Wednesday, November 07, 2007

Privatizing public roads: "The public interest can be subordinated to the private interest."

Toll road 85, free road 50?

Nov. 6, 2007

Houston Chronicle
Copyright 2007

Today's news is that Harris County toll roads are throwing off so much "profit" that they are paying for $120 million worth of other street and road projects and maintenance.

How would you feel if, in order to make even more "profit," the Harris County Toll Road Authority raised the speed limit on, say, the Hardy Toll Road to 85 mph while lowering the limit on the parallel portion of Interstate 45 to 50 mph?

Then how would you feel if they raised the tolls to reflect the increased demand for the Hardy?

Don't worry. The Harris County Toll Road Authority doesn't have the power to play with speed limits that way.

Speed-limit games

But the state of Texas does.

And buried in the 192-page "concession agreement" between the Texas Department of Transportation — known affectionately as TxDOT — and the private-sector folks who will build and operate Texas 130, one of the first privatized toll roads to be part of Gov. Rick Perry's Trans-Texas, are incentives to play just such speed-limit games.

San Antonio Express-News reporter Pat Driscoll stumbled across this possibility while wading through Page 79 of the densely worded document, trying to figure out a section which provides for penalties should TxDOT build or allow anyone else to build roads that might reduce profits on the toll road.

An unintended side benefit

TxDOT signed the contract with a consortium of the Spanish company Cintra and San Antonio-based Zachry Construction Corp. last spring, at a time when legislators were trying to put a brake on Perry's ambitious privatized toll road system.

The penalties for allowing competition to the toll road can be offset by the amount of profit added to the toll operation by a "decrease in the maximum daytime posted speed limit for passenger vehicles on all or a substantial portion of I-35 where it runs generally parallel" to the toll road.

(An unintended side benefit could be a sharp jump in revenue from speeding tickets.)

Conversely, the contract makes TxDOT pay the consortium if the state raises the speed limit on I-35, leading to a decline of toll road profits.

The contract's incentives for a high speed limit on Texas 130, the first leg of which which will run from north of Austin to Seguin, are more precisely calculated.

If the speed limit is 70 mph, Cintra will pay TxDOT $25 million upfront. At 80 mph, the payment would be $92 million.

And for 85 mph: a cool $125 million.

Or TxDOT could choose a set of profit-share percentages bumped up for higher speed limits.

TxDOT says it would never adjust speed limits to enhance revenues. Speed limits are determined by considerations of highway design, driver habits and safety concerns.

Well, yes, and the state of Texas signed a contract with the donors of the Christmas Mountains saying they would never sell the land to a private owner without the donors' written permission. Now Land Commissioner Jerry Patterson says that promise is "unenforceable."

I'll bet Cintra's lawyers were smart enough that the toll road contract's penalties if TxDOT makes nearby free roads too nice are quite enforceable.

That's one of several problems with privatizing public roads. The public interest can be subordinated to the private interest.

If the public gets angry enough at the Harris County Toll Road Authority, Commissioners Court will slap the agency upside the head and make it behave.

But Cintra's lawyers have crafted a 50-page contract that largely shields the firm from public passions.

The contract, for example, provides a complex formula that allows the consortium to charge tolls no elected official would vote to approve.

For 50 years.

Like cable TV companies, they will set their rates on what the traffic will bear.

Except that they won't have to worry about satellite competition or AT&T.

How do you feel about that?

You can write to Rick Casey at P.O. Box 4260, Houston, TX 77210, or e-mail him at

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