Sunday, September 01, 2002

Perry's "Vision" of Trans-Texas Corridor Stimulates Campaign Contributions

Perry's vision for toll roads could lead to financial crash

September 1, 2002

Rick Casey
San Antonio Express-News
Copyright 2002

You can't blame Gov. Rick Perry for projecting passion over his proposed Trans Texas Corridor - a grand scheme to crisscross the state with toll roads, high-speed rail and utility lines.

Estimates for the price tag range from $145.2 billion to $183.5 billion, and such estimates are historically optimistic.

That's a lot of money - a lot of money to be made.

Perry's highway vision already has provoked those who stand to profit from it to give the governor $500,000 in campaign contributions since he took office 21 months ago.

As the Houston Chronicle's R.G. Ratcliffe reported Friday, the latest contributor was Fluor Corp., a California construction company.

It gave Perry $30,000 less than a week before signing a $1.5 billion contract to built Trans Texas Corridor 's first leg, a 49-mile, north-south toll road that will bypass Austin.

If Perry gets his way, the private sector could not only get to build the toll roads. It could get to own them.

One of the financing mechanisms being proposed by the Texas Department of Transportation would have private corporations owning the franchise to operate toll roads after building them with state-sponsored tax-free bonds.

But before we buy DOT rhetoric extolling the speed with which the private sector can build expressways and the efficiency with which it can operate them, we should check the experience of California.

A recent Los Angeles Times article put it succinctly: "Political and financial problems have led many state leaders to conclude that California's nearly two-decade experiment with toll roads has failed, despite fervent hopes and vast investments."

The most controversial roads are ones operated by private sector companies.

The California State Senate voted unanimously to allow an Orange County transportation authority to buy a 10-mile stretch of toll lanes from a private company that has been operating them since 1995.

The reason the authority is willing to pay $207.5 million for the lanes is not that its tolls, ranging from $1 to $4.75, generate vast amounts of revenue.

It's because a clause quietly negotiated by the private company after the Legislature approved the project gave it veto power over major improvements of 30 miles of freeways that compete for traffic.

Because traffic on the toll lanes did not meet projections, the private company has prevented the state from adding free lanes to adjacent highways, causing a political nightmare.

Citizens are more than a little miffed that a private company was given such control.

Not all privately operated toll roads in California give the companies such veto power over nearby public highway construction, but other projects do include clauses that compensate the companies if expansion of nearby free highways hurts their traffic.

Private operators say they wouldn't be able to sell construction bonds without such guarantees.

Optimistic projections for toll roads are not unusual. Business Week recently cited toll roads as the "biggest problems" among troubled municipal bonds.

"Of the 10 major ones constructed since the mid-1990s, nearly half carry far less traffic than projected," the magazine reported.

"Some $4 billion in toll-road bonds risk default over the next five years unless they're refinanced, estimates Robert H. Muller, a municipal bond analyst at J.P. Morgan Securities Inc."

Texas has only one privately operated toll road, and it's connected with Perry's gubernatorial opponent, Tony Sanchez.

Sanchez pressed for a toll road near Laredo in the early 1990s.

When Gov. Ann Richards wouldn't back the project, Sanchez and his International Bank of Commerce donated $75,000 to help George W. Bush defeat her.

The 22-mile road then received state approval and was built.

But it has not fared well. It has failed to make its projections and is in danger of defaulting on the revenue bonds that financed it.

So more than a little skepticism is in order before Texas buys the panacea that the private sector can solve our highway problems with toll roads.

To leave a message for Rick Casey, call (210) 250-3544 or e-mail His column appears on Sundays, Wednesdays and Fridays.

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