Monday, February 11, 2008

Toll Road Hype: TxDOT's much-touted 'economic engine' runs like an overpriced jalopy

Tollways may or may not be money machine

February 11, 2008

Ben Wear
Austin American-Statesman
Copyright 2008

It was the first, and seemingly best, argument I heard for toll roads when I got this beat more than four years ago. Haven't heard it much lately, however.

Toll roads, Texas Department of Transportation officials said, would be an "economic engine" for highway financing as gas taxes grow increasingly scarce, generating excess cash that could be spent on other roads. Like in Houston, they'd say, where the Harris County Toll Road Authority has spun off cash for other nontoll projects and still has hundreds of millions of dollars stockpiled.

But when TxDOT officials the other day gave legislators a spreadsheet with the agency's expected cash flow through 2015, I didn't see any toll road profits in there. I asked James Bass, the agency's chief financial officer, about that. After all, TxDOT owns six toll roads now, including three in the Austin area. Won't they be throwing off some cash, I asked Bass?

Not anytime soon, he said.

So I looked at the "official statement" for the Central Texas Turnpike Project, which is the overall name for the Loop 1, Texas 45 North and Texas 130 tollways. It was a thick document shared with the investment community before the agency went out and borrowed $2.2 billion on the bond market in 2002.

The numbers are startling. It looks like the only thing throwing off dollars will be TxDOT itself.

According to that statement, the three roads will make $8.7 billion in toll revenue through 2042. In that same time, there will be $7.2 billion in debt payments for that borrowed $2.2 billion, $1.1 billion in operations costs, $752 million in routine maintenance and $388 million for long-term maintenance. The net of all that? Almost $750 million in the hole over 35 years.

More like an economic jalopy.

Of course, the three roads could do better than expected. That happens. But sometimes tollways underperform instead.

Parts of the Austin toll roads have been open for 15 months now and have charged tolls since last January. Hard to draw any firm conclusions from the limited history. But at first glance, the results don't scream, "Bonanza!"

The three roads made $27.5 million from January through November, $3.6 million in the last month, which equates to about $31 million for the first full year. That's well under the $42.4 million first-year projection in the official statement. That statement shows revenue nearly doubling in three years, to $79.4 million, and then topping $100 million in year five.

Will that actually happen? Only 75 percent of Texas 130 is open — the rest opens in April — and another tollway completing the Austin bypass to Interstate 35 should be done in about a year. Maybe the tollways — with that loop done, with economic growth and more consumer comfort with tolls — will hit the targets. And lose three quarters of a billion dollars over the next generation.

Economic engine? We'll see.

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