When the Metropolitan Washington Airports Authority board voted last week to spend another $300 million for an underground Metro station at Washington Dulles International Airport, the price tag of Dulles Rail Phase Two jumped to $3.83 billion — or $1.33 billion more than the MWAA’s original estimate.
The vote also exposed the incredibly rickety financial structure underlying this billion-dollar boondoggle.
General obligation bonds, which are based on a municipality’s ability to impose taxes,are generally used to finance public projects like parks and schools. In contrast, revenue bonds, which will be used to finance Phase Two, are backed only by specific future revenue streams.
Revenue bonds are riskier because they can go into default if the revenue predictions don’t materialize. For instance, in January 2010 the Las Vegas Monorail Co. filed for Chapter 11 bankruptcy after attracting less than half of an anticipated 19 million riders.
The monorail’s bond insurer also filed for bankruptcy, so bond holders will likely recoup just $18.5 million out of $451.4 million they invested in these AAA-rated, tax-exempt revenue bonds.
The MWAA’s problem is that three-quarters of Phase Two’s $3.83 billion cost will come from revenue bonds secured by future tolls collected on the Dulles Toll Road. But in order to raise enough money to pay off the principal and interest, tolls would have to rise to $15 — one way — by 2030, costing the average commuter $7,500 per year.
“Under current projections, tolls would have to go up to $2.50 per mile, compared to 25 cents per mile on Maryland’s Intercounty Connector and 20 cents per mile on the private Dulles Greenway,” Chris Walker, president of the Dulles Corridor Users Group, told The Washington Examiner. “Nobody’s going to pay tolls that are 10 times higher than the ICC.”
But the MWAA needs to raise $1.1 billion annually by 2053 to pay off the revenue bonds. If traffic volume on the toll road decreases, the MWAA will be in a real pickle. MWAA board member Frank Conner, one of four to vote against the underground station, candidly acknowledged that under the circumstances, securing financing for Phase Two is far from certain.
Then Virginia Transportation Secretary Sean Connaughton threw in another monkey wrench. After expressing his “disappointment” with the underground station vote in an April 6 letter to MWAA Chairman Charles Snelling, Connaughton informed Snelling that the commonwealth “views the alignment as an airport improvement rather than part of the rail project. Therefore, it is not considered a financial commitment to the rail project, local partners, the Dulles Toll Road or the Commonwealth.”
In other words, if the MWAA wants to spend another $300 million, go right ahead, but the authority can pay for the underground station itself.
Then there’s Loudoun County, which is also balking at the prospect of getting trapped in this growing financial morass. Under the funding agreement, Loudoun’s Board of Supervisors is legally required to vote on whether to participate in funding Phase Two within 90 days of receiving the completed preliminary engineering report.
But the MWAA has no contractual obligation to provide supervisors with a traffic or revenue analysis, leading Loudoun Board Chairman Scott York to speculate that “it could end up costing more to ride the toll road than it could to ride the Metro.”
So Loudoun supervisors are expected to vote blindly on an issue of paramount concern to tens of thousands of their constituents with no public hearing, no traffic or revenue analysis, no nothing. Dulles Toll Road users are supposed to just shut up and pay — but continue driving on the toll road, of course, because if they don’t, Dulles Rail’s shaky financial scaffolding collapses under its own substantial weight.
Barbara F. Hollingsworth is The Examiner’s local opinion editor.
