In the early 2000s, the Procuring Authority began advancing plans for a traditional highway expansion to help address growing congestion on the Capital Beltway I-495 in Virginia. The plan faced significant opposition from the community, because it was considered unaffordable, required the demolition of more than 350 homes and businesses, and did not provide the transit options needed to support the local business district. In 2002, the private sector proposed an alternative plan under the Public Private Transportation Act - to build four new HOT lanes that would expand capacity and deliver new travel choices, including a network for buses and carpools. The Procuring Authority embraced the proposal. A partnership with the private sector and tolling would help the Procuring Authority deliver improvements more quickly and with fewer tax dollars, provide new travel choices, and reduce impacts on the community and the environment. The new approach would also reduce the number of homes which needed to be demolished from 350 to just eight.
The Procuring Authority advanced a competitive procurement, a series of environmental reviews, and a public engagement process for the new project. In 2005, local leaders voted to include HOT lanes as part of the region's long-range transportation plan. In 2007, the Procuring Authority finalised a long-term partnership agreement with the Project Company to design, build, finance, operate, and maintain the USD $2.069 billion HOT lanes project.
The Project Company's equity investors provided a substantial upfront equity commitment to help fund construction and financed the rest of the project through Private Activity Bonds (PABs) and a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan. PABs are tax-exempt bonds issued by or on behalf of local or state government, to provide special financing benefits for qualified projects. The financing is most often for projects of a private party, and the government generally does not pledge its credit. The TIFIA loan program has a strategic goal to leverage limited Federal resources and stimulate capital market investment in transportation infrastructure by providing credit assistance in the form of direct loans, loan guarantees, and standby lines of credit (rather than grants) to projects of national or regional significance. The arrangement enabled the state of Virginia to leverage private capital to translate every state tax dollar into four dollars of transportation improvements.
According to the project website1, the project supported 31,000 jobs and injected approximately USD $3.5 billion into the economy. The Project Company contracted USD $490 million of work to disadvantaged businesses and small, women-owned, and minority-owned businesses, which was the largest contribution in Virginia's history for such businesses for a single transportation project at the time.
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