Project finance lawyer advises private toll road operators
Journal Record - Oklahoma City
The demand for more interstates and highways is pushing Texas to explore a concept that's quickly gaining momentum in America and ultimately may drag Oklahoma along as well: private toll roads.
We're just going to wait and see for now, said Oklahoma Transportation Authority Director Phil Tomlinson. What's being proposed and is getting pretty far down the road in Texas. - So we're watching that closely, and have had numerous meetings with them, because whatever they do on that ultimately will affect us.
Imagine paying toll to a company instead of the state government to drive from one city to the next. The idea might seem to go against the tradition of elaborate highway systems built on a wide tax base, but it's been a common practice in Europe for years, Tomlinson pointed out. And the $286 billion federal highway spending bill, House Resolution 3, which cleared a conference committee Wednesday after nearly two years of delays, includes a limited incentive to privatize by allowing companies to raise up to $15 billion for highway projects with tax-exempt bonds.
The Texas Transportation Commission has already taken steps in that direction by accepting a deal by a consortium fronted by toll road developer Cintra in Madrid to invest $6 billion in the first stages of a massive Trans Texas Corridor stretching from Mexico to Oklahoma. In exchange for developing the 400-mile toll road, the group would be given rights to operate the Dallas-San Antonio portion.
And if the project works out as well as Texas officials hope, it would empty a pipeline of traffic at Oklahoma's borders, Tomlinson said.
It's a little dreamy of an idea, but they are on their way with it and they're at least going to try to construct new sections of turnpikes to fit into that long-range plan. He said the authority and the Oklahoma Transportation Department are working with Texas people to see if it's something that will become realistic enough to affect us, and if it will be appropriate at some point for us.
At least 19 states have enacted some form of public-private partnership program for transportation, said Ned Neaher, a project finance lawyer with White & Case law firm in New York. Neaher has advised on several toll road projects in Latin America and Europe, and White & Case has played a part in the AKA M5 Motorway in Hungary, Mexico's Autopista de Nuevo Leon toll road, and Chile's Costanera Norte toll road financing.
Neaher cited California Gov. Arnold Schwarzenegger, for example, who recently unveiled legislation to allow private construction of toll roads. Colorado's Legislature has considered privatized tolls to offset its $100 billion transportation deficit. And New Jersey's Gov. Richard Codey said the state was considering leasing one or more toll roads, including the 148-mile New Jersey Turnpike.
Neaher also pointed to the Chicago Skyway toll road project, in which the city of Chicago granted a 99-year lease to Cintra and Macquarie Infrastructure Group to rehabilitate, operate and maintain the road. The development brought about $1.8 billion to the city's coffers.
States and municipalities are taking a look at many of the structuring and financing techniques and newer tolling technologies employed by overseas transportation projects to see if such techniques can be applied to U.S. projects, Neaher said. Public- private partnerships are now viewed - as an attractive method to obtain budgetary support while ensuring first-class transportation infrastructure.
Michael Pagano, director of the graduate public administration program at the University of Illinois at Chicago, said fuel taxes that are supposed to provide funding for roadwork have been insufficient for years. He believes the public would rather accept user-specific fees such as tolls over more general tax raises.
We have become accustomed to thinking that when we go to the gas pump to fill it up, we're paying for the roads we use, but that's not true. We use up more of the road than we're paying, he said. Pagano is also a member of the Transportation Research Board's committee studying fuel tax financing.
Tomlinson said Oklahoma is in pretty good financial shape, but we're still basically spending everything we take in.
State Transportation Authority Finance Director Wendy Smith said the authority is projecting collections of about $192 million in toll revenues for this year, 3.5 percent greater than collections the year before, which in turn were 3.6 percent greater than the previous year.
Those tolls are used to pay for new construction and maintenance of the existing road system. Overall, the authority has about $1.2 billion in debt scheduled to be retired in 2028.
Transportation agencies in the United States are more likely to first develop limited private-toll capacities alongside general use roads, Pagano said - single toll lanes, for example, or segregated trucking lanes.
Tomlinson said Oklahoma's own plans include expanding capacity on existing roads before even looking at more arteries. Plans are already in the works for the Creek, Kilpatrick and Turner turnpikes, for example. Work is planned to begin between 2013 and 2015 on the Creek in Tulsa and Kilpatrick in Oklahoma City. Private roads will come much later, if at all.
The thing about the private toll road is that in order to attract private investors, they're going to have to take what you might call the cream of the crop of the sections, Tomlinson said. The San Antonio-to-Dallas run, fueled by traffic from the North America Free Trade Agreement, likely would be very profitable.
In Oklahoma, the strong traffic corridors prop up the weak, he said, and help the development of additional roads. Tomlinson said private interests would want to take as much traffic - and profit - as possible, likely at the expense of other roads.
We don't have a prejudice; we don't feel like we have anything to protect. We're really looking at it open-mindedly, he said. It will depend on what happens to the south.