“Portsmouth Takes a Hit from Tunnel Construction”

The City of Portsmouth has been clobbered by the imposition of tolls on the Midtown Tunnel and Downtown Tunnel connecting the city to Norfolk, and hammered again by construction-related disruptions to service on the tunnels. Combined, the impact of tolls and disruption have reduced quarterly taxable sales by $24 million annually, materially harming businesses and crimping tax revenue, finds James V. Koch, president emeritus of the economics department at Old Dominion University in a new study.

In the report, “The Impact of Tolls on the City of Portsmouth: The Evidence 15 Months Later,” Koch is especially critical of the Virginia Department of Transportation (VDOT) and its private-sector partner, the Elizabeth River Company (ERC), for providing motorists inadequate warning of the interruptions to traffic disruptions, thus creating widespread uncertainty among discretionary drivers “east of the river” who might otherwise travel to stores, recreation, churches or social gatherings in the city. “In many drivers’ minds, tunnel closures have become sufficiently unpredictable that they are not going to take chances,” he writes.

Koch does not criticize the decision of VDOT under the McDonnell administration to impose tolls on the formerly toll-free tunnels in order to finance construction of new tunnel lanes and related land-side transportation improvements to alleviate some of the worst traffic congestion in Hampton Roads. Benefits will be felt throughout the region. But he does note that Portsmouth is suffering disproportionately.

Says Koch: “My rough estimate is that Portsmouth is impacted 31 percent more than Suffolk by the tolls and closures, 459 percent more than Norfolk, and 616 percent more than Virginia Beach.”

Bacon’s bottom line: It’s no surprise that imposing tolls where there were none imposes economic pain. What I find most interesting is Koch’s conclusion that the impact of construction-related disruptions was almost as severe — $10 million of the $24 million — but could be partially mitigated if ERC and VDOT did a better job of alerting drivers, either through advertising or signage, of those disruptions. That is a management issue, not an inevitable consequence of the construction project.

Koch thinks the hit to taxable sales could get worse this year and next. However, the region should start feeling the benefits when the project is complete. As Koch writes:

When all of the construction is completed (and setting tolls aside), the cost of driving in and out of Portsmouth will decline. Vehicles will be able to travel at higher speeds, fewer traffic jams will confer time savings, travel will become much more predictable, vehicle wear and tear will decline, and there will be diminished pollution. To the extent these reductions in costs exceed the size of the tolls being paid, they will make Portsmouth a more attractive place to live and/or to locate a business.

From a macro-economic perspective, Portsmouth may wind up better off in the long run. But that won’t be much consolation to the businesses that Koch thinks very well could go out of business in the meantime. VDOT and ERC need to act quickly to mitigate what harm they can.