Project Financing and Implementation

Although VDOT and ERC had taken several steps to lower toll rates, the realization that tolls would be introduced on the existing tunnel crossings in September 2012 was drawing an increasingly negative response from local Tidewater residents and many elected officials in Virginia as the project neared financial close. In March 2012, a group of local residents and business owners opposed to tolls began preparing a lawsuit challenging the legality of the P3 procurement approach used to implement the project and the introduction of tolls on the existing crossings. In response to the growing opposition to tolling, VDOT and ERC executed a contract amendment that would allow the governor of Virginia to delay the collection of tolls on the tunnels. In April 2012, just days after ERC reached financial close, the Commonwealth Transportation Board unanimously approved a measure to allocate an additional $100 million in state funding in order to delay the introduction of tolls until the beginning of 2014. Like the state's initial subsidy, the funding for the additional $100 million would come from state bonds on future federal transportation funding that were later issued in July 2012.

In spite of these steps, discontent over the prospect of tolls on the crossings continued to grow. In July 2012, the tolling opponents sued VDOT and ERC, arguing that the imposition of tolls on the existing tunnels was a tax that neither VDOT nor ERC had the authority to levy. The group collected over 10,000 signatures, and meanwhile groups elsewhere in the state were mobilizing to contest the governor's plans to introduce tolling in other locations. The anti-toll movement was embraced by a number of state legislators who introduced a bill in January 2013 to change several important components of Virginias Public-Private Transportation Act that would have ended the use of partnership projects in the Commonwealth.

The bill was not passed, but on May 1, 2013 a Virginia circuit court judge issued a decision on the lawsuit against VDOT and ERC, agreeing with the plaintiffs that the tolls were unconstitutional. Recognizing that the ruling would jeopardize the state's ability to embark on partnership projects, VDOT and ERC sought to appeal to the Supreme Court of Virginia. The Supreme Court agreed and heard final arguments in the appellate case on September 11, 2013. Then on October 31, 2013 the Supreme Court issued a unanimous decision reversing the earlier ruling, concluding that the tolls were a user fee rather than an unconstitutional tax. The Supreme Court's decision could not be appealed and tolling on the existing Downtown and Midtown Tunnels began on February 1, 2014.

In spite of risk of a negative outcome to the lawsuit, ERC continued project construction throughout 2013. The new Midtown Tunnel carrying eastbound traffic opened June 17, 2016, allowing the rehabilitation of the existing Midtown Tunnel to begin. That work will continue through mid-2018. Initially one lane was made available; the second lane opened during morning rush hours in mid-October. ERC completed rehabilitation of the Downtown Tunnel on August 17, 2016, and opened the MLK Extension on November 30, 2016. All three elements opened prior to the original schedule's end of 2016. The total cost of the Downtown Tunnel / Midtown Tunnel I MLK Expressway Extension project is $2.089 billion. This includes $1,494 million for construction, $113 million for operations and maintenance during construction, and approximately $482 million in interest, reserves, insurance, and development costs. ERC's 58-year operating period will extend through 2070.