I-35 toll lanes a possibility as lawmakers mull more toll road deals

April 12, 2017

Toll roads, after several years of reversals in the Texas Legislature, could be making something of a comeback.

A House committee on Wednesday spent a couple of hours hearing from supporters and opponents of legislation that would authorize toll agencies to make up to 18 long-term toll leases with private companies for Texas highway projects, including toll lanes on Interstate 35 in Central Texas. However, officials emphasized that some of those deals could stop short of that sort of private toll road model, and that many of the 18 might never need the special designation sought in the bill.

Proposed I-35 toll lanes Photo: American-Statesman Staff

House Bill 2861, sponsored by state Rep. Larry Phillips, R-Sherman, was left pending in the committee and likely won’t be voted on for at least a week. The fate of the legislation, which at this point does not have a Senate sponsor, remains unclear.

The bill authorizes the Texas Department of Transportation to do “comprehensive development agreements” for six specific projects, including added toll lanes for I-35 from RM 1431 in Round Rock to Texas 45 Southeast near Buda. And it would allow regional toll agencies to do a dozen more, in each case stipulating the authority to sign such deals expires in August 2021. That list includes the proposed tollways on U.S. 290 in Oak Hill and South MoPac Boulevard.

Without passage of Phillips’ bill or similar legislation, TxDOT and regional toll agencies would lose the ability to negotiate and sign such public-private partnerships. The authority that exists in state law for a handful of such projects expires at the end of August.

Under comprehensive development agreements, a private company could agree to design, build, finance and operate a TxDOT or toll agency project, usually for 50 years. Although the Legislature in the past several sessions has authorized many such possible deals, typically referred to as “concessions,” TxDOT has so far done just five: Texas 130 south of Mustang Ridge, Texas 288 near Houston, Interstate 635 in Dallas and two sections of what is called the North Tarrant Express in Fort Worth.

But James Bass, TxDOT’s executive director, said that under state law, “comprehensive development agreements” can also include deals where the agency simply contracts with a private consortium to design and build a highway project, not operate it and profit from tolls later.

“Not all of these are going to be done,” Phillips said of the list in his bill. But he noted that the Trump administration has indicated a preference for such public-private infrastructure deals.

“We need to be ready for whatever Washington does,” he said. “I think we’re be rewarded if we’re ready, and we don’t come back for two years.”

Transportation officials over the past dozen years or so have argued that concession agreements in particular transfer the risk of doing toll roads from taxpayers, who might be on the hook if traffic and revenue fail to meet expectations, to private companies. And they say that private companies in such cases provide upfront cash — principal, in effect — leaving tax dollars available for building free-to-drive roads.

But concessions also hold the promise of taxpayers losing out in cases where a toll road performs better than expected, generating profits for the private company that instead might have accrued to TxDOT. In Central Texas, that has not been the case: Texas 130, at least the privately built and operated portion of it between Austin’s southeast fringe and Seguin, has had drastically less traffic than predicted and the owners sought bankruptcy protection last year.

On the other hand, the Central Texas roads on the HB 2861 list are much better situated than Texas 130, in the middle of a traffic-choked urban area, and thus far less likely to fall short of meeting debt payments and operating costs.

Although toll roads are still under construction in Austin, Dallas-Fort Worth, Houston and the Rio Grande Valley, most of those projects were conceived and initiated years ago when tolls seemed like metro areas’ only way to build larger projects. But toll fatigue among consumers and legislators, combined with the passage of two state constitutional amendments that gave TxDOT about $4 billion more annually to spend, have stalled the momentum in Texas for pay-to-drive roads.

Phillips’ bill will be a test of just how far legislative enthusiasm for tolls has fallen.