Sunday, July 05, 2009

"Perry's Department of Transportation fought like a badger to put state highways 121 and 161 in the hands of private toll road firms."

Long a leader in toll-road pursuits, Texas taps the brakes on efforts

badger attack


The Dallas Morning News
Copyright 2009

AUSTIN – Texas spent the past six years leading the nation in its pursuit of private toll roads. Now, it looks to be among the first to call a timeout.

Lawmakers quit the Capitol on Thursday after refusing Gov. Rick Perry's pleas to extend the state's authority to enter long-term contracts with private toll-road developers beyond this summer.

The decision won't kill all private toll roads in Texas – not yet. But it signals a significant halt to one of Perry's signature initiatives, and a pause for a policy that not only helped launch a powerful trend in statehouses across the U.S., but also sparked an explosion of toll roads in Texas, nowhere more extensively than in Dallas.

Perry's policies, first given life by the Legislature in 2003, have meant both billions of dollars in new highways constructed and ever-higher tolls for millions of Texans.

Now, the state may be headed down another road as its authority to strike new deals expires Aug. 31.

"I am as happy as a hog taking a bath in a pond of slop," said Hank Gilbert, an East Texas farmer who was the Democratic – and losing – candidate for agriculture commissioner in 2006. He also has been one of the loudest voices against toll roads in Texas. "It just couldn't be no better than this."

Gilbert and many other grass-roots activists had campaigned tirelessly against toll roads, public or private, since 2003.

The strongest opposition came from voices in rural Texas, where roads are already adequate and where many feared, unnecessarily it turned out, that Perry's proposed Trans Texas Corridor would result in a giant land-grab.

Urban impact

But it is places like Houston, Austin, and, especially, Dallas that have seen the biggest impact of Perry's push. Two of the richest toll contracts in the country involved highways running through North Texas, and Perry's Department of Transportation fought like a badger to put state highways 121 and 161 in the hands of private toll road firms.

Instead, those contracts went to the North Texas Tollway Authority, although the Highway 161 deal is not final.

But in large measure, Perry's approach won there anyway. To beat out private-sector competitors, NTTA had to embrace the same kind of staggering debt loads, quickly escalating toll rates and big upfront payments to the state that characterize the private deals.

The impacts are everywhere in North Texas. Drivers here pay higher toll rates on NTTA's growing network of roads. Rates that were less than 10 cents a mile just a few years ago are about to be 14.5 cents per mile. Rates on so-called managed lane projects, where drivers are given the choice of driving on optional tolled HOV lanes, could be 50 cents to 75 cents a mile, or even more, during rush hour.

Under pressure from local leaders demanding more roads, NTTA plans to build a half-dozen or more major toll roads in the next five to 10 years.

Meanwhile, the Spanish firm Cintra has agreed to spend billions to rebuild LBJ Freeway in Dallas and to construct the North Tarrant Express near Fort Worth. Both projects involve a mix of tax dollars and private funds, and will result in highways with free lanes and tolled managed lanes.

NTTA chairman Paul Wageman said Perry's push for private toll roads has clearly had its benefits but also comes at a price.

"It's not for me to speak to the governor's legacy when it comes to this policy," Wageman said. "But it has allowed the state to build out a network of roads that would not have otherwise been built."

On the other hand, Wageman said, "I do have concerns" that voters don't realize just how many toll roads are headed their way.

"The public needs to be educated and made aware that is what is going to happen," he said.

Some of those toll roads, and others throughout Texas, might end up being private roads despite lawmakers' decision last week.

The Highway 161 project in Dallas County, and the Grand Parkway, a 200-mile tolled loop around Houston, could still be private roads – if the public toll authorities decide they can't build them. A 2007 bill gave state transportation officials until 2011 to conclude private deals on those two projects, and some others throughout Texas.

Kris Heckmann, deputy chief of staff and top transportation expert on Perry's staff, said public toll authorities don't have much time.

"If they don't want it, then they have got to give it to TxDOT in a hurry," Heckmann said, noting that 2011 is not as far away as it seems, given how long some of the private deals can take. "There's still time, but if they screw around for six months there may not be."

Other projects, including the conversion of local HOV lanes to tolled lanes, had been expected to involve private toll road companies, but now can't unless the Legislature restores private toll road authority in 2011.

State has stood out

But whatever the impacts on local roads, one thing is clear, lawmakers have ended, at least temporarily, Texas' role as a national leader in the race among states to embrace privatization.

"Texas was huge," said Leonard Gilroy, an analyst at the Reason Foundation and one of the nation's most insistent voices in favor of privatization of government functions. "They came out with a bold agenda that was combined with a massive need [for new roads]. Other states looked at what was happening and said, 'Wow.' "

The Bush administration championed highway privatization religiously, and praised Texas' push at every turn. But President Barack Obama's secretary of transportation, Ray LaHood, has also embraced it, as have many Democratic leaders in Congress.

New York, Florida, Virginia, Georgia and Pennsylvania all have expanded authority for private toll roads. California, debt-ridden to the point of near-collapse, recently approved new laws that give a green light to Perry-style privatization.

But the legal authority for such projects has often not been followed by new toll roads, at least not to the scale and scope of the leveraged deals in Texas.

Many of the most recent privatization deals involve endeavors other than highways, such as private contracts for city parking in Chicago and Pittsburgh and even, in California, public courthouses.

And increasingly, the existing private toll roads, others note, are confronting the same problems facing NTTA, including sagging traffic and huge debts.

A much-watched deal to sell Chicago's Midway Airport collapsed this spring, and a $12.8 billion proposal to privatize the Pennsylvania Turnpike collapsed last year.

Former U.S. Secretary of Transportation James H. Burnley, who served under President Ronald Reagan and now represents transportation-related clients as a lawyer in Washington, said Wall Street's appetite for the highly leveraged toll road deals has waned.

There is significantly less capital available for those kinds of investments, he said.

"Virtually all of the public-private deals that have been seriously discussed in the past decade have involved significant leverage," he said. "As we return to a more normal economy those kinds of deals will be attractive again. But lenders [may] continue to be more conservative for many years to come, reducing availability of capital for infrastructure."

Because the need for highways is so much more than the available tax funds to pay for it, private toll roads will continue to be important, Burnley said. "But they will play a reduced role."

Break may benefit

Gilroy said a two-year pause in Texas might help strengthen support here for privatization, given that the state's need for new highways isn't going anywhere.

That could make Perry's sales job easier in 2011, when, if re-elected, his aides said he would try to put Texas back on the path to private toll roads.

"Absolutely, the governor is going to keep pushing, pushing for putting this tool back in the box," Heckmann said. "If he had waited for the Legislature to raise taxes or for Congress to send us back an even return on what we send to Washington in gas taxes, then nothing would ever get built."

Gilbert said anti-toll activists are now going to work just as hard to convince lawmakers that a modest increase in gas taxes is politically viable.

Otherwise, Texas will either return to tolls or, just as bad, keep borrowing billions in a race to keep up, he said.

"That is just as fiscally irresponsible as the [private toll roads]," Gilbert said. "The vast majority of Texans would much rather pay at the pump than at the toll booth."

That's not clear. Lawmakers haven't raised the state gas tax since 1991, when they set it at 20 cents per gallon. Congress last increased the federal rate in 1993, to about 18 cents a gallon.

Efforts by Sen. John Carona, R-Dallas, to persuade Texas lawmakers to attach a modest gas tax increase died this past session, just as they did in 2007.

Indeed, probably the most important political dynamic in Perry's push for toll roads lay in the fact that it produced billions in new revenue, without requiring elected officials to raise a single tax. Instead, they simply made it legal to expand tolling, and let it be embraced by local planning boards and toll road authorities themselves, whose members are only indirectly accountable to voters.

Heckmann said that's a good deal for Texans, since "using a toll road is an option."

But as they proliferate, especially in North Texas, and as free roads are allowed to become increasingly traffic-jammed, the notion that toll roads are optional is quickly losing its virtue.

Drivers who use toll roads are paying far more for their highways than they would if they were simply required to pay higher gas taxes. But on the other hand, drivers who don't use them, or use them only rarely, pay much less than they would if gas taxes were increased.

Heckmann said that if lawmakers decide they want to raise gas taxes, then Perry might go along – as long as it was first put to the voters in a constitutional amendment. He said his boss, however, is a political realist.

"We're not holding our breath for that to happen," he said.


Lt. Gov. David Dewhurst, flanked by two leading senators, stressed last week that the decision not to extend the state's authority for private toll roads would not have a negative impact on North Texas drivers. Still, several North Texas projects could be affected. Here's how:

STATE HIGHWAY 161: This Dallas County highway is among a handful of toll roads in Texas that have a special extension from the lawmakers' decision. That means state officials have until 2011 to sign a private toll contract. NTTA has conditionally been awarded the deal but has until February 2010 to sign it. If NTTA passes, the state will have to race to complete a private contract by 2011. Regional transportation officials advanced hundreds of millions of dollars from other projects to speed the highway's construction, and if it is not built as a toll road, they could lose that money.

MANAGED LANE PROJECTS: North Texas' network of HOV lanes has more than doubled in recent years, and scores of miles are slated for conversion to tolled lanes by 2030. Two big projects, the LBJ Freeway reconstruction and North Tarrant Express, will proceed despite lawmakers' decision. Many others won't, or they'll be delayed until at least 2011, when Gov. Rick Perry tries again to get lawmakers to authorize private deals. They include: Interstate 35E from Northwest Dallas to Denton County; I-30 in Dallas and Tarrant counties; and State Highway 183 in Dallas County.

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