Governor McDonnell’s Transportation Plan

On Friday, January 14, Governor McDonnell announced a transportation plan that dedicated $140 million per year to Northern Virginia and Hampton Roads to improve our streets. He described it as “a plan that pumps billions into roads, creates tens of thousands of new jobs, adds no new debt, starts work now, and doesn’t raise taxes.” This is a no-brainer for us. It lets us keep part of the existing sales tax revenue generated here in NOVA for projects in NOVA.

The Governor’s plan also accelerates existing bond authority. In 2007, the General Assembly approved $1.8 billion in transportation bonds, to be sold over the next ten years to raise money for roads. Gov. McDonnell’s plan is to sell them now in order to take advantage of low construction costs and low interest rates.

This is great news for Springfield residents. One of my projects as your representative is to secure funding to widen Rolling Rd. from Old Keene Mill to the Parkway. Selling bonds to get this project started now will save us a tremendous amount of money in the long run. In fact, I’ve calculated just how much.

Prices on road construction have dropped 40% due to the recession. For example, if the Rolling project cost $20 million today, then it will cost $28 million when prices go back up. On top of that, the interest rate on government bonds right now is only 3.5%. That’s a lot of numbers, so I’ve tried to simplify it in the charts below. They show the difference between building today at 3.5% on $20 million, and building in 10 years at 4.5% on $28 million.

Purchase in 2011 on 25-Year Bond Purchase in 2021 on 25-Year Bond
Initial Cost: $20,000,000 Initial Cost: $28,000,000
Annual Interest Rate: 3.5% Annual Interest Rate: 4.5%
Total Cost: $30,037,414.22 Total Cost: $46,689,928.15
$16,652,513.93 (or 55%) more expensive
Purchase in 2011 on 15-Year Bond Purchase in 2021 on 15-Year Bond
Initial Cost: $20,000,000 Initial Cost: $28,000,000
Annual Interest Rate: 3.5% Annual Interest Rate: 4.5%
Total Cost: $25,735,771.49 Total Cost: $38,555,661.76
$12,819,890.27 (or 50%) more expensive
Purchase in 2011 on 10-Year Bond Purchase in 2021 on 10-Year Bond
Initial Cost: $20,000,000 Initial Cost: $28,000,000
Annual Interest Rate: 3.5% Annual Interest Rate: 4.5%
Total Cost: $23,732,608.19 Total Cost: $34,822,505.34
$11,089,897.15 (or 47%) more expensive

The bottom line is this: when it comes to transportation improvements, Virginia can’t afford to wait. The longer we wait, the more money we’ll have to spend. I owe it to you to get these road improvements underway as soon as possible.

Questions? Comments? Contact me at DelDAlbo@house.virginia.gov!

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One response to “Governor McDonnell’s Transportation Plan

  1. Don Fredericksen

    Dave,
    That is good news. We know you had a lot to do with that happening. Good work!
    Don

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