Thursday, July 29, 2010

"Equity" Means Even Higher Tolls for Texas Commuters

Houghton: State should be 'equity' partner in toll roads it helps fund


Michael Lindenberger
The Dallas Morning News
Copyright 2010

In a remarkable development a few minutes ago, the Texas Transportation Commission has signaled that it will expect to be treated as an equity partner in future public or private toll road projects for which the state provides right of way or other contributions.

In approving new toll projects in Travis County and in El Paso, Commissioner Ted Houghton of El Paso that the word grant be replaced with the word "equity."

He said he would like Texas to get a share of revenues from every toll transaction, an arrangement he said would recognize the significant tax contributions -- $80 million in bond money in the El Paso example -- the state makes to these toll roads.

The money is slated to allow the Camino Real Regional Mobility Authority reconstruct two main lanes (without tolls) as part of its overall project to add the managed lanes that will toll drivers seeking a faster commute much like the paid HOV lanes on LBJ Freeway will do once that highway is rebuilt. (Houghton says, and I haven't been able to get anyone at the CRRMA to actually pick up the phone to confirm, that the $80 million wanted for this project would pay for all of its costs. He raises a valid question, at least to my mind, If the state is paying outright for a project that will be tolled, then why shouldn't the resulting toll revenues be shared with the state?)

Still, the idea of having to treat the money from the state as an investment, rather than a grant, brought immediate concern from CRRMA folks and its lawyer. If TxDOT expects a cut off the top of toll revenues, then traffic and revenue studies "on which we have spent millions" will have to be redone, they said.

That's not certain, given that it will depend on how firmly TxDOT digs in its heels in the negotiations over what "equity" will mean for the state.

But Houghton was clear that he thinks TxDOT should share in the revenues of toll roads it helps build. The impact will be certain: Either toll rates on the project must be raised or the amount of money investors or lenders are willing to provide for the project will be reduced. Houghton said he believes most toll rates in Texas are already set below market rates -- the amount drivers really think the faster commuters are worth -- and so higher toll rates to make room for revenue sharing with TxDOT makes sense, he said.

This idea, championed in North Texas by the Regional Transportation Council, is why NTTA now regularly raises its toll rates. But El Paso tolling officials said their regional rates are closer to that market rates than in some wealthier areas of the state, and they said TxDOT's insistence on equity could spoil the deal they've negotiated.

The El Paso concerns may not materialize, however. The wording change pushed through by Houghton does not impose any particular terms on the project. It merely requires a negotiation and the next step will be for the El Paso officials to decide what the word "equity" will mean.

(The past is never a sure guide to the future, but if the North Texas experience is predictive, they'll be arguing about this for months. Just saying.)

But the vote, which was unanimous despite hesitation by some commissioners, is important for another reason, and could significantly change the terms of future toll road financing in North Texas.

Houghton said "I've been thinking about this for a very long time," and feels strongly that if the state provides right of way or other assistance for a toll road, it should be brought in as an investor -- with ownership rights in the toll revenues.

It's not unheard of here.

The state chipped in $160 million to make possible the eastern extension of the President George Bush Turnpike, a 10-mile, six-lane extension from SH 78 to Interstate 30 that will cost $1.04 billion and open late next year.

In return NTTA will charge tolls that are 20 percent higher than the rate for the rest of the system, and that money will be paid to the state, NTTA spokeswoman Sherita Coffelt said. By law will let RTC spend it on other projects in North Texas.

Still, it's all but certain to create another layer of complication for already tense deals with NTTA and TxDOT, and potentially local officials as well -- especially in an area where even the toll authority leaders are saying drivers are tolled too much.

Just before the meeting adjourned, Commissioner Ned Holmes of Houston suggested the commission needs to give the staff guidance about
what it meant by "equity." He said insisting on a slice from the top of revenue would be onerous for some smaller toll authorities, and said instead they ought to have a share of net profits.

But what impact his feelings will have is far from clear. After he made his comments, his colleagues adjourned the meeting without discussion.
Update: Just spoke to Commissioner Ted Houghton, who insisted it's only fair to point out that even if "the state" gets a cut of local toll revenues, the money will be spent locally -- and in most cases according to decisions made by the regional planning agencies, such as the Regional Transportation Council.

Fair enough.

He also says he's less worried about the specifics of the deals between the state and the local toll authorities, than in the change in approach he says is long over due. "It's a philosophical difference. We need to let the (locals) understand that you can't just assume you come here and we'll hand you money and that's the last we ever see of it. It ought to be looked at as an investment. The taxpayers are paying, and in return they get an asset. But they ought to get more than the asset. These are revenue-producing assets, and they ought to produce a return (back to the taxpayers.)"

Of course, if by insisting on a revenue-split, you end up jacking the toll rates up, then the toll payers are the ones who are paying that return -- in a sense like asking some shareholders to pay extra for their shares, so that the dividends to everyone can be bigger. But he makes a valid point to say these questions ought to be debate. "We need more revenue sources. It's got to come from somewhere," he said, noting that neither the state nor federal government is likely to raise gas taxes anytime soon.

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