"Toll roads should ease congestion for drivers, not provide a disincentive to build more roads."

Nichols files bill to restrict, but not eliminate, use of private toll roads

3/2/09

Michael Lindenberger
The Dallas Morning News
Copyright 2009

A bill filed Monday in the Texas Senate would significantly change the rules for private toll road contracts. Authored by Sen. Robert Nichols, R-Jacksonville, the bill would do a number of things:

• Public tolling authorities, such as the North Texas Tollway Authority, would have first-crack at developing all toll roads within their jurisdictions, a requirement for so-called "primacy" that is part of the temporary law passed in 2007. Without action this session, the provision would expire later this year. Gov. Rick Perry has said previously he won't go to war over the issue, though supporters of privatization have argued against giving public agencies an advantage over their private counterparts.

• Private toll contracts would also be unable to restrict the state's expansion of interstates, no matter what impact such work would have on the toll project. Any non-compete clauses that do end up in a contract would be limited to 30 years after the road is built, instead of the 50-year terms now included.

• Finally, the bill, which Nichols says is co-sponsored by Sen. John Carona, R-Dallas, would also require that any contract with a private toll road developer stipulate exactly how both sides would determine a so-called buy-back price, should the state ever desire to end the contract. Currently, the contracts include only the requirement that the state pay market value, but don't specify how that figure would be determined.

See the jump for the full press release from Nichols.

Austin -- Today, state Senator Robert Nichols (R-Jacksonville) filed Senate Bill 17 to reform the way private toll road contracts are issued.

"Last session the Legislature realized there was an urgent need to fix the way private toll road projects were built, and we imposed a two year moratorium on them to create a better system," said Nichols. "This bill reflects the efforts of stakeholders who worked together to create a process to build new roads and protect the taxpayer."

The bill gives local tolling authorities and the Texas Department of Transportation the option to develop the toll project before a private company can. SB 17 prevents private companies from selecting only the best and most profitable projects and leaving the rest for public entities. (See the attached flow chart for more information.)

"It is important to establish a process for building new roads, but private financing for transportation projects should only be used as a last resort," said Nichols. "State and local entities will build and operate a road in the public's interest, not the shareholder's."

The bill also addresses concerns about private equity contracts, including setting a purchase price if the state ever needs to terminate the contract early and buy the project back from the private investor. Currently, private equity contracts call for the state to pay "fair market value" but do not specify how this value is determined. This could put the state on the hook for billions of dollars and a long legal fight.

Nichols' bill requires private companies to include a competitively priced pay schedule in their initial proposal specifying what the state would have the option to pay if it ended the contract early.

"Most people don't sign a cell phone contract without asking themselves what it would cost to end it early. It is just as important for the state to carefully consider its long-term contracts," said Nichols.

The bill also reigns in non-compete clauses, which require the state to compensate the private company for lost toll revenue if a competing public or private road is built nearby. Under Nichols' bill, the state could expand any interstate or build any pre-planned project without penalty. SB 17 also limits the non-compete clause to last no longer than 30 years after a road is completed, unlike the usual term of 50 years.

"Toll roads should ease congestion for drivers, not provide a disincentive to build more roads," said Nichols.

Last session Nichols, a former Texas transportation commissioner, authored a two-year moratorium on private toll roads. During the last two years, he worked with fellow legislators, the Texas Department of Transportation, regional tolling authorities and other stake holders to develop this legislation.

Sen. John Carona (R-Dallas), the chair of the Senate Committee on Transportation and Homeland Security is a joint author of SB 17. Other joint authors include: Sen. Jane Nelson (R-Flowermound), Sen. Dan Patrick (R-Houston) and Sen. Florence Shapiro (R-Plano).

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