Friday, August 22, 2003

Ric Williamson talks about the Trans-Texas Corridor

Interview, pt. 2: Williamson talks about the Trans Texas Corridor

by David Guenthner and James A. Cooley

August 22, 2003

The Lone Star Report
Volume 8, Issue 4
Copyright 2003

Last week, LSR ran the first part of our interview with Texas Transportation Commissioner Ric Williamson . This week, we conclude with an update on the state’s major transportation initiative – the Trans Texas Corridor project – as the commission prepares to receive bids on the first corridor next month.

LSR: The commission recently put out the bid for the first Trans Texas Corridor. What will you be looking for from potential developers?

Williamson: We had an unsolicited proposal from the private sector brought to us that described a result that meets our existing statewide transportation plan, meets the goals of the commission to build assets that will be attractive to the consumer to pay a toll on, and meets the governor’s goal of transferring hazardous material and congestion away from the existing footprint.

Based upon meeting that criteria, we have asked for others in the world to offer competing proposals to accomplish that same result.

I have to say that because it is important. It is going to take us a long time, I think, [to educate] about the difference between our regular program – which is where we say we need to build a road from point A to point B – and the Trans Texas Corridor, which says, “Private sector, tell us what transportation infrastructure you are prepared to build and finance that accomplishes the long term goal of the state.” Whether it is point A to point B, or point B to point C, or two points that we’re not even dreaming about yet but that you, the private sector, have dreamt about because of the relationship between investment and risk.

It’s two different paths. We’ll have our traditional program building all the time. Meanwhile, we’ll have cash flow in that program available to the private sector to do partnership deals for the future if they make sense to us.

Based upon that, we’ve asked for competing ideas, and what we expect is no less than three – and possibly as many as six – competing proposals which provide the same end result but perhaps on a different schedule or at a different ownership level or at a greater cost to the state initially. Some may be more focused on freight rail, and some may be more focused on truck roads. We can’t anticipate what the private sector will propose.

That’s why we created the program – so that different minds could come up and imagine different solutions to the same problem. But based on our experience, we believe that we’ll get somewhere between three and six proposals for the same end result, with varying degrees of focus on the inside pieces of the proposal. We will rate those inside pieces, and from that, we will pick someone, and we will negotiate a contract to accomplish the following.

LSR: How quickly will the commission make a decision on who will develop the first Trans Texas Corridor? When do you see ground being broken on it and how long before it actually opens?

Williamson: The proposal period closes in September. I think our staff intends to have a recommendation to us on the short list of groups by our December meeting. I believe we will approve the short list in December, and in January we’ll go to final [bids], and that will take probably 90 days. My guess is that in June of ’04, we’ll have signed our first contract and groundbreaking will occur shortly thereafter. I can’t anticipate when it would open because that is a function of the winning proposer’s approach.

Let me give an example. The proposal that we found acceptable on its face starts at the Oklahoma border and ends in Brownsville, so we know generally that there are vehicle roads and railroads and utility lines for that length of project. But it may well be the case that the initial proposer wanted to build the East Dallas-to-Austin piece first, and then build the Lockhart-to-South San Antonio piece second, and then build one railroad in combination with Union Pacific from Dallas to San Antonio, and then finish from San Antonio to Brownsville and from Dallas to Denison.

That might be their schedule proposal, as opposed to a second proposer who might be selected. His or her proposal might have been, “I’m going to buy your SH 130 and pay you cash, and I’m going to start at Lockhart and go to south of San Antonio first.”

So I can’t honestly tell you when the first lane will be open, because I don’t know who the winning proposer is going to be and which piece he or she evaluates as the highest for the purpose of privately financing the program and getting their money back.

I mean, if I were in the business, what I would propose for the state of Texas would be to take over the south end of 130 and extend that to IH-10, because that is the richest toll collections available to me right now. If I could talk the state into letting me do my first piece right there, I could be knocking down a lot of cash while I went to the north end of 130 and extended it to Dallas, and then east out of San Antonio and extended it around to Brownsville, and finally Dallas up to Denison. I could put off the least valuable until the end.

But I can’t anticipate what somebody else might be thinking, and let me give you a reason why. ... [H. B.] Zachry might have a deal with Union Pacific or [Burlington Northern Santa Fe] to build a corridor and build the rail first...[I]t is entirely possible that Union Pacific and BNSF believe that non-stop 80 mph freight rail from Brownsville and Laredo to the switching station at Temple to Dallas and ultimately to Oklahoma City is of such value to them that they are willing to be part of a bigger proposal if that rail gets done first. If that were the case, the rail piece gets built first, and maybe it’s done in 10 years.

I can’t honestly answer the question until we select the final proposer. Part of having the public-private partnership, as the governor wants, and not as other states have done it, is that you are leaving it to the private sector to define the most marketable transportation asset that can be built.

The traditional public-private partnership has been something like this: We, the government, tell you, the private sector, what we are going to build. You, the private sector, build it to our specifications and our timetable, and we manage it together. We put up part of the money, and you, the private sector, put up part of the money and make this happen. Well, all that really is is a privately financed government program.

The governor’s vision is that the private sector uses its skills and instincts to determine what is most marketable to the consumer of the product – in this case, vehicle roads, railroads, and utility lines – and the private sector proposes to the state on that basis. Our mission is not to have another government-run program that is simply financed by the private sector. We want a true partnership between the private sector and the citizens of the state of Texas.

LSR: During the gubernatorial campaign, there were a lot of misconceptions about the Trans Texas Corridor, particularly the cost to the state. Do you have any rough estimates as to the percentage of TTC funding from the state as opposed to private sector sources?

Williamson: The entire program, when finished 50 years from now, will probably cost close to the $180 billion that everyone has projected. Of that, my instinct is that the state will end up putting up somewhere between 10 and 15 percent, so roughly $18 billion-$23 billion of a $180 billion program over a 50-year period.

I believe the private sector will put up probably $36 billion-$40 billion, and then debt will supply the balance of that capital, and that debt will be repaid by the users of that system – those who choose to put a car on the vehicle road and pay the toll, those who choose to put a railroad car on the rail line and pay the toll, those who choose to put water into the water lines and pay the toll, those who choose to transmit electricity and telephonic messages on the utility lines and pay the toll. They will pay the biggest bulk of the $180 billion.

LSR: Have any entities expressed interest in using the Trans Texas Corridor tools on another corridor?

Williamson: What an odd question, because the answer is yes. We tried to prepare the governor that this is a really visionary, a nothing-like-it-in-the-world approach to building assets, and we tried to warn the governor that things we couldn’t even imagine right now would quickly pop up as a result of this legislation.

And one of those things is that several local communities with local private sector individuals have already come to us and said, “These corridor tools are wonderful, but we’re not on the primary routes of the corridor. But we think it makes sense. There is this chemical plant (in a certain place which I can’t divulge), and we believe that they will expand if we have a wide right-of-way that will allow for a rail; [and also] a two-foot-thick road for trucks and a commuter rail to the principal location of people where they live who also work at this plant; and [if we] also allow for the product to be shipped, not to boat, but over land to a distribution center by truck and rail. We don’t want it to be part of a corridor, but we think the corridor width, depth, design, and financing tools make perfect sense for this 15-mile stretch of road. Can we use those tools for this project?”

We’re researching it now, but I think the answer is going to be yes. It doesn’t necessarily have to be part of the corridor to be treated like a corridor.

And then there is another “who.” If I went too far into the details, it would reveal where it was, and it wouldn’t be fair to the city that was working on it. I have to be circumspect and leave it at that.

LSR: When the Trans Texas Corridor was unveiled, there was a 50-year plan that showed corridors criss-crossing the state. Do you realistically think that all or most of these will be built, or was the Trans Texas Corridor merely a method to get a trade route parallel to IH-35 when the state had no money to build it?

Williamson: Based on growth patterns, development patterns, and what we consider a logical sequence of events, we believe all of those routes will end up being the primary routes of the corridor.

If you think about it, you strip away the secondary routes and focus on the primary routes – that is, Oklahoma to Brownsville along IH-35; that is, basically Laredo to Corpus Christi to the Port of Houston to St. Louis along the proposed IH-69, and Port of Houston to Dallas to Wichita Falls and up into the Midwest – those are the principal growth corridors of the state now. There is no reason that those won’t continue to grow.

The interesting piece is from El Paso to Beaumont, in terms of rail and utility. A huge percentage of the nation’s rail traffic follows that general route. It’s logical to assume that a rebuilt transportation infrastructure that lets railroads operate faster and lets utility lines, electricity, and water flow along that same corridor – it’s logical that the corridor will develop.

Nah, we’re pretty comfortable that we laid out what we thought would be the 50-year plan. And the governor has not hidden from where the issue of where the primary routes were, nor has the commission. ... That’s just logical because you’re waiting for the private sector to propose, based on taking a risk and earning a profit.

The private sector is not going to propose the East Dallas-to-Wichita Falls route before its time. It will propose it when the market indicates that we can get a return on investment for helping build this asset, and not until then.

LSR: TxDOT is about to increase from a three-member to a five-member commission. How do you see that affecting commission decision-making?

Williamson: It will take longer to make decisions because, by definition, it takes longer to educate five than it does three. That’s not necessarily a bad thing. Perhaps we’ll make better decisions. I don’t know of any really poor decisions we’ve made.

Some take exception to our effort to control access roads and frontage road growth. Some will say that was a bad decision. We at the commission level, while we have taken our share of criticism for it, think that someone had to bring the matter of frontage roads and access roads to the table, because frontage road use, access road use, and on/off ramps were out of control, and that produces congestion in urban Texas.

Unless the governor picks wisely – this governor will; who knows what subsequent governors will do? – there will be a tendency to regionalize the state, but that tendency already exists.

Traditionally in Texas, you’ve had a Houston member, a Dallas member, and a rural member. Some years, it was East Texas. Some years, it was West Texas. Some years, it was actually Fort Worth, not Dallas. Some years, it was actually Beaumont – in the case of David Bernsen – not Houston. Generally you have a Houston, Dallas, everywhere-else-but-Houston-and-Dallas membership. Probably some regionalization occurred in that matrix.

The character and the quality of the people that governors select will determine whether five commissioners cut the state up into pieces more than the state is now. As I said, this governor won’t make that mistake; we’ll just have the judgment of future governors [to concern us]. O

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