Saturday, June 16, 2007

Gov. Perry on SB 792: “Under this legislation, every planned road construction project will move forward as scheduled."

TxDOT responds to private toll road ban


by Christine DeLoma
Volume 11, Issue 42
The Lone Star Report
Copyright 2007

With or without the private toll road moratorium, private financing to build the state’s roads still remains on the table, said chairman Texas Transportation Chairman Ric Williamson at the June 14 commission meeting.

Earlier this week, Gov. Rick Perry signed SB 792, a two-year moratorium on comprehensive development agreements between the Texas Department of Transportation (TxDOT) and private developers to build and operate toll roads. (Many urban projects already in the planning stages are exempted from the moratorium).

Private financing

Despite the ban, Williamson said the new law does not preclude the state’s obtaining financing from private developers.

“The Legislature said it’s OK for the private sector to finance these assets,” Williamson said. “It’s OK for them to take the construction. But it’s not OK for them to take the traffic risk and to collect the money from the citizens.” In other words, SB 792 does not allow the private developer of the project to collect toll revenue.

Amadeo Saenz, assistant executive director for TxDOT, said under the “availability payments” method, private developers would put up the entire cost of the project and the state would pay the developer back over a specified period of time.

For example, he said, if the state had a $300 million project, it could pay it off over 10 years. “Once the project is built, [the state would] collect the toll from that toll road and from the tolls [and] pay the developer his $30 million a year,” Saenz said.

“If the tolls are only $20 million a year, because we are keeping the traffic risk, we would have to make up the difference from other sources of money, Fund 6, for example. But if the tolls bring in $40 million a year that would result in $10 million a year in surplus of additional money a year to develop other projects.”

Traditional financing of public toll roads requires local toll entities to secure financing through the bond market.

Market valuation timeline

The new law requires TxDOT and local planning organizations to work together in setting the terms and conditions of new road projects. It also requires them to agree to a market valuation or price of each project. To help facilitate this, the agency developed a timeline in which to work with local tollway authorities and metropolitan planning organizations to implement the planning process.

TxDOT released a list of 87 candidate toll projects throughout the state estimated to cost nearly $60 billion. Agency officials will be meeting with local tolling entities and planning organizations over the next 60 days to develop terms and conditions for each road project.

Once terms and conditions are agreed to, an independent market valuation would be conducted.

Each party would have up to 90 days either to accept or reject the market valuation. If it was accepted, the local tolling entity would have the first option to commit to proceed with the road project within the six months. If the entity declined, TxDOT would have two months to consider building the project.

“These are projects that local officials have said are needed to reduce congestion but are waiting in line for funding,” Williamson said. That’s why all of the projects of the list are slated as toll projects.

Several controversial Trans-Texas Corridor projects appear on the priority list stretch through various counties as far as the Oklahoma state line to Laredo. TxDOT may face an uphill challenge getting agreement from rural communities under the new cooperative arrangement laid out under SB 792.

Exempted projects

The signed legislation is the product of a compromise between the Legislature and the governor. It exempts 12 projects, mostly in urban areas, from the moratorium.

“Under this legislation,” said Perry upon signing the bill, “every planned road construction project will move forward as scheduled, local leaders will have more authority to build new toll roads, and all toll revenue will be used for transportation projects in the area it was raised.”

Exemptions include:

* Trinity Parkway, Dallas

* North Tarrant Expressway

* DFW Connector

* IH-635

* Loop 1604

* SH 121, Dallas area

* SH 161

* Loop 9

* Grand Parkway, Houston

* I-69 South of Refugio County

*Certain CDAs in the county of El Paso, Cameron, or Hildalgo before May 1, 2007.

* Any CDA in Grayson County

Other provisions

* 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.

* Sunset of CDAs. The CDA process will sunset Sept. 1, 2009, except for certain projects like managed lanes, which sunset in 2011. At that 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 its 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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