Saturday, January 02, 2010

"Hutchison’s promise to kill Governor Perry’s Trans Texas Corridor (TTC) project cannot be taken seriously."

Kay Bailey Hutchison’s transportation plan revives the Trans Texas Corridor


For Immediate Release
Texas Public Interest Research Group (TexasPIRG)
Copyright 2009

Kay Bailey Hutchison calls for some good reforms in her transportation proposal, Putting Texas Transportation Back On The Road to Success. However, her plan falls short in protecting taxpayers and fails to offer a method for financing the state’s transportation system other than continuing to privatize roads and pushing the use of private toll road arrangements called public-private partnerships (PPPs) which are fraught with risk for taxpayers.

Hutchison is correct to demand that the state reform TxDOT’s broken financing system and enact measures that will regain the public’s trust in the very same state agency that made a $1.1 billion accounting error a few years back. She is also correct to insist that data be more transparent and consistent across all regions, especially data that pertains to controversial projects such as private toll roads. She is absolutely justified when she demands that the state ends the diversion of Fund 6 transportation revenue to other programs. In the 2010-2011 state budget, $1.2 billion of dedicated funds were diverted to other purposes. Hutchison also outlines some particularly good ideas for developing both local and statewide outcome-based accountability measures for transportation projects. Finally, we applaud the inclusion of a strategic freight initiative and the emphasis Hutchison places on high speed and commuter rail as alternate types of transportations as well as the emphasis she places on rail relocation for urban freight rail networks—the first step to getting Texans moving on tracks.

However, Hutchison’s promise to kill Governor Perry’s Trans Texas Corridor (TTC) project cannot be taken seriously. Her proposal offers no additional means for financing Texas’ transportation infrastructure other than the very same TTC-style private toll road arrangements that have come to define Governor Perry and TxDOT over the course of the past decade. In her transportation plan, Kay Bailey Hutchison claims that she will kill the TTC once and for all. However, without a new method for funding the multi-modal transportation system she proposes, her plan sounds awfully similar to Governor Perry’s Trans Texas Corridor.

Reviving the unpopular Trans Texas Corridor

The Trans Texas Corridor will not be dead until we rid the state of TTC-style private toll road arrangements such as public-private partnerships (PPPs) which are Comprehensive Development Agreements (CDAs) by another name. These are the same type of road privatization deals Governor Perry used to fund the unbelievably unpopular Trans TTC project. CDAs and PPPs are fraught with problems and characterized by the same leveraging of debt, reckless shifting of risk and conflicts of interest that triggered the recent financial crisis. CDAs and PPPs place transportation policy and planning in the hands of private Wall Street investors seeking reliable returns from rising tolls.

The plan to build Governor Perry’s TTC ran into fierce public opposition and fiscal constraints. Thousands of Texans attended anti-TTC rallies and meetings across the state and continue to voice strong opposition to private toll roads today. Texans worry about the potential government seizure of farmland, the prospect of foreign ownership of state roads, rising tolls and the loss of public control when road policies are dictated by contracts with Wall Street investors. As the recent financial crisis shows, what is good for Wall Street is not always what is good for taxpayers.

Public-Private Partnerships cost taxpayers money

Hutchison’s transportation proposal states, “Public-private partnerships are an important part of a modern transportation system, and can often build roads faster and cheaper than the government could do it working alone.” This statement is grossly misleading. While privatized toll roads offer a hard-to-resist "quick fix" for state politicians, they have major hidden costs and big potential downsides for the public. Private toll road operators seek to maximize their profit through rising tolls. According to testimony given by the Government Accountability Office regarding private toll roads, “there is no ‘free’ money in public-private partnerships” and it is likely that tolls on a privately operated highway will increase to a greater extent than they would on a publicly operated toll road (GAO-08-44).

Hutchison’s plan creates a loophole that will open up future roadways to privatization

Hutchison is correct when she begins to outline public protections against risky road privatization deals in her plan but wrong when she includes a glaring loophole that will enable the state to privately toll future roads and associated structures. She states that “No existing road should be tolled, except to add capacity through new tolled lanes within existing rights of way.” This opens up any future road constructed in Texas to privatization and grants the state the right and power to use private toll road deals to build private toll road interchanges, managed lanes and additional roads adjacent to the state’s “free” roads. TexPIRG does not support new forms of road privatization at all.

Furthermore, upon reading this section of Hutchison’s proposal, thoughts of Senator Nichols’ Senate Bill 17 from last session come to mind. While at first glance, SB 17 acknowledged the need to protect Texans against the dangers of private toll roads, it contained a number of hidden clauses that seriously undermined this goal. SB 17 contained loopholes that would have opened up Texas’ roadways to private investment by permitting TxDOT to avoid upholding the public protections from harmful private toll road deals initially set up. As Governor, if Kay Bailey Hutchison intends to safeguard taxpayers from bad road privatization deals, she should not include loophole language that will unravel these public protections.

Protecting Texas taxpayers once and for all

As Hutchison very accurately states, too often, these “partnerships have given unfair advantages to private parties at public expense.” Therefore, if Hutchison intends to move forward using the same TTC-style road privatization deals to build the multimodal transportation system she puts forth in her proposal (and this is clearly her intention), she must insist on the strongest possible public protections to ensure complete transparency, full value for taxpayers and continued public control of transportation policy. The protections she outlines in this proposal do not go far enough to safeguard Texans from risky road privatization.

In order to protect Texans, Hutchison should strengthen the public safeguards in her proposal by ensuring that the public retain control over decisions about transportation planning and management and that taxpayers receive fair value so future toll revenues are not be sold off at a discount. No future private toll road deals should contain non-compete or compensation clauses nor should any deal last longer than 30 years because of uncertainty over future conditions and because the risks of bad deals grow exponentially over time. Contracts should require state-of-the art maintenance and safety standards instead of statewide minimums and there must be complete transparency to ensure proper public vetting of privatization proposals. For full accountability, the legislature must approve the terms of a final deal, not just approve that a deal be negotiated. And finally, no existing roads should be privatized.

Restructure TxDOT like a corporation?

Hutchison’s transportation plan also veers off track when she bizarrely proposes restructuring TxDOT by giving its Commission “a more rational corporate structure” and CEO. Nothing good can come out of this. By definition, corporations must return a profit to their shareholders which are just that—people who own shares of stock in the company. In the case of public-private partnerships, the shareholders will unfortunately be the private toll road investors not Texas’ taxpayers as Hutchison purports in this section of her transportation plan.

In the same section, Hutchison also proposes two changes to TxDOT’s structure that contradict one another. First she states that she will make the executive director of TxDOT a CEO. A few sentences later she makes a very different claim when she calls for a “bottom-up, grass roots approach that will put the local communities and citizens of Texas first.” So what will TxDOT look like if Hutchison is elected governor? Will Hutchison impose a corporate top-down structure on the agency, one that will prioritize profit over the long-term good of the public? Or will she take the more mindful approach and shake TxDOT down from the bottom up? Right now it is hard to tell.

Transportation will be a big challenge for the next governor of Texas

There is no question that the next governor of Texas will face the very difficult task of fixing the state’s broken transportation financing system. Some state lawmakers have suggested indexing the gas tax. There have also been some murmurs in the state of creating a Vehicle Mileage Tax (VMT) pilot program as the state of Oregon has done. Texas must also stop diverting transportation funds to other programs and ought to invest in more sustainable methods of transportation such as rail that will have greater returns on initial, upfront investments.

However, continuing to push public-private partnerships is not the answer for our state’s roads, interchanges, managed lanes or rail. Pushing these deals will simply mean business as usual at TxDOT. Texans have made it abundantly clear that they do not want private toll roads as part of their transportation infrastructure. It will be the responsibility of the next governor (capitalized?) of Texas to ensure that the public gets what the public wants.

For More Information:
Melissa Cubria

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