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Board of Supervisors of Loudoun County v. State Corp. Commission

Supreme Court of Virginia

September 8, 2016

BOARD OF SUPERVISORS OF LOUDOUN COUNTY
v.
STATE CORPORATION COMMISSION, ET AL. DAVID I. RAMADAN
v.
STATE CORPORATION COMMISSION, ET AL.

         FROM THE STATE CORPORATION COMMISSION

          PRESENT: Lemons, C.J., Mims, McClanahan, Powell, Kelsey, and McCullough, JJ., and Lacy, S.J.

          OPINION

          ELIZABETH A. McCLANAHAN JUSTICE.

         These consolidated appeals of right by the Board of Supervisors of Loudoun County ("Board") and David I. Ramadan (collectively, "Appellants") arise from a Code § 56-542(D) investigation by the State Corporation Commission ("Commission") of the tolls charged by Toll Road Investors Partnership II, L.P. ("TRIP II") for the Dulles Greenway ("Greenway"), a privately owned toll road located primarily in Loudoun County. Following the investigation, including an extensive evidentiary hearing, the Commission decided against reducing the tolls under the authority of Code § 56-542(D), notwithstanding Appellants' requests for their reduction. We affirm the Commission's decision.

         I. BACKGROUND

         Under the Virginia Highway Corporation Act of 1988, Code § 56-535 et seq. (the "Act"), the General Assembly authorized the construction and operation of private toll roads in Virginia. See 1988 Acts, ch. 649. The Act delegates certain regulatory authority for these roads to the Commission, including approval and revision of the tolls. Code § 56-542. Specifically, the Act provides in subsection (D) of Code § 56-542 that the Commission "shall have the duty and authority to approve or revise the toll rates charged by the operator." In exercising this authority, the Commission is required to approve the initial rates "if they appear reasonable to the user in relation to the benefit obtained, not likely to materially discourage use of the roadway and provide the operator no more than a reasonable rate of return as determined by the Commission." Id. Utilizing these same criteria, subsection (D) then provides: "Thereafter, the Commission, upon application, complaint or its own initiative, and after investigation, may order substituted for any toll being charged by the operator, a toll which is set at a level [1] which is reasonable to the user in relation to the benefit obtained and [2] which will not materially discourage use of the roadway by the public and [3] which will provide the operator no more than a reasonable return as determined by the Commission." (Emphasis and numbers added.)

         Pursuant to this statutory and regulatory scheme, TRIP II's predecessor obtained a certificate of authority from the Commission to construct, own, and operate the Greenway, consisting of a fourteen mile limited-access toll road from Leesburg to the then-existing Dulles Toll Road. TRIP II then acquired and completed the Greenway, which opened in 1995- becoming Virginia's first and only privately owned toll road to open in nearly a century and a half.[1] The initial and subsequent "substituted" toll rates approved by the Commission for the Greenway under Code § 56-542(D) incorporated incremental rate increases for future years. The last such action was in 2007 when the Commission approved incremental rate increases for the years 2008 through 2012.

         Then, in 2008, the General Assembly amended the Act by adding subsection (I) to Code § 56-542, which provides three different ways for annually increasing tolls "[e]ffective January 1, 2013 through January 1, 2020 . . . notwithstanding any other provision of law." Code § 56-542(I); see 2008 Acts, ch. 841. As relevant to this case, subsection (1) of Code § 56-542(I) requires the Commission to approve toll rate increases requested by the operator based on the greater of the change in the consumer price index ("CPI") plus one percent, the change in gross domestic product, or 2.8 percent.[2]

         In November 2012, TRIP II filed its first application requesting an increase in the toll rates for the Greenway under Code § 56-542(I) to become effective in January 2013. TRIP II made the request under subsection (1) of Code § 56-542(I) based on the increase in the CPI since TRIP II's last increase in the toll rates under Code § 56-542(D) that went into effect in January 2012 (as approved in 2007).

         Responding to TRIP II's Code § 56-542(I) application, Ramadan, then a member of the Virginia House of Delegates, sent a letter to the Commission in December 2012 designated "an official complaint" under Code § 56-542(D). Ramadan therein requested (i) that the Commission investigate the "current toll rates" for the Greenway (i.e., the rates as of 2012) "to ensure that they comply with [Code § 56-542(D)]" and (ii) that TRIP II's "current request for a toll increase [under Code § 56-542(I)] be suspended until this complaint can be addressed and resolved by the [Commission]."

         TRIP II filed a response to Ramadan's letter, asserting to the Commission, inter alia, that while it was "certain that any review of the [then current] tolls will have the same result as past reviews by the Commission, [Ramadan's] inquiries under § 56-542(D) of the Code are not germane to the current proceeding under § 56-542(I) of the Code." Under Code § 56-542(I), according to TRIP II, "the Commission 'shall approve' any request to increase tolls that comply with the prescribed statutory percentage increase" and TRIP II's pending application was in compliance with subsection (I). Thus, TRIP II contended, the application was "ripe for approval by the Commission" and "any suspension of the current proceeding on the basis of the issues raised by Delegate Ramadan would be inappropriate."

         Agreeing with TRIP II, the Commission, by order entered in January 2013, concluded that subsection (I) of Code § 56-542 did not give it discretion to suspend the proceeding on TRIP II's subsection (I) application for the purported purpose of initiating a subsection (D) investigation. The Commission thus denied Ramadan's request to suspend the proceeding. Shortly thereafter, Ramadan responded with a second letter to the Commission in which he objected to the order; asserted again that "any increase in the current toll structure" on TRIP II's Code § 56-542(I) application would violate Code § 56-542(D); and renewed his request for an "investigation into the current rate structure, " advocating "that the current rate be decreased."[3]On the same day it received this letter, the Commission entered a final order approving increases in the toll rates charged by TRIP II for the Greenway (effective January 21, 2013) based on the increase in the CPI "[p]ursuant to the requirements" of Code § 56-542(I). Ramadan did not appeal that order to this Court. [4]

         The Commission, however, issued an Order Initiating Investigation ("Initiating Order") several days later in January 2013 in response to Ramadan's two complaint letters. The Initiating Order began an investigation, pursuant to Code § 56-542(D), of the "current toll rates" charged by TRIP II for the Greenway. Therein, the Commission asked Ramadan and TRIP II, as the designated parties to the proceeding, along with the Commission's Staff ("Staff"), "to address and define with specificity the standards that the Commission should apply" for each of the three criteria in Code § 56-542(D) and "to explain, based on [an] analysis of the law and the facts, why the current toll rates do or do not meet such criteria."

         The Initiating Order also appointed a hearing examiner to conduct the proceedings in this case and to file a report containing findings and recommendations. During the course of the proceedings, the hearing examiner granted the Board's motion to participate as a respondent in the case. [5] The Board joined Ramadan in advocating a reduction in the toll rates for the Greenway.

         Following extensive public comment, discovery and evidentiary proceedings, the hearing examiner issued her report in January 2014. Her threshold determination was that the Greenway's toll rates approved by the Commission in 2007 (establishing increases through 2012) "are not currently subject to adjustment" under subsection (D) of Code § 56-542 because of the enactment of subsection (I) of the statute. Subsection (D), she concluded, was superseded by subsection (I) for the years 2013 to 2020, as set forth in subsection (I). However, the hearing examiner proceeded to evaluate the toll rates under subsection (D), as directed in the Initiating Order, and concluded that Appellants failed to "bear the burden of proving" that the existing rates (i.e., those approved by the Commission with the subsection (I) increase in January 2013) did not comply with subsection (D) as they claimed, with one limited exception.[6]

         Upon its review of the record and the hearing examiner's detailed report and recommendations, the Commission issued an Order Concluding Investigation ("Concluding Order") in which it decided not to substitute new toll rates for the Greenway under the authority of Code § 56-542(D). In doing so, the Commission considered the evidence, including expert testimony presented by Ramadan and TRIP II, as well as Staff, and their respective arguments as to the application of the three criteria set forth in subsection (D). Unlike the hearing examiner, however, the Commission analyzed the record without "plac[ing] a threshold burden [of proof] on any participant." The Commission also opted "not to define further" the three criteria under subsection (D) in conducting its analysis.

         With regard to subsection (I) of Code § 56-542, the Commission concluded that, since presently it would not be substituting new toll rates under subsection (D) to the extent subsection (D) was controlling, it need not reach the question of whether subsection (I) "prohibits the Commission from substituting tolls under [subsection (D)] until after January 1, 2020."[7]Commissioner Christie, however, while concurring with the majority's decision to conclude the investigation without changing the toll rates, wrote separately on the basis that he would decide the case under subsection (I). On his reading of it, "[s]ubsection (I) does not authorize the Commission to order toll changes on the Greenway between the years 2013 and 2020, except as prescribed by [s]ubsection (I)"-this being "the General Assembly's ...


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