Can Private Equity Save The Dulles Rail?

Or maybe a better question is should private equity take over?

Several private equity investors such as Carlyle Group are reviewing proposals to partner with Virginia for a rail line to Dulles International Airport as hope fades that the federal government will help fund the 23-mile Metrorail extension.

"It does have the characteristics of a project that we would like to be involved with," said Robert W. Dove, co-head of the Carlyle Infrastructure Fund. He noted that his fund, with assets exceeding $1 billion, looks for such public works as highways, bridges and tunnels in which to invest.

The attraction for Carlyle is the steady revenue from tolls, he said. One possible scenario would be a long-term lease arrangement in which Carlyle owned both the toll road and the rail line, with Metro still in charge of the transit operation.

"Metro would run it, but someone would make a payment to us for making it available every day," he said.

Private purchase of the rail line or the Dulles Toll Road to fund the extension would attract strong opposition from those who believe such public infrastructure is far too valuable to hand over to for-profit corporations. But with the outlook for keeping the rail project alive bleak, regional business and political leaders who are adamant that the rail line must not die are increasingly of the mind that private partnership must be considered.

By Dan Beyers  |  January 28, 2008; 7:45 AM ET
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I find it interesting that law makers who appear to have no back bone at the moment when it comes to this Tunnell Tyson's children's play group, would suddenly grow a back bone with a private equity group that has the means to actually get something done. This project should have been started years ago and if it's not already super obvious the federal gov't doesn't care about the city of DC by not giving them a congressional seat, we'll just chalk this up to just one more slap in the face by the leaders of "Democracy".

Posted by: "Fed" Up | January 28, 2008 11:58 AM

Private Purchase of the Dulles Toll Road would be outrageous. Dulles Toll Road is already very expensive and is only used by those people who can afford paying a lot of money for their daily commute.

The Toll Road should be for the benefit and for the use of everyone -- not just the selected few who can pay for it.

Posted by: AC | January 28, 2008 1:37 PM

I hope that, if private equity is brought into the Dulles Rail project, that regulators are cautious about the financing terms.
The Dulles Toll Road is run by VDOT and the toll is about $0.75. The Dulles Greenway is run by an Australian infrastructure company named Macquarie and the toll is about $3.50. The Greenway is the most expensive toll road in the country.
The Greenway is saddled with about $900M in debt while the cost to build it was less than half that. Commuters are the ones that pay the price of the debt.
This region badly needs the Dulles Rail in some shape or form. But running a metro rail is very expensive and a for-profit enterprise will forever be able to justify rate hikes. Regulators should be very cautious and ensure that the cost to commuters is reasonable and in line with other metro systems.

Posted by: UncleLongHair | January 28, 2008 5:26 PM

As expected, once the federal government refused to pay for any part of this boondoggle, the focus shifted to how Toll Road drivers could be milked to pay for 100% of the rail line, rather than 60% to 75%. "Private" money (with risks 100% assumed by taxpayers) is the latest grift.

The plan works like this: Sell the toll road for $2 billion or so, commit $1 billion to rail, and waste the other $1 billion on spending outside Northern Virginia. The private company then raises tolls to $10 or whatever it wants, puts about half the money into rail, and keeps the other half. If toll revenues are not enough to ensure a rich profit for the developers, taxpayers will be called on to fill the shortfall.

This is already the model being used for the HOT lanes on the Beltway and I-95 - only in the Toll Road's case it is an entire highway that will become unaffordable to the working public, not just some "Lexus lanes".
Don't be surprised if this is proposed, it is up to the voters to prevent it (if we can - remember the toll increase that was slid through with no public input) or make it clear that we will throw the bums out and elect someone who cares about the taxpayer more than their big money donors.

Posted by: Restart From Scratch | January 28, 2008 9:32 PM

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