Governor McDonnell Announces VDOT And ERC Reach Financial Close on Midtown Tunnel Project in Hampton Roads Region

Governor McDonnell Announces VDOT And ERC Reach Financial Close on Midtown Tunnel Project in Hampton Roads Region
Toll collection delay pending action by the Commonwealth Transportation Board; Construction to begin on new Midtown tunnel, MLK extension and other improvements by summer 2012

From the office of Gov. Bob McDonnell

RICHMOND – Gov. Bob McDonnell announced today that the Virginia Department of Transportation (VDOT) and Elizabeth River Crossings (ERC) reached financial close to begin construction on a new Midtown Tunnel. Financial close releases all funding needed to build the $2.1 billion project, which also includes extending the Martin Luther King (MLK) Boulevard and rehabilitating the existing Midtown and Downtown tunnels, providing a network of transportation improvements and congestion relief to motorists in the Hampton Roads region. Construction will begin as early as summer of 2012.

Toll collection, originally scheduled to begin in late summer, may be delayed until January 2014 pending action by the Commonwealth Transportation Board (CTB) to allocate funding. The governor is requesting the CTB allocate funds for this purpose. The project will be financed through tolls, initially ranging from $1.59 to $1.84 per car for the tunnels and $.50 for the MLK Extension for tunnel users and $1 for non-tunnel users. This is approximately 40 percent lower than the $2.89 toll rate originally estimated. The interim agreement was signed in January 2010 before the McDonnell administration took office.

“I am requesting the Commonwealth Transportation Board (CTB) allocate up to $100 million to cover the costs of delaying tolls until January 2014. This is in addition to the significant funding VDOT has already contributed to the project to the lower tolls,” said Gov. McDonnell. “VDOT has also implemented a second toll relief measure. The parties have agreed to limit toll charges for High Street ramps to be built on the new MLK Extension. Vehicles entering or exiting the new extension from the High Street or London Boulevard ramps and taking a local trip in Portsmouth will not be required to pay tolls.”

Anticipated funding for the toll delay will largely come from funds set aside for the state’s contribution at financial close that were not needed due to current low interest rates. VDOT will present the governor’s request to the CTB at its April 18 board meeting in Richmond.

Under the Public-Private Transportation Act (PPTA), VDOT continues ownership of the infrastructure and oversees ERC’s activities. ERC will finance, build, operate and maintain the facilities for a 58-year concession period. ERC also assumes risk of delivering the project on a performance-based, fixed-price, fixed-date contract, protecting users and taxpayers from cost overruns and delays. In addition, ERC will be responsible for long-term routine and life-cycle maintenance of the project for the term of the concession.

“Financial close marks a significant step forward for transportation improvements in Hampton Roads,” added the governor. “We would like to thank the U.S. Department of Transportation for approving a $422 million TIFIA loan to help pay for construction, making financial close possible and lowering the projected tolls. Once this project is completed, motorists will save about a half-hour round trip everyday plus benefit from a much improved transportation network that will better connect the region, stimulate the local economy and create jobs.”

Because of the low interest rates and flexible repayment terms, demand for loans made under the Transportation Infrastructure Finance Innovation Act (TIFIA) is strong among states across the country. Due to the importance of the project and the firm commitment of the public and private partners, ERC was granted $422 million to build the Midtown project. ERC will pay off the TIFIA loan through toll collection.

“The Midtown Tunnel project is ranked as the number one transportation priority by the region’s leaders and is the largest project to get under way in the region in almost 30 years,” said Transportation Secretary Sean T. Connaughton. “Procurement as a public private partnership is the only feasible way to fund a project of this magnitude, and that depends on tolls.”

“VDOT and ERC are ready to begin this project now,” said VDOT Commissioner Greg Whirley. “The existing Midtown Tunnel is a half-century old and in dire need of expanded capacity for the sake of safety, reduced congestion, better travel times and improved connectivity. The project not only involves building a tunnel, but improving the transportation network in the region.”

Background information

The key components of the project include:

  • Listed as the region’s top priority by the Hampton Roads Transportation Planning Organization and local elected leaders
  • Doubling the capacity of the Midtown Tunnel by building an additional two-lane tunnel near the existing one under the Elizabeth River
  • Reduce congestion that now causes back-ups stretching over two miles at the tunnels during peak periods – will lower fuel consumption and emissions
  • Commuters to save an average of 30 minutes per day
  • Reduce traffic (including heavy truck traffic) on Portsmouth city streets
  • Increasing transit service between Portsmouth and Norfolk
  • Rehabilitating the existing Midtown Tunnel and both of the Downtown Tunnels
  • Extending the Martin Luther King Boulevard from London Boulevard to I-264, with an interchange at High Street
  • Modifying the interchange at Brambleton Avenue/Hampton Boulevard in Norfolk
  • Financed through tolls, initially ranging from $1.59 to $1.84 per car for the tunnels and $.50 for the MLK Extension for tunnel users and $1 for non-tunnel users. This is significantly lower than the $2.86 toll rate estimated when the interim agreement was signed in January 2010 before the McDonnell administration took office
  • Tolls will be collected electronically using E-ZPass, eliminating the need for toll booths
  • More than 500 jobs will support construction activities and another 1,000 jobs in other sectors of the local economy. ERC plans to spend over $550 million on construction materials and supplies as well as provide subcontracting opportunities to disadvantaged business enterprises and small, women-owned, and minority businesses.
  • When completed in 2018, the project is expected to cut round-trip travel time by a half-hour a day. Results will be improved safety, reliability and connectivity to the region’s transportation network.


  • The comprehensive agreement was signed last December for a value of $2.1 billion. This includes total project costs such as financing, designing, building, maintaining and operating the tunnels and the MLK extension
  • Project and its financing mechanism were endorsed by the Hampton Roads Transportation Planning Organization and local elected leaders in January 2012
  • VDOT’s contribution is more than $300 million specifically designated to lower the tolls by 40 percent compared to initial rates under the interim agreement signed in January 2010. Funds provided are from the Governor’s 2011 Transportation Funding Package.
  • VDOT’s contribution is reduced from $362 million because it was able to secure a lower interest rate at financial close. Money saved will go back into toll relief
  • The U.S. Department of Transportation provided a $422 million low interest TIFIA loan. This loan enabled the toll rates to be reduced to current levels.
  • The comprehensive agreement requires ERC to take full responsibility to design, finance, build, operate and maintain the project. ERC is investing a significant amount of their own equity and is borrowing another $1.1 billion at their risk to build the project. ERC is solely responsible for obtaining and repaying all project debt.
  • Toll escalation limited to the greater of 3.5 percent or changes to CPI. This is comparable to annual increases in VDOTs operations and maintenance costs.
  • The comprehensive agreement does not guarantee a profit to ERC and the agreement has controls in place so ERC’s return stays at a reasonable rate. Revenues from toll collection must first be used to pay operations and maintenance expenses, debt, taxes and reserve accounts before any possible return would be realized by ERC’s equity investors.
  • Should gross toll revenues reach a certain level, a percentage of the revenues would go to VDOT, which would be used for transportation improvements in and around Portsmouth and Norfolk.

Online resources:

Comprehensive Agreement:

Amendment #1 to Comprehensive Agreement that provides VDOT with option to delay tolls:

Amendment #2 to Comprehensive Agreement that limits tolls on MLK Extension:

Project website:

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