Thursday, April 05, 2007

“I don’t think that four years ago anyone imagined that we could basically sell our roads to the highest bidder.”

Toll-Road Battle Goes On in Texas

Public or Private Financing at Issue


by Richard Williamson
The Bond Buyer
Copyright 2007

DALLAS — A battle over public versus private financing of Texas toll roads escalated yesterday after Gov. Rick Perry went to bat for the private investors while the state Senate voted unanimously to double tax-backed bond issuance for highways.

Under SB 1795, sponsored by Sen. Steve Ogden, R-Bryan, bond authorization for the Texas Department of Transportation would double to $6 billion. The bill still needs to pass the house.

The bond debt would continue to be backed by the state’s gasoline tax, and additional funds would come from diverting $150 million a year of gas tax revenue from the Department of Public Safety. The DPS, the agency that operates state highway patrols, would instead be funded by general state taxes and fee revenues.

Ogden, who once supported Perry’s proposed public-private toll road financing play, has changed his mind in favor of traditional public financing.

“I don’t think that four years ago anyone imagined that we could basically sell our roads to the highest bidder,” Ogden said in a hearing on the bill last month in the Senate Transportation and Homeland Security Committee.

As Ogden won passage of his bill, a stronger rebuff to privately financed toll roads remained bottled up in the Senate Transportation Committee that he serves on. A proposed two-year moratorium on privately financed toll roads, co-sponsored by 26 of 30 state senators, awaits a committee recommendation, as does a similar House bill.

Transportation Committee chairman Sen. John Carona, R-Dallas, has indicated that the moratorium may be too harsh of a solution to the rapid rise of privately financed highway projects.

Fearing the legislators could still pass the moratorium, Perry lashed out at the idea in a press conference in which he was backed up by U.S. Secretary of Transportation Mary Peters.

“Our message today is that building needed infrastructure is essential to creating jobs and attracting economic development investments in Texas,” Perry said. “And you can’t accomplish that with a two-year moratorium on needed road projects.”

Perry noted that even though private investors, such as Spain’s Cintra Concesiones de Infraestructuras de Transporte, might own the roads themselves, the state would continue to own the land beneath the pavement.

“Let no one be confused: There are no such things as freeways,” Perry said. “There are taxways and tollways, and for 50 years we have tried taxways that have been underfunded by Austin and Washington and that have left local communities choking on pollution and brimming with congestion.”

“You have heard me say before that we have three alternatives: toll roads, slow roads, or no roads,” he continued. “If this moratorium passes the Legislature without some other significant investment in our roads, we will be down to one alternative — no roads. Let’s get roads built so that jobs, trade, and opportunity continue to come to Texas.”

Perry’s alarm at the prospect of sidelining private investors echoed that of officials from Tarrant County in the Dallas-Fort Worth area, who testified last month about how the moratorium would cripple projects already in the works.

Cintra is on the front lines of the battle after winning preliminary approval to operate a toll section of Highway 121 north of Dallas for $2.1 billion upfront and $700 million over the 50-year contract. Critics, including Ogden, say the project could be operated at lower cost by the North Texas Tollway Authority because of its ability to issue lower-interest debt.

Peters, who appeared with Perry at a press conference in Austin Tuesday, also met with state transportation officials struggling to adjust to a reduction in federal funds.

State transportation officials on Tuesday cut funding for several projects under orders to return $288 million to Washington by April 19.

“The reductions will not impact existing construction projects and are being made in a way to maintain flexibility so locally determined priorities can be achieved,” said Mike Behrens, TxDOT executive director.

TxDOT held a public hearing last week, in which speakers tended to favor across-the-board cuts in all regions rather than targeting a single project.

The reductions come on top of $305 million of funds TxDOT has had to return to Washington over the last 15 months.

“This situation is not unique to Texas,” Behrens said. “All 50 states have been directed to return federal transportation funds to Washington.”

Other federal funding priorities, such as the war in Iraq and Hurricane Katrina relief, are forcing the reductions in funding for state projects, officials said.

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