VDOT launched its multi-phased procurement process for the combined Downtown Tunnel / Midtown Tunnel / MLK Expressway Extension by issuing a Solicitation for Conceptual Proposals for the design, financing, construction and operation and maintenance of the project in May 2008. The solicitation did not specify the length of time the private partner would operate the completed project and collect tolls, but it did state that no public funding would be available to support the implementation of the project.
When the conceptual proposals were due in September 2008, VDOT received only one response to its solicitation. The offer was submitted by Elizabeth River Crossings, LLC, or ERC, which was a special purpose company composed of two partners: Skanska, a Swedish contractor and infrastructure developer with involvement in several other transportation partnership projects; and Macquarie, a large Australian investment bank with extensive toll road holdings. VDOT confirmed that ERC's proposal met all the state's legal requirements, so it advanced the proposal for subsequent review by an Independent Review Panel appointed by the Secretary of Transportation in early 2009.
Later in the year at the recommendation of the Independent Review Panel, the Commonwealth Transportation Board approved VDOT's entering into an Interim Agreement with ERC to assess the project's financial viability in greater detail and obtain environmental approvals for the combined project. VDOT and ERC signed the Interim Agreement in early January 2010. At that time no public funding was available for the project and ERC's financial analysis indicated that the project could be financed using toll revenues alone during the 58-year operating period with a one-way crossing toll of $2.86 for automobiles and three times that amount for trucks upon opening. VDOT and ERC recognized that the high toll rate would be problematic and agreed to explore what could be done to lower it during negotiations that followed the execution of the Interim Agreement.
VDOT received its final environmental approval in April 2011 and ERC began detailed design work for the project. By the summer of 2011, VDOT and ERC reached agreement on the business terms for the private financing, which were formalized in a Comprehensive Agreement executed in December 2011. VDOT and ERC agreed on a series of steps that enabled them to reduce the starting toll to $1.84 during peak travel periods and $1.54 at other times for automobile crossings. They achieved this by introducing tolling on the two existing tunnels during the construction period and increasing toll rates for trucks to four times those of automobiles. In addition, after opening, toll rates for both automobiles and trucks would increase by the cost of inflation or no less than 3.5 percent each year. In addition, VDOT had agreed to contribute $308 million in public funding to help offset the cost of the project. VDOT planned to raise the funds for its non- reimbursable contribution using bonds issued by the state against future federal transportation funding. The bonds were placed on March 1, 2012 and were a particularly innovative financing solution, as this form of grant anticipation had never been used before to support a P3 project.