Thursday, April 12, 2007

"It’s ... very difficult for the public and... many members of Cattle Raisers to get comfortable with the Trans-Texas Corridor approach.”

TSCRA Members Hear From Panel Concerning Trans-Texas Corridor


By Colleen Schreiber
Livestock Weekly
Copyright 2007

FORT WORTH — The controversial Trans-Texas Corridor was once again one of the key topics discussed during the recent Texas and Southwestern Cattle Raisers Association annual convention here.

A panel of speakers representing various interests offered their thoughts during the natural resources and environment committee meeting. Ben Love, co-chairman of the committee, provided opening remarks.

“We all recognize that as we move forward into the 21st century we have to consider our mobility and transportation needs. It takes a long time to build a highway. I think we owe a debt of thanks to Governor Perry for having the vision and the fortitude to tackle the problem,” Love said.

“We may or may not agree with the legislature that has turned out the product that we’re discussing today, but it is high time that we start considering our transportation and mobility problems in Texas.”

Love pointed out that 80 percent of the truck imports into the U.S., some three million annually, come through Texas, which only compounds the transportation problem.

“Several years ago a federal study on I-35 found that the segment of highway from San Antonio to Austin is the most heavily impacted, heavily used, congested part of that entire interstate,” Love told listeners. “It has the highest fatalities and the slowest rate of movement per mile of that segment than any other highway.

“We all know that, so it’s abundantly clear that we’re going to have to do something. That something is on the table today in the form of the Trans-Texas Corridor legislation which was passed in the last session of the Texas legislature.”

Phil Wilson, deputy chief of staff for Governor Rick Perry, opened his remarks by reminding listeners that the state’s population is expected to double in the next 30 to 35 years.

“The demand from Texas’ transportation infrastructure has never been higher,” Wilson commented. “Just as the interstate highway system was an essential element to the growth and prosperity of our economy over the last 50 years, the Trans-Texas Corridor will sustain the economy over the next 50 years,” he insisted.

Paying for the needed transportation infrastructure is part of the crux of the matter.

“The gas tax doesn’t even pay for all the maintenance fees, let alone the new construction,” Wilson told listeners. “We could raise the gas tax again … but you would have to raise it to $1 a gallon to raise enough revenue to meet our transportation needs. The Governor doesn’t think this is an option.

“We could wait for the federal money genie to finally return our fair share,” he continued. “We’ve been talking about that for a decade. We don’t believe Washington is going to come to our rescue on transportation needs.

“The other option is private financing — using up-front money with the investment recouped from tolls. Under this model you could build the roads faster, ultimately cheaper, and with little new tax money spent for up-front construction,” Wilson stressed.

He also noted that tolls generate revenue tied to use. The gas tax, however, isn’t tied to use, meaning that those who live in rural Texas must pay as much in gas tax as someone who lives in Austin or Dallas or Houston.

“Tolls are more equitable, because users pay for the use,” he opined.

Like Wilson, Kris Heckman, deputy legislative director for the Office of the Governor, started his comments by pointing first to the rapidly growing population in the state.

“In 1990 we had 16.5 million in the state. By 2000 there were 21 million, and today the population is over 23 million, and we’re still growing,” Heckman said.

He noted that roughly 10 million people, almost half the state’s population, live within 20 to 25 miles of I-35.

Heckman shared results from a 1997 study looking at the long-term ramifications of population growth and of NAFTA for I-35.

“That study revealed some pretty eye-opening realities. One thing it said was that by 2025, I-35 in San Antonio would need to be 18 lanes; Austin would need to be 16 lanes, and there would need to be 12 lanes in between those two cities. That’s in 18 years,” Heckman stressed.

“Right now, I-35 is a minimum of three lanes a side from San Antonio to Georgetown through Williamson County, and it’s down to two lanes in Bell County and Hill County and essentially two lanes from Temple up to the Y in Hillsboro, where it goes east and west to Dallas and Fort Worth.

“In 1997 to upgrade that infrastructure by adding a lane to either side of I-35 in that 75 to 80-mile stretch was going to cost $1.8 billion.

“The state doesn’t have $1.8 billion for roads. They might if you shut down road construction in Dallas and Fort Worth and in Houston and places like that,” he added.

In the past when big transportation projects like that were needed, Heckman explained, the state traditionally dedicated a chunk of money to it every year, gradually knocking out the work piece by piece.

“In the past the state might commit $100 million in the first year. TxDot would bring out the orange cones and tear up three or four miles of the interstate and move the traffic over. The next year the state would dedicate another $100 million and tear up the next three or four miles, and so on and so forth and continue that way, spending $100 million for 18 years until the project was completed.

“Only it’s not $1.8 billion by that time because of inflation,” Heckman pointed out. “Inflation in the construction industry is higher than the inflation rate in the rest of the economy because the primary ingredients in the road are land, concrete and steel. All those things tend to rise faster in price than the rest of the economy.”

Figuring the average construction inflation rate of five percent over 18 years, the original $1.8 billion pricetag becomes $2.5 billion, Heckman noted, which then takes roughly 25 years to complete if only $100 million in funds are available annually.

“That is the way the state has traditionally addressed issues likes this,” he reiterated. “The State of Texas would spend 25 years tearing up the busiest road in the state and in the end, after spending $2.5 billion over 25 years, what they’d get is one additional lane on either side of I-35. The Governor just said we’re not going to do that anymore. It doesn’t make sense.”

Heckman also pointed out that part of the reason improving the I-35 corridor is so expensive is because, first and foremost, the land on either side of I-35 is expensive real estate. Additionally, there are almost 100 bridges and overpasses in that 70 to 80-mile stretch, and under the old plan every one of those would have to be torn down and rebuilt because they’re not wide enough to handle more lanes, Heckman told listeners.

“By moving a few miles east or west and extending the road north and south, the state can build a road cheaper and faster, and it can be done without disrupting traffic on I-35,” Heckman commented. “Plus, if it’s a toll road, it can be built with little to no tax dollars.”

From that idea came the Trans-Texas Corridor.

A secondary piece of the Trans-Texas Corridor plan is even more about planning for the future, as it includes additional rail capacity and all the other infrastructure, such as electric transmission lines, necessary for continued growth.

“The Union Pacific line between Temple and San Antonio is already at maximum capacity — 35 trains a day,” Heckman told listeners. “In the fall, during harvest, they put existing customers on rations on cars because there is simply not enough train capacity in that corridor.

“It makes sense in planning for a new road to buy enough land to increase rail capacity at the same time.”

The Trans-Texas Corridor is being built with private financing, Heckman reminded listeners, and in so doing they are taking the risk.

Three large consortiums submitted proposals to the state. The winning bid, he noted, was a consortium of 18 companies, but within that there were primarily two large equity partners, Cintra, an international company based in Spain, and H.B. Zachary, a third generation Aggie-owned company based in San Antonio. The two companies formed a partnership called Cintra-Zachary LP.

“Cintra has been building private toll roads since the late 1960s,” Heckman told listeners. “They’ve built toll roads in Europe, Latin America and even some in the U.S.

Cintra-Zachary LP’s winning proposal entailed a 350-mile toll road from the Sherman/Dennison area, north of Dallas, south to San Antonio. Their estimated cost was $7 billion. The other piece of the financials, Heckman said, involved a $3 billion up-front payment to the state to be used for roads and infrastructure for the corridor in exchange for the ability to share in the toll revenue.

In 2004 the state started an environmental study which is required by the federal government, for this first piece of the Trans-Texas Corridor, known as TTC-35.

“We have probably another three years before that environmental impact study is completed, and we can’t determine where the route is going to be until that study is completed,” he told listeners.

Another environmental impact study is going on in the eastern part of the state where some have been advocating for the upgrade of state highway 59 into I-69.

“They’ve been waiting for about 15 years, and some have figured out that the federal government is not just going to drop an additional $7 billion on the State of Texas to build this interstate, and the other 49 states aren’t going to cut their pieces of the pie smaller so that Texas gets more money for this road,” Heckman commented.

“So when they saw what the Cintra-Zacharys of the world could do, what private investment could do, some suggested that the private sector be used for the I-69 proposal as well.”

The bids for the TT-69 project have been submitted but have not been fully reviewed, the speaker said. Interestingly enough, in this project Cintra and Zachary are competing against each other.

Jack Hunt, CEO of King Ranch, offered some comments more from the perspective of a private landowner.

“I also want to thank Governor Perry for first understanding and then acting to accelerate the enhancement of transportation infrastructure in Texas,” Hunt commented. “I think we all understand the needs to improve Texas transportation and infrastructure as the state grows, and particularly in urban areas.”

That said, Hunt added that he believes that to some extent the public has been excluded from the process that led to the creation of the Trans-Texas Corridor concept.

“The public/private partnerships, which are deals that people don’t really understand, have raised legitimate questions among the public. There are a lot of issues involved, and these include the conversion of free roads to toll roads, the sale of public assets to private companies, the sales of private concessions for private toll roads, cost of tolls and non-compete provisions,” Hunt said.

“All these issues are out there, and it’s made it very difficult for the public and I think many members of Cattle Raisers to get comfortable with the Trans-Texas Corridor approach.”

He and other TSCRA members are also concerned about the broad powers of condemnation that are imbedded in Trans-Texas Corridor legislation.

“We’re concerned about the fact that these powers may be assigned to private entities; we’re concerned about the fuzzy government structure for the various entities that might be established under the Trans-Texas Corridor concept, the very broad range of access and property issues, property valuation issues, threats we heard in public meetings of condemning land well in advance of known road alignments, and the inclusion of all sorts of utility easements in these corridors. Cattle Raisers is also concerned about who is responsible for maintaining the fences, particularly when dealing with a private operator who is operating the road for a profit.

“I think all these issues need to be considered in the light of day so that the taxpayers, toll payers, landowners whose land may be condemned can judge for themselves whether their elected representatives have negotiated well on their behalf,” Hunt stated.

He admitted that the agriculture and landowner community did not stand up and ask the hard, necessary questions when the legislation was first proposed back in 2003.

“The bill was signed with little fanfare,” Hunt commented. “I don’t know if there were any hearings at all, and I think many of the legislators who voted for it didn’t really understand what the bill did.

“The bigger failure for which we are all responsible is that we did not organize citizens’ stakeholders groups at an early stage in the process to work on reasonable solutions to our mobility needs.”

During the 2005 session, then Senator Todd Staples, now agriculture commissioner, and other legislators worked to correct some of the concerns raised by the landowner community. Some progress was made, Hunt said. More work is being done this legislative session as well.

Hunt pointed to yet another mobility study conducted by the Texas Transportation Institute at Texas A&M University and other consultants that was issued in November 2006.

“The solutions offered in that report are in the mode of what I call blocking and tackling, which includes a combination of gas tax, tolls, as well as the use of debt to accelerate improvement of roads,” Hunt told listeners. “The report does not support the idea of these private deals as a method to address mobility needs.”

Hunt concluded his comments by suggesting that the proposed legislation offered by Senator Nichols calling for a two-year moratorium might not be a bad idea.

“I think at the very least we need to slow down, rethink and build some consensus and then move forward.”

Tarrant County Judge B. Glen Whitley, who sits as a member of the Trans-Texas Corridor advisory committee, offered yet another perspective.

Whitley squelched the rumors that have been floating around with regard to the size of the footprint of the possible corridor route.

“I have heard mass rumors about the corridor being 50 miles wide, and if you look at some of the maps you will see that the initial proposed corridor was a 50-mile swath of land from the San Antonio area to DFW area. That was the study area,” the judge explained. “That study area was then narrowed down to a 10-mile area.

“What is going to happen is that the corridor may be at max 1200 feet wide and in many areas it will be less,” he insisted.

The judge, too, pointed to problems associated with a rapidly growing population, namely that of congestion in the urban and suburban areas.

In Tarrant County we have about 1.7 million people. We have some congestion. By 2030 we expect our population (Tarrant County) to move to 2.9 million to overtake Dallas, so for us it is a crisis,” Whitley stressed.

“I think it’s a matter of acknowledging the fact that we have a problem,” he added. “Anyone who has traveled on I-35 knows it’s a three-hour trip from Austin to Dallas on a good day. Last week, right after spring break, it took someone in our office five hours to get to Austin. Sometimes over Thanksgiving weekend it takes my daughter six to eight hours if she doesn’t time it just right.

“We have to figure out how is the best way to solve the problem, because in my way of thinking, saying that we don’t want to grow anymore isn’t the solution.”

Funding the state’s transportation needs, he acknowledged, has long been a problem.

“We’re getting back all total about 50 percent of the tax dollars that we raise in this region out of the federal and state sales tax on gasoline. The rest of the money goes to other places in the state. Furthermore, the state is probably only getting back a little less than 90 percent.”

The judge told listeners that he and other officials in Tarrant County became interested in the Trans-Texas Corridor when it appeared that the proposed route could circumvent Tarrant County altogether by going far to the east.

“We began fighting from day one the proposed corridor, and we were able to affect and get changes,” he told listeners. “Originally the path was to be 15 to 25 miles east of the I-35 corridor right up through the heartland, right up through some of the farmlands in Central Texas. We said that to prevent sprawl it needs to be brought in closer and it also it needs to connect with the urban areas, because that is where a lot of the congestion is. We advocated for that,” Whitley stressed.

The judge concluded his remarks by reminding listeners that the state is only getting about a third of the money needed for the transportation infrastructure from state and federal government. Like Hunt and others, Whitley advocates the use of many tools.

“One is an increase in the gas tax, and some of that gas tax needs to be fairly returned to those areas raising the tax,” Whitley commented. “We need to look at toll roads, both public and private. Some of those we can do with bonds, but some need to be from private companies because we just don’t have the money.”

He encouraged everyone to be an advocate by voicing their opinions and weighing in on the discussions.

“I don’t necessarily think the process was done just the way it needed to be done, but I hope everyone in this room recognizes that if Texas is going to continue to grow, we have to address the transportation issue.

“Finally, what I’ve found is that if the rural counties aren’t making it, the urban counties aren’t going to make it either, so we all have to work together to try to make it work for both of us.”

The formal presentations were followed up with a question and answer format. The issue of access came up again.

“In my reading of Chapter 227 of the Texas Transportation Code, the access provisions provide that if TxDot acquires a tract of land for the Trans-Texas corridor that severs someone’s property that it may — not shall — allow the owner to build in compliance with federal law an alternative access between the severed tracts, and then if and only if the owner obtains TxDot approval of the designs and specifications,” co-chairman Ben Love commented.

Kris Heckman told listeners that issue was corrected in the last legislative session.

“We worked with various ag groups last legislative session to require the state to compensate not just for the land but to pay damages caused by inaccessibility from one tract to another. That is something that is now law,” Heckman stated.

“People want to know if they’ll be able to get access. Certainly, all of the large tracts will have to be connected; some will get access, some will have less,” he acknowledged. “Some will have overpasses; some may have underpasses; in some cases there will be frontage roads; in some cases there won’t, but now the law requires that at least the landowners be compensated.”

Jack Hunt posed a question about the up-front payment plan.

“If you’re going to take a large up-front payment from a private company who is then going to build a toll road, how do you get a return on that money which is then going to be used elsewhere?” Hunt asked. “The private company is going to want a return on that money, so it seems to me that the people who are going to use that toll road will pay a much higher toll to subsidize for the use of that up-front money.”

Heckman responded that the law requires that not only must the toll money stay in the region in which it is collected, but that the upfront payment be used for transportation infrastructure needs within the region where the toll is located.

He used as an example the toll bypass around Austin, better known as State Hwy. 130. SH-130 starts in Georgetown, goes east and parallels I-35 some, then goes down to the Austin airport. That stretch, Heckman noted, is now open.

“Originally, the plan was to intersect with I-10 further south at Seguin,” Heckman told listeners.

The pricetag for that 40-mile stretch was $3.5 billion, and it was funded using a traditional toll plan.

“The state put in $700 million in gas taxes and locals put in $500 million from their tax revenue, for a total of $1.2 billion,” Heckman explained. “Then the state issued $2.2 billion in toll revenue bonds.

“There wasn’t enough money to do the southern part. The environmental study has been done, but there is no funding because for one, this is a less urban area and those rural counties don’t have $500 million to put in, so it remained unbuilt.

“So what we did was we went to the private sector,” Heckman continued. “They proposed to build the southern part with entirely their own funding for $1.3 billion. In exchange they get a contract to operate and collect a portion of the toll revenue for 50 years. The toll is to be split with the state on a floating scale.

“For example, if the toll is $1, the state gets five percent and private sector gets 95 percent. As the traffic on the road goes up, the percentage increases,” he noted. “And by law, the state’s toll portion has to be spent in the San Antonio, Austin TxDot district.

“On the other hand, if the private sector didn’t make a good decision and the toll isn’t used as much as they’d hoped, the state doesn’t owe anything. The road is built.”

There was another question about who sets the toll rate and whether the government has any say in increasing the amount of tolls on a privately funded toll road.

“By law, TxDot has to approve what we call toll methodology,” Heckman said. “That means they have to approve the rates, and they have to approve increases as well, and they set the penalties for non-payment, etc.”

Another TSCRA member asked about the option for landowners whose land is condemned to negotiate for royalty payments from the toll road.

“It’s an option available in law,” Heckman confirmed. “That option, however, is not risk-free.”

Another question was posed about mitigation. The federal government requires that when the state condemns land for such improvements as highways that the state must mitigate any adverse environmental impacts caused by roads.

If, for example, a new highway takes out 10 acres of hardwoods, the state must set aside a prescribed amount of hardwood acres somewhere else in the state, and that land cannot be developed. Rather than take two different properties from private hands, there is now language in the Trans-Texas Corridor legislation that would allow conservation easements to be used for mitigation purposes, Heckman noted.

Still another question had to do with the idea that the state could take land today for a road that might not be built for another 20 years, and that by condemning the land today the state would be getting it at a cheaper price than what it might cost farther down the road.

“First, the environmental study must prove that there is a need for an infrastructure,” Heckman said, “and that need can’t be 20 years from now.”

He noted, too, that advance acquisitions can be done but condemnation cannot be used in such transactions.

“They can make offers to purchase land ahead of the completion of an environmental study, but they cannot use condemnation,” he reiterated.

Another TSCRA member who lives in the Panhandle commented that he didn’t expect he would be using these new toll roads much and he was not in favor of raising the gasoline tax.

“The people that are going to use that road can pay the toll. The judge said none of us like tolls. Well, I like ‘em.”

He added that the once-paved blacktop that went to his ranch entrance is now a gravel road because his county, Hudson County, didn’t have enough money to maintain that road.

The judge responded that his particular region of the state actually gets more back in gas taxes than it pays.

“If you only received the gas tax that is raised in your area, you wouldn’t have anything but caliche or gravel roads,” Whitley said.

“As I said earlier, if you look at this purely from a rural or urban standpoint we’re all going down, but I want to tell you, a lot of rural areas have benefited from a lot of the gas tax dollars that the urban areas are paying. The

Childress District has consistently gotten well over 100 percent of their money back while the Metroplex gets only about 50 percent back.”

Phil Wilson wrapped up the question and answer session by offering an opinion on the proposed two-year moratorium.

“We’ve already had over 700 meetings across the state on the Trans-Texas Corridor. “We don’t have time to stand still and look at this,” Wilson told TSCRA members. “Plus, no concrete can be poured until the environmental impact study is completed,” he reminded.

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