The 495 Express Lanes in Northern Virginia are bleeding money.
Since opening on Nov. 17, 2012, the EZ Pass-only toll lanes running 14 miles along the Beltway between the I-95/I-395 interchange and Dulles Toll Road have struggled to attract motorists. And although the number of drivers using the lanes and toll revenues show steady growth, both figures continue to fall below the projections of the private sector firm that mostly paid for and built the highway: Transurban, the Australia-based construction conglomerate.
$51 million in losses
In a conference call with investors earlier this month, Transurban CEO Scott Charlton defended the firm’s $1.4 billion investment in the $1.9 billion road, according to a report in theNewspaper.com, an online journal about driving. The 495 Express Lanes lost $51 million in 2013. Charlton is quoted telling investors, “We think there is long term value here, recognizing that this is a 75-year concession period."
Transurban makes up the private piece of the public-private partnership that saw Virginia contribute only $400 million to the highway’s total cost. Transurban will receive the bulk of the toll revenue for the next seven decades as a return on its larger investment. So far the investment is not working out.
The firm already is restructuring $430 million in debt from the project and asking investors put more money into the lanes, according to the online report. “Traffic and revenue has remained below our project case expectations,” Charlton is quoted as saying. The expected slow ramp-up of traffic volume is going slower than the company anticipated, even in one of the most congested corridors in the Washington, D.C. region.
In an interview with WAMU 88.5 FM, Transurban spokesman Michael McGurk downplayed the 495 Express Lanes’ early struggles.
“This is really a testament to our long-term commitment to the project and to the region,” McGurk said. “Frankly, it is an outstanding example of the public-private partnership model working exactly as it is intended to work. The private partner on this project, Transurban, assumed the risk. What you are seeing now is our confidence in the long-term and our willingness to invest to get the project on sustainable footing.”
People are driving less
Certain long-term trends don't bode well for the 495 Express Lanes. The lanes charge drivers a toll depending on distance and congestion, a plan known as dynamic pricing.
From 2005 to 2011 the Washington metropolitan area’s population grew by 350,000 to 5.1 million people, an increase of 7.3 percent. During the same six-year period, total daily driving stayed about the same — around 110 million vehicle miles per day, according to data compiled by the National Capital Region Transportation Planning Board. The result was a 6.1 percent drop in driving per person from 22.9 miles a day in 2005 to 21.5 miles a day in 2011.
“Vehicles miles traveled in this country essentially peaked in 2005,” said Joshua Schank, the president of the Eno Center for Transportation, a D.C.-based research group. “We are seeing trends that show diminishing growth in travel by car, and more people are choosing either to forgo driving on congested highways every day for a lifestyle that allows them to walk, take transit or bike.”
Demographics are changing, too.
“What we’ve seen in the D.C. area over the last decade is an infusion of younger people who are choosing to live in the city for longer periods of time and forgo car ownership for longer periods of time than in previous generations,” Schank added.
Why such a tough sell?
Despite the move away from the single-occupant vehicle, congestion still remains a terrible problem in Northern Virginia. To anyone who drives I-495 north toward the American Legion Bridge it would appear Transurban has plenty of potential customers who might prefer to try the congestion-free toll lanes.
Moreover, Tysons Corner is anticipating a large job and population boom over the next several decades, adding potential toll road users. And the 95 Express Lanes, also built by Transurban, are scheduled to open early next year. Schank said the new highway will help feed drivers onto the 495 toll lanes.
“That will be a huge help. The more consistency in pricing, the more you are going to see the benefits to the types of pricing structures on 495,” Schank said. “In other words, if we have mostly free highways like we do now and only a small segment is priced, that’s not only confusing for drivers, it is also unusual and they are more reluctant to pay for it. But if the whole system becomes a network of toll lanes that enables people to get where they need to go faster, then people are going to see more value in that, and you are going to see a much greater uptick in use.”
Other long-term prospects may hurt the Express Lanes’ business model. The expected rise of autonomous vehicles and, even sooner, connected car technology could make the construction of new highway capacity unnecessary decades from now. Such vehicles would efficiently use the existing road space, ending waves of stop-and-go congestion and preventing most crashes. “Autonomous vehicles are going to fundamentally transform our transportation system. Problem is no one reatlly knows exactly how,” Schank said.
Transurban has conceded it needs to improve its public outreach efforts to educate the driving public about the layout of the highway and where to get EZ Pass. The firm’s figures indicate many Express Lanes users are whizzing under the toll gantries without the EZ Pass transponder. It collected $11.6 million in tolls but also issued $3.2 million in fines and fees last year, according to the report published by theNewspaper.com.
“We’re still focused on our efforts to get out EZ Pass and promote unders
anding of the access points to the 495 Express Lanes,” Transurban’s McGurk said. “Some of our recent research has shown us that drivers are comfortable with using the lanes to and from work, but they might be harder to convince to use some of the new entry and exit points around Tysons.”