the facility,” Stegmaier said.