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Posted at 1:55 PM ET, 09/14/2010

Privatization proves difficult in two Va. deals

By Peter Galuszka

Gov. Robert F. McDonnell's plan to privatize the state-owned Alcoholic Beveral Control stores has finally emerged as a complicated scheme involving fees, excise taxes and six-figure purchases of state licenses.

But it's not the only privatization plan in the Old Dominion that seems to have a lot more confusion than clarity, not to mention devilish details. Plans to privatize the Port of Hampton Roads have fallen apart, and another public-private scheme to build a new toll road from Interstate 95 to Hampton Roads will proceed only if the state comes up with cash.

Last week, Transportation Secretary Sean Connaughton pulled the plug on three proposals to operate the Virginia Port Authority facilities in Norfolk, Portsmouth and Newport News. One was from CenterPoint Properties, an Ilinois-based company; another was by a partnership of Carrix Inc. of Seattle and Wall Street giant Goldman Sachs, and the third was from Washington-based Carlyle Group. All were submitted in 2009.

Problem was, the proposals were embarrassing lowballs based on 2009 traffic, when the Great Recession had crunched cargo shipments. Upfront cash offers ranged from $250 million to $750 million -- not exactly big bucks.

It isn't certain whether the proposals will survive or be withdrawn.

And McDonnell has been forced to change his plans for the new superhighway by throwing an undisclosed portion of state cash into the deal. Since doing so, the state may have some serious offers.

McDonnell badly wants a privatized superhighway through the peanut country of Suffolk and other southeastern counties to Petersburg to replace pokey U.S. 460 and offer a safety valve for the clogged U.S. 64 on the Peninsula. It could offer Washingtonians a faster way to the sands and shores of Virginia Beach.

McDonnell tried the idea without any state money, and it flopped. But once he put up some public money, bidders showed up. They include 460 Partners, which includes Skanska USA Civil Southeast, AECOM and Bank of America; Multimodal Solutions LLC, including constructon giant Kiewit Cnstruction, the Louis Berger Group and Autostrade; and finally, Spain's Cintra Infraestructuras S.A.U., a leading global infrastructure construction outfit.

It isn't clear how the financing will work, but proposals in 2006 flopped in part because they called for tolls of $13 per vehicle for a 55-mile trip.

So McDonnell is 1-1 on these deals. Once again, privatization is proving a difficult panacea for the state's fiscal shortfalls. One of the hardest aspects is setting a fair price for assets that taxpayers have spent millions building up. Another is guaranteeing that private partners won't walk away with the store and that taxpayers get a fair long-term return.

Peter Galuszka blogs at Bacon's Rebellion. The Local Blog Network is a group of bloggers from around the D.C. region who have agreed to make regular contributions to All Opinions Are Local.

By Peter Galuszka  | September 14, 2010; 1:55 PM ET
Categories:  HotTopic, Local blog network, Va. Politics, Virginia, development, economy, energy, environment, real estate, taxes, traffic, transportation  
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McDonnell has accomplished exactly nothing as governor except to diminish the reputation of the Commonwealth. His thinking is a triumph of rigid adherence to ideology regardless of the facts. While he and Kookinelli pursue their harebrained schemes, Virginia's roads deteriorate, the state's educational system suffers, and the budget shortfalls remain. What a buffoon.

Posted by: Bob22003 | September 14, 2010 6:05 PM | Report abuse

The problem with the ABC privatization plan is it makes a lot of guesses and hopes for the income to go with them. I haven't seen where after ten years the state will recieve as much revenue through privatization as if it maintained the current program. It also has other problems discussed elsewhere related to why have a state owned system vs private. I don't see this coming to fruition. I'm still waiting for the Repubs to fix the transportation probs in VA. Making every problem area a toll road seems to be their only solution. Why should I pay a toll for a road that I have paid to build ? New roads okay and make them pay for it with no guarantees.

Posted by: Falmouth1 | September 15, 2010 6:14 AM | Report abuse

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