"TxDOT admits Trans Texas Corridor still alive & well."

Public hearing turned lobbyist feeding frenzy



2/2/10

By Terri Hall
San Antonio Express-News/Houston Examiner
Copyright 2010

We've seen it before. But in an election year during an economic downturn, it's breathtaking -- a room stacked with lobbyists and elected officials lobbying for higher taxes. Yesterday's Joint Public Hearing of both the House and Senate Transportation Committees (more news coverage below) to discuss the state of transportation finance was what San Antonio Rep. Ruth McClendon defined as insanity, doing the same thing over and over and expecting a different result. McClendon feels that unless the political aspect of why road funding has not been properly addressed, all the public hearings and testimony won't change the outcome.

Ultimately, Governor Rick Perry has repeatedly threatened a veto of any increase in transportation funding other than his policy of privatized toll roads, and he's managed to successfully starve or squander existing funding enough to accomplish his goal. Perry, David Dewhurst, Tom Craddick and Steve Ogden's desire to raid teacher retirement and public employee pension funds to finance these risky toll road deals fell flat in the Legislature, a sentiment echoed in yesterday's hearing.

Once again, lawmakers tried to make the case that TxDOT is plum out of money and that higher taxes are needed to build more roads, while conservative legislator Rep. Linda Harper-Brown and a handful of conservative watchdog groups pushed back saying there's already tax collected that's not getting to transportation, which needs to be fixed first.

Business interests like the Texas Association of Business and virtually all the urban Chamber of Commerce groups shamelessly advocated private toll roads, and every tax imaginable to go to roads. San Antonio Greater Chamber of Commerce President Richard Perez even asked for a "arterial collection" tax, which is code for tolling surface streets, not just highways. These hogs at the trough want no tax left "un-levied" to exploit the powers of government taxation and forcibly empty our pockets to fill theirs. They want it all -- from a hike in vehicle registration fees and vehicle sales tax to property tax, sales tax, and basically taxes on anything that moves.

Lawmakers again had a hard time discerning the true funding "needs" due to TxDOT persistently including projects not on the state highway system in its "funding gap" figures that started at $86 billion in 2006 (then was revised downward by $30 BILLION after the State Auditor found TxDOT had bloated that figure) and is now up to $387 billion.

TURF also obtained sworn testimony from a former employee of the State Auditor that Perry's Transportation Commission directed the agency to gin-up its 2006 funding gap so that it appeared insurmountable under the gas tax system (so it could push private toll roads as the solution to funding shortfalls). Distrust of TxDOT is the elephant in the room few lawmakers seemed prepared to address.

Americans for Prosperity and Texans Uniting for Reform and Freedom, two of only three watchdog groups to testify (Eagle Forum didn't show and Texas Public Policy Foundation was invited but declined) compared with 31 invited witnesses in favor of higher taxes without accountability, emphasized prioritizing existing funding first, like ending diversions of gas taxes revenues away from transportation, and cleaning up a broken TxDOT that continues to illegally use taxpayers money on lobbying for more privatized toll roads.

Defending the indefensible

Though the Texas Conservative Coalition echoed many of the same sentiments, its Director, John Colyandro, was taken to task by Chairman Senator John Carona for advocating the most expensive road tax while rejecting a more affordable gas tax increase. "How is that conservative?" asked Carona.

While Colyandro stopped short of endorsing Rick Perry's position of having all new capacity being toll lanes handed over to foreign corporations that charge 75 cents PER MILE to use public roads, he did advocate that private toll roads have a legitimate role as part of a mix of both toll and non-toll roads.

Earlier in the hearing, Carona laid down the gauntlet asking, "I'm looking for someone to come and defend to me that a privately built toll road is less expensive than a free road 'cause it just ain't so."

While Colyandro and many of the lobbyists and local politicians asked for the moratorium on private toll roads be lifted and remain "one of the tools in the tool box," none could defend how that funding "option" was more affordable than a gas tax increase. Because it isn't. It's rather telling when even a so-called anti-tax advocate lobbies for the most expensive road funding option, but outright rejects the most affordable one.

TxDOT admits Trans Texas Corridor still alive & well

Considering all the campaign rhetoric from Perry claiming the Trans Texas Corridor (TTC) is "dead," his highway department laid it to rest when it admitted on the record that it's still alive and well in the transportation code. The Department still has the legal authority to move forward with it should Perry be re-elected. So once again, all the claims that the TTC is dead, are just plain inaccurate. In fact, one of Perry's appointees to the Transportation Commission, Ned Holmes, asked at a Commission hearing last fall that the TTC-69 private toll contract be expedited. Two other pending TTC corridors, La Entrada de Pacifico and Ports to Plains are also actively being pursued.

Private toll roads cost more than public
As part of the discussion on private versus public toll roads, several lawmakers queried TxDOT staff and Commission Chairwoman as to why public agencies can't go to the bond market and fund these toll roads the same as a private operator can and even more cheaply since they can access tax-exempt bonds and don't need to make a profit. The answer is it can stay in the public's hands more affordably.

Though Transportation Commission Chairwoman Deirdre Delisi tried to say the private operators can tap money the taxpayers can't, it's totally false. In fact, it's the other way around. The private sector is exploiting the tax-exempt capital backed by taxpayers (like federally backed TIFIA loans and Private Activity Bonds, PABs, as well as other sources of taxpayer revenue like gas taxes to subsidize toll projects) in addition to its access to the private bond market, which charges higher interest rates resulting in higher toll rates.

If a potential road is toll viable, the public toll entity can go to Wall Street and get private investors to fund the project using toll revenue bonds based on traffic forecasts. The private investors, not the taxpayer, are on the hook if the traffic fails to show-up to cover the debt. No public money has to be tapped when building a toll viable road.

Delisi seemed clueless as to what a toll viable road even was or how one is funded, looking to TxDOT staff to bailout her out of answering the question. That's because TxDOT hasn't built any toll viable roads since she became Chair. Delisi also claimed there were no guarantees (where the taxpayers bailout the private entities) that the private operators would make a profit, yet an article in today's Bond Buyer confirms there are.

Financial death spiral
Under Perry, rather than scrap toll projects that won't pay for themselves, he's buried the taxpayers in massive amounts of new debt to SUBSIDIZE losing toll projects, socializing the losses and privatizing the profits. Pre-Perry, there was ZERO debt for roads. On Perry's watch, $12 billion in debt has been amassed, not counting the off-budget debt local toll entities have had to incur to pick-up the slack for the State's failure to properly fund STATE highways (and millions the Governor's office has spent on roads for Colonias).

Much of this money has been leveraged multiple times (using borrowed money as collateral to borrow more money, and often several times over), the same reckless financial methods that got us into the mortgage crisis and bailout era. If we continue down this road, debt service payments will likely eat-up our existing gas taxes at a faster pace than inflation, fuel efficiency, and diversions COMBINED!

Though there's some room to borrow more money for roads, the Texas Bond Review Board Executive Director warned, there's not much available. Many of the State's bond ratings have already dropped from AAA to AA+. Perry has basically maxed out the State's credit card in just 5 years!

Carona closed the hearing saying the committees planned to reach out to taxpayer groups next time around to try and reach consensus so that road funding issues get solved and not stonewalled for another session. From our perspective, more funding is a non-starter until they end gas tax diversions and audit and clean house at TxDOT, holding them accountable for the years of wrongdoing.

Be sure to read TURF's oral testimony and written testimony.

© 2010 TURF: texasturf.org

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