Responding positively to its unsolicited proposal, VDOT reached an agreement-in-principle with Transurban in May 2006 to lease the Parkway for 99 years in exchange for a payment of $522 million. The state used the concession payment to retire $450 million in outstanding debt issued by the Pocahontas Parkway Association and compensate VDOT for its operating costs.
Under the agreement, the state maintains the right to terminate the concession after the first 40 years, but would have to refund the concessionaire's equity investment and pay off any outstanding debt. The agreement gave Transurban the right to set toll rates up to a cap of $2.25 until 2007. Rates could then rise to $3.00 by 2012. From 2012 to 2016, rates were allowed to increase $0.25 per year. After 2016, the maximum toll increase per year is based on the highest of increase in GDP per capita, increase in CPI, or 2.8 percent.
The concession agreement also includes a revenue-sharing clause entitling VDOT to 40 percent of gross toll revenues if the concessionaire's rate of return is 6.5 percent or higher. If the concessionaire's rate of return exceeds 8 percent, VDOT is entitled to 80 percent of toll revenues. The agreement also includes a non-compete clause where VDOT must compensate the concessionaire for any lost revenue from the construction of new crossings of the James River within three miles of the Parkway.
As part of the agreement, Transurban also agreed to build the $45 million Richmond Airport Connector. The construction of the connector was contingent upon Transurban receiving a $150 million loan from TIFIA, a federal credit program that provides low-interest loans for revenue-generating transportation projects. The size of the TIFIA loan was determined through a financial analysis that showed that $150 million for construction and refinancing was the minimum amount required to incentivize Transurban to assume the risk of constructing a much needed airport connector roadway that was not financially feasible otherwise.
Transurban pursued its unsolicited offer to lease the Pocahontas Parkway because it believed that over the long-term the road would be a financial success. The road provided access to vast tracts of land prime for residential and commercial development, and the corridor provided an alternate route to the airport. Transurban believed that the profits generated in the concession's later years would offset potential losses due to low traffic levels in its early years.
Transurban installed a new toll collection system in November 2009 allowing customers with E-ZPass transponders to travel through the toll plaza at highway speeds. Transurban hoped that this improvement would entice more motorists to use the Parkway and reduce the amount of revenue lost to toll violators.