Reston Citizens Association Report: Forecast Overestimates Dulles Toll Revenue

The Reston Citizens Association says that a recent forecast of traffic and revenue from the Dulles Toll Road contains "many very large errors" and wants an additional study be untertaken before there are any more decisions made on moving forward with Phase 2 of the Metro Silver Line.

“Our analysis of a number of Wilbur Smith Associate’s forecasts for toll facilities indicates they frequently overestimate the toll revenues,” said Colin Mills, President of the Reston Citizens Associations (RCA) Board of Directors.

“These overestimates have led to major financial restructurings and even toll road bankruptcies in the cases we looked at, resulting in major losses to investors and bondholders as well as often requiring new public funding and higher tolls.”

RCA sent its study on Friday to Gov. Bob McDonnell, Fairfax County Board of Supervisors Chair Sharon Bulova, Metropolitan Washington Airports Authority Board Chair Michael Curto and other stakeholders in Phase 2.

The study was finished as Wilbur Smith Associates (WSA) is about to complete its third traffic and revenue forecast for the Dulles Toll Road and the funding partners for the Silver Line are preparing to approve a decision to move forward with Phase 2 of the line’s construction.

The 81-page analysis,  titled Wilbur Smith Associates’ Traffic and Revenue Forecasts:  Plenty of Room for Error, examines the “optimism bias”—overestimating traffic and revenues—in toll road forecasts.

Data from a national study of toll road overestimates indicates WSA’s forecasts averaged a 127 percent overestimate of revenues—more than double—for the first five years for 12 projects it supported.  Other forecasting groups performed nearly as poorly, but WSA’s forecasts did not improve over that time span while the others improved markedly.  

 The RCA assessment notes that WSA’s work in its two studies of the Dulles Toll Road so far (2005 and 2009) show overestimates as well.  Its 2005 forecast put the revenue maximizing toll at $2; its 2009 study called for tolls to reach $11.25.  It used the highest available population and employment forecasts in both forecasts, overestimating 2010 Fairfax employment by 25 percent in 2005 and 52 percent in 2009.

The pattern of overestimates in WSA’s forecasts suggests a substantial risk in proceeding with the Metrorail line’s current financial plan. Among the risks:

Lenders will not fund the $3 billion needed to finance Dulles Toll Road construction, or will require state guarantees or funding for an investment grade rating.
Tolls may double those forecast by WSA to meet debt servicing requirements, compensate for the revenue overestimate, pay higher interest rates, and offset reduced traffic demand.
Much higher toll rates on the Dulles Toll Road will discourage economic growth along the Dulles Corridor and force a substantial flow of traffic to already congested nearby highways and roads.
MWAA may have to use airport revenues to pay Dulles Toll Road debt servicing obligations. 
MWAA may face default or restructuring of its Dulles Toll Road debt at a greater debt servicing—and greater toll— expense over a long period of time.
RCA also calls for MWAA to release the upcoming traffic and revenue study as soon as possible, and for all the funding partners to engage the public in a dialogue on whether and how to proceed with Phase 2 under the current financial plan.  Longer term, it calls on FHWA to oversee a process that would lead to a substantial improvement in traffic and revenue forecasts.

“RCA has long been enthusiastic about Metrorail to Dulles via Reston,” said Terry Maynard, the report’s principal drafter, said in a statement. “But we do not want a rail line at any price, especially one that forces Dulles Toll Road users to absorb most of the financial burden and area communities to absorb added traffic on already crowded local roads.  The prospects are even worse if the WSA forecasts overestimate revenues as much as our research suggests."

 
The entire report can be found here: RCA Study--Wilbur Smith Traffic & Revenue Forecasts--012712