The Link: LINK

The Story: An informal survey conducted by the Virginia-Pilot newspaper indicated that CenterPoint may already have enough City Council support for its industrial park along Holland Road.  While the project isn’t officially to be voted on until January 2, six of the eight council members had positive things to say about the project.

The Analysis: The big issue with this project has never been about the current or future zoning of the CenterPoint land.  It has been, and continues to be, about who is going to fund the necessary improvements to Holland Road.  There is also a lingering question of how much those improvements will cost.  CenterPoint claims +/- $53 million.  The States numbers come in closer to $94 million.  In either case, CenterPoint has proposed to pay just $3.96 million of the total.

I think it is important for Suffolk to seriously examine if this is the best use of taxpayer dollars.  Everyone agrees the project is a good one.  CenterPoint is a top notch developer and has done a great job of designing the project.  However, the taxpayer costs seem very high and the anticipated returns low.

The article indicates that Suffolk anticipates approximately $3 million in tax revenue from the project.  If we pick a road cost somewhere in the middle of CenterPoint’s numbers and the States (say $73.5 million), that works out to a return on cost of just over 4.3%.  Granted, that’s better than a Treasury bill right now and there would be other future improvements along Holland Road that would boost the tax rolls further.  As a reference, that would mean that the State would effectively invest $12 PSF into the CenterPoint project ($73.5 million less CP’s contribution divided by 5.8 mSF).  But, with cash as a finite resource, are there better options for Suffolk and the State to spend that money that would have a higher return?

What about funding the Nansemond Parkway widening?  Using rough numbers for the total build out of Northgate and the cost to widen Nansemond, that project would yield a return on cost of approximately 8.7%. (+/- 2.5 mSF of product, $0.51 PSF for taxes, $15 million for road improvements)  That’s just one project and I am sure there are many more out there that are just as viable.

Is it an status play to say you have a 5.8 million SF industrial park in your City, or is it a prudent use of taxpayer funds?

The Link: LINK

The Story: Last year VDOT received three plans to construct the new highway 460 running from Hampton Roads to Petersburg, south of Richmond.  When those plans were received they contained provisions for massive amounts of public money to make them a reality.  VDOT is now asking those bidders to revisit their proposals to potentially reduce the amount of public money required.  While making 460 a toll road was a possibility in the first round of proposals, it will almost certainly be a component of the revised bids.

The Analysis: Few realize just how vital highway 460 is to the economy of Virginia.  In addition to being an additional hurricane evacuation route, it is a critical link in the global supply chain that comes through the Port of Virginia.  While Interstate 64 might seem like the logical way for containerized goods to leave the area, anyone who has attempted to traverse the bridge-tunnel at 3pm knows it can be a slow process.  460 offers a convenient way for trucks to leave the area without having to go through that bottleneck.  Before you start complaining, yes, 664 is better but still not great.

America’s global supply chain is a very low margin business where every penny matters.  VDOT needs to be very careful that they don’t price 460 out of the market.  Any additional cost associated with getting goods through the Port of Virginia is a competitive disadvantage.  Planning 460 as a toll road could have the unintended effect of pushing more trucks through the tunnel or pushing port business further south to Charleston or Savannah.

Highway 460, if done correctly, has the potential to be a significant relief valve for Hampton Roads traffic.  If tolls are the answer, I would hope that VDOT would at least make some considerations for fast toll lanes and/or a toll exemption for trucks.