Friday, May 18, 2007

"Lawmakers are trying to produce a bill Gov. Rick Perry can live with."

Legislature sends Perry another moratorium bill


by Christine DeLoma
Volume 11, Issue 38
The Lone Star Report
Copyright 2007

Under threat of gubernatorial veto, the Senate and the House this week went back to drawing board and passed another private toll road moratorium bill.

Lawmakers are trying to produce a bill Gov. Rick Perry can live with.

SB 792 by Sen. Tommy Williams (R-The Woodlands) is the product of a compromise between Williams, Sen. John Carona (R-Dallas), Perry, and TxDOT officials. It is intended to replace HB 1892 by Rep. Wayne Smith (R-Baytown), which Perry had threatened to veto.

HB 1892, Williams said, “has been the subject of some disagreement between the Legislature and the governor’s office about whether that bill really accomplishes what everyone thinks is best for the state…SB 792… hopefully avoids the necessity of a veto override fight.”

Perry told reporters last week he would be forced to veto HB 1892 unless certain “fixes” were made to it. He vowed to call lawmakers into special session if the issues were not resolved.

Perry’s main problems with the legislation are that it allows counties the use of state rights of way without compensating the state and that it gives local toll authorities the right of first refusal in building road projects.

In the compromise bill, there’s a little something for everyone.

First and foremost, the bill keeps the two-year moratorium on comprehensive development agreements for private toll road contracts – but it does add to list of exempted road projects.

The moratorium is an issue that, despite Perry’s public misgivings, many lawmakers deemed non-negotiable.

The compromise bill, however, gave TxDOT and the governor’s office a few concessions. While the bill makes it more difficult for TxDOT to extract large upfront fees from private vendors, it can negotiate with local tollway authorities to extract the maximum amount of revenue out of a toll project.

The two primary test cases for the market valuation process will be SH 161 in the Dallas area and the Grand Parkway in the Houston area.

First, local tollway authorities would have to work with TxDOT in setting the terms and conditions of a particular road project including development, construction, operation and the setting of toll rates. Both have to agree for the project to proceed (either one has a veto).

Local tollway authorities would also be required to work with TxDOT to determine the “value” of each road project by conducting a market valuation study.

The study, which can be conducted by an independent third party, determines how much the local tolling authority must either pay in an upfront concession fee to TxDOT or invest those dollars in building additional roads.

Sen. Robert Nichols (R-Jacksonville) expressed concern that the concept had never been given a public hearing. “For the first time you’re having a county toll authority or a regional mobility authority that is going to have to come up with a front end concession, kind of like a private entity…” Nichols said. “They’re going to have to commit to spend those funds… either to TxDOT or to other projects in that area.”

To Carona, however, the market valuation ensures competitive bidding for each road project. “It’s important,” Carona said, “that transportation projects be looked at regionally and that we offer a system that per project maximizes the revenue enabling us to build other projects…

“It’s not a process that any of us like. I prefer the days when toll rates are kept as low as possible, but because we don’t have sufficient motor fuels tax revenue, we have to move toward a market rate model…”

To help each region pay its share of the concession, the bill gives counties the ability to issue bonds.

A local tollway authority that disagreed with the market valuation could negotiate with TxDOT on a different number. If no agreement was reached, the project would die.

Another major concession is the creation of a two-year Houston area demonstration project in which the region’s Metropolitan Planning Organization (MPO) is granted the power to develop and set the terms and conditions of the Grand Parkway project (SH 99), including the setting of toll rates for the local tollway authority.

“This is something that frankly, I’m not in love with,” Williams said. “I don’t want to sit here and pretend that I am and defend it, but this is something that the governor’s office feels very strongly about.

“They think it’s the right way to do regional mobility planning, and so what we agreed is that we’ve got a multi-county project, that being the Grand Parkway project, which eventually, I think, would go through about six counties… so what we’ve done is set up a process where we can try that out for a couple of years and see how that works.”

Other provisions include:
  • Rights-of-way. SB 792 establishes a statewide method of determining how local tollway authorities can use and acquire state rights-of-way. Under the bill, counties can purchase the right-of-way at actual or historical cost from TxDOT.
  • Exemptions. SB 792, like HB 1892, exempts from the moratorium certain urban area projects already in the planning stages. These include: State Highways 161 and 121, Trinity Parkway in Dallas, and Loop 9. SB 792 adds two more exemptions: the Grand Parkway in the Houston area and I-69 in South Texas.
  • Some managed lane projects are also exempt from the moratorium. A managed lane is a single tolled lane on an existing controlled access highway.
  • Sunset of CDAs. The CDA process will sunset Sept. 1, 2009 except for certain projects like managed lanes which sunset in 2011. At which time the Legislature can decide if it wishes to let TxDOT continue using CDAs to build private toll roads.
  • Oversight and legislative review. SB 792 sets up a legislative study committee to look at the public policy implications of selling a toll road project to a private vendor. The committee will hold quarterly public meetings and recommend their findings to the legislature by Dec. 1, 2008.
  • The bill also requires the attorney general, the Legislative Budget Board, and the state auditor to review certain provisions in a comprehensive development agreement before the contract is signed.
  • Public disclosure required. When a CDA can be entered into, TxDOT must make public the terms and conditions of the contract, including how toll rates will be set and the amount of the concession payment. A public hearing must be held after the contract is signed.
  • Local primacy. Local tollway authorities are given the first option to build a toll road project. But TxDOT can proceed with a project if a local tollway authority declines to bid.O

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