The talking point first reached my ears in February.
The Legislature, I was told by a transportation lobbyist, needed to authorize more toll road “concession” projects this session. Otherwise, the logic went, the state would miss out on money from President Donald Trump’s proposed $1 trillion infrastructure plan, which we’ve been told will emphasize “public-private partnerships.”
OK, that’s a whole lot of transpo jargon. I’ll translate:
“Pass House Bill 2861.”
The Texas House on May 5 decided not to do that. The bill, after an hourlong debate that included the Trump talking point and occasionally turned personal and nasty, was mowed down 79-52. Most of the “no” votes came from lawmakers who, like the president, have an R by their names. And the bulk of the “yes” voters were Democrats. Topsy-turvy, in other words.
HB 2861 would have allowed the Texas Department of Transportation and regional toll road authorities to build up to 18 big projects around the state through “comprehensive development agreements,” including Interstate 35 toll lanes from Round Rock to Buda, the South MoPac Boulevard toll lanes and a toll road through the Oak Hill “Y” of U.S. 290 and Texas 71. The clock will run out Aug. 31 for such development agreements on 10 of the 12 that are currently authorized (the Grand Parkway, the huge Houston outer loop, and Texas 183 near Dallas have no deadline to get going).
As you’ll see below, that doesn’t mean any or all of those projects won’t get built or will be built any slower than probably would have happened under HB 2861. As for any lost opportunity to tap federal dollars, that notion seems flimsy at best.
These so-called CDAs come in various flavors, from simply hiring a contractor to design a road and then build it to having the private sector do it all: design the road, get private financing to pay for it, build it, then operate and maintain the road (and take the toll revenue) for as much as 50 years. The latter is what happened with the southern 41 miles of Texas 130 through a long-term lease between TxDOT and a consortium led by Spanish toll road builder Cintra. The road and its splashy 85-mph speed limit opened in late 2012.
As you might have read or heard, because of far lighter than expected traffic that deal turned out pretty badly, at least for the U.S. Department of Transportation (which loaned the group about $550 million) and private investors (on the hook for another $721 million in unpaid debt). The Cintra group filed for bankruptcy protection in March 2016. I’m told that the road probably will come out of bankruptcy later this spring, with investors and Uncle Sam displacing the Cintra partnership as owners.
TxDOT and Texas drivers, however, have made out well despite the financial shambles. Under the 50-year lease, TxDOT got a $125 million payment from Cintra years ago and receives a 4.65 percent cut of the ongoing toll revenue. Motorists willing to pay a toll have gotten a new (if somewhat bumpy) highway.
Still, the Texas 130 deal carries the stench of failure and serves as a handy example for those in the Legislature who don’t like toll roads in general and concession agreements in particular. They were lying in wait when HB 2861, which had breezed through the House Transportation Committee on a 9-1 vote, came to the House floor.
The critics argued that Texas voters, in approving new cash for TxDOT in the past four years, had sent a message that they want roads built on a pay-as-you-go basis rather than with tolls.
Rep. Larry Phillips, R-Sherman, the bill’s sponsor, pulled out the Trump argument early on.
“There’s going to be a designation of money that incentivizes us doing CDAs,” Phillips said, showing more confidence in the Trump team’s legislative prowess than early results might merit. “It would be a shame for us to not let our local communities work with Washington and get their projects underway.”
Trump and his aides have talked about using tax credits and other to-be-determined mechanisms to entice private companies to put big bucks into mega transportation projects around the U.S. Some argued that this initiative should have been first, or nearly so, on Trump’s policy plate because it would have been a job program and might have gathered both Republican and Democratic support.
But the administration, for whatever reason, has pushed it down the list behind health care, immigration, tax reform and fending off Russia-related investigations. So this $1 trillion program, whatever it really might be, won’t come up for an unspecified period of time. And it might or might not pass. The 18 projects in HB 2861 might or might not have ended up being beneficiaries. The Legislature will be back in 2019 and could act then.
And besides, the massively expensive Grand Parkway is sitting out there as a possible project for help should the infrastructure plan materialize.
Which is to say, using Trump as a rationale for passing HB 2861 was pretty thin gruel.
Perhaps more on point, supporters of giving TxDOT and its little brother agencies the authority for these concession deals said that many of these highway projects might not happen anytime soon without this “tool.” But this line of reasoning is far from air tight as well.
Back when TxDOT officials were on a zealous toll and concession kick, in the 2005 time frame, they said one advantage of concessions is that they shift the risk of doing a toll road from taxpayers to the private sector. This has certainly turned out to be case with that southern section of Texas 130, which, if nothing else, has proved the weak demand for a quick way to get from Mustang Ridge to Seguin.
But that is not the case with I-35 through Austin, or South MoPac and the “Y,” all of which have frustratingly heavy traffic. Toll lanes in those congested urban corridors are probably a very safe bet for TxDOT or the Central Texas Regional Mobility Authority, which might be deputized to build and operate them.
Each of them, then, could be built as toll roads with or without HB 2861 and the ability to hand them over to the private sector. None of them, because of the great cost involved, can be built anytime soon without tolls and borrowing.
State Sen. Kirk Watson, D-Austin, has been pushing for the $4.6 billion I-35 overhaul for several years, and several hundred million dollars of that work has already begun using TxDOT cash. The agency has $3 billion to $4 billion more to spend each year — statewide — because of constitutional amendments passed in 2013 and 2015 redirected existing tax revenue to highway spending. Even so, getting all of the proposed I-35 work done, including about 20 miles of an added lane on each side, will require borrowing. And tolls.
Watson this week told the Austin Monitor that while the passage of HB 2861 would have been nice, is not a deal killer for I-35. TxDOT could sell the bonds, as it did with four Austin tollways, and pay back the debt with toll revenue.
“We’ve been operating under the assumption that a (comprehensive development agreement) wasn’t an option,” he said via email. “The project and the process continue to move forward.”