Financial analysts ask when Dulles Greenway will bottom

Traffic on the Dulles Greenway in the first half of this year was 47.3k average daily transactions (ADT) a drop of 4.3% on 2009's 49.4k and 23% down on the high year of 2005 when ADT was 61.2k. Every year in the past five years has seen a drop in traffic. And in the first half of this year revenue is down too - by 3.8% to $61.4m/yr v $63.8m in 2009.

The first half of this year was depressed in part by the great blizzard of February when some 40 to 50 inches (1m to 1.3m) snow was deposited on the DC metro area in a week. Adjusting for that, traffic would have averaged 47.7k, a 3.6% drop rather than 4.3% actual. The blizzard cost the Greenway by our estimate about $400k in revenue so adjusting for that the half year would be an annualized $61.8m v $61.4m actual.

A Greenway official told us in his opinion some of the decline can be attributed to construction work especially the flyovers of competing VA28, plus a change in work patterns of government employees and contractors.

He said that in 2003 and 2004 the Greenway benefitted from closures on VA28 while the construction of interchange ramps was under way. Traffic went from 48k in 2002 to 61k in 2004/2005, an increase of about 27%.

Some of this would have been underlying growth in traffic but a decent slab may have been traffic temporarily using the Greenway to avoid lane closures on VA28.

Since that 2004/5 high, traffic has dropped  in the past four years 6%, 4%, 4%, and 5% with this year looking like another decline of perhaps 3%. Traffic is about back down to 2002 levels now.

This seems to reflect:

- a reduction in time savings for residents of the Waxpool, Brambleton, Broadlands and Ryan estates on the Greenway versus VA28 with construction of four fancy interchanges with tax money in place of signalized intersections, plus improvements to Waxpool Rd (see map at bottom)

- higher toll rates, now averaging $3.56 v $2.03 in 2005, a rise of 75%

- more flexible workhours for government workers and contractors that reduce the pressure to travel at congested times when the Greenway's time advantage is greatest

Development has continued in the Dulles corridor but at a much slower rate since 2007.

Unsmart smart growth

Loudoun County has adopted so-called 'smart growth' boundaries not far west of the Greenway. These limits on development have made housing more expensive, less competitive, and more prone to foreclosures.

The Greenway official said the coming of metro rail to the Greenway median (scheduled for 2016) could be a net benefit to traffic. That's if it stimulates dense developments around the train stations, development which would also generate road trips.  The train might take some commuters off the Greenway but this could be more than  offset  by extra trips on the Greenway to and from station parking lots plus the extra traffic from the development itself.

Mac's exquisitely bad timing

Macquarie bought into the Dulles Greenway in 2005 with exquisitely bad timing - buying it just as traffic peaked. They've made significant investments in third laning and extra interchanges - required by the terms of their concession but not by traffic.

They run a tight operation with completely unstaffed ramps and very high transponder usage - 88%. Even in peak hours they often only have two staffed lanes

Last year's $64m in toll revenue was offset by operations, maintenance, policing, insurance, legal and administrative costs of about $15m, property taxes and easement fees of $3m, leaving positive cash flow of $46m. But they charge depreciation of $11m, and the killer is interest on their debt of $950m that is $63m/yr. So their net loss last year was $28m.

The Greenway has a major handicap in its poorly designed toll system. This has some 85% of the traffic paying the one toll at the mainline toll plaza at the eastern end of the pike  - the tolled ramps face away to pick up traffic that doesn't use the mainline plaza. This arrangement of tolls makes for excessively high per-mile tolls for trips exiting at close interchanges or joining close to the mainline plaza, and tolls too low for long trips.

The Greenway also lacks open road tolling.

A new toll system is being considered but seems to be a couple of years away.

COMMENT: On the big question of when the traffic will bottom our sense is it can't go much lower. Competitive free improvements are done. No more are likely. Nevertheless future prospects are way less rosy than when Big Mac bought in. Any recovery could be slow and quite modest, especially if the dominant area employer, the federal government, is put on a diet.

http://www.dullesgreenway.com/

http://www.macquarieatlasroads.com/

TOLLROADSnews 2010-08-16