Sunday, February 27, 2011

"Texas has borrowed $11.9 billion for roads, which will cost $21.1 billion, including interest and other fees, to pay back over 30 years."

Your Commute

Texas Transportation Department going into debt to pay for road work


By Gordon Dickson
Fort Worth Star-Telegram
Copyright 2011

Texans are increasingly borrowing from their children to pay for the roads they are using today.

Unable to persuade lawmakers to raise gas taxes or vehicle registration fees, the Texas Department of Transportation is going deep into debt to build roads and keep up with the state's explosive growth.

Since 2001, legislators and voters statewide have allowed the department to use a variety of new tools to speed up road work. That eased traffic congestion in the short term -- but now nearly $1 billion of the agency's roughly $8 billion annual budget goes to debt service.

It wasn't always that way. Traditionally, roads weren't built until the state had cash in hand. But many long-awaited projects were delayed because of chronic funding shortages.

"We've advanced as much as we can with the ability to borrow funds," Transportation Department spokeswoman Jodi Hodges said. "Now we're having to pay it back with interest."

Texas has borrowed $11.9 billion, which will cost $21.1 billion including interest and other fees, to pay back over 30 years, said state Rep. Joe Pickett, D-El Paso.

Some of the money repays debt from bond sales. Some goes to reimburse cities and counties, which use property tax-backed bonds to build roads.

"At the end of the day, there's not going to be any new money," Pickett said. "So we're leaving it up to the communities to handle this crisis."

Some of the money is paired with private equity from private developers: the North Tarrant Express project on Loop 820 and Texas 121/183 in Northeast Tarrant County, for example. The developers bring in their own funds to a project in exchange for control of the roads and toll collection for 52 years.

Though some Texas leaders criticize the federal government for engaging in expensive programs that mortgage the nation's future, the state is arguably doing something similar by increasingly relying upon alternative financing options such as debt and public-private partnerships that commit public resources for decades.

Even so, supporters of the approach say building the roads now -- even if Texas can't put cash on the barrelhead -- is a worthwhile investment.

Relieving the traffic now, they say, creates a setting for continued job growth in Texas and reduces air pollution in Dallas-Fort Worth.

Examples of alternative financing tools used in Texas:

Proposition 12

In 2005, voters authorized the Legislature to issue up to $5 billion in Proposition 12 bonds for road work and repay the money through the state's general fund.

So far, $1 billion in bonds has been obligated to nontoll highway projects, and repayment over 30 years will cost taxpayers $1.5 billion including interest and fees, Pickett said.

Another $1 billion was authorized for the state infrastructural bank.

The Transportation Department is seeking authorization from lawmakers to spend another $1 billion.

Projects must fit into a handful of categories, including rehabilitation work or improvements to nontoll corridors of statewide significance.

Most of the funds have been spent outside Dallas-Fort Worth, although $144,000 was used to resurface Cooper Street in Arlington from Arkansas Lane to Pioneer Parkway.

Nearly $1.9 billion overall is being spent improving 94 miles of Interstate 35 in the Waco, Belton and Hillsboro areas -- much of it from Proposition 12 funds.

Many projects are coming in under budget because contractors are bidding less than expected, so more projects may be financed with Proposition 12 funds.

"We definitely have the benefits of an economy working in our favor," Randy Hofmann, the Transportation Department's Tyler district engineer, told transportation commissioners Thursday. Hofmann is overseeing the Proposition 12 program.

Proposition 14

The Transportation Department has issued $4.6 billion in funds from Proposition 14, which allows the agency to repay the debt with future gas tax revenue. Repayment over 20 years will cost $7 billion, Pickett said.

And more projects are on the way. The state has authorized all but about $45 million of the $6 billion in Proposition 14 funds, said Hodges, the Transportation Department spokeswoman.

The long-awaited I-35W expansion in north Fort Worth could be under construction by 2017 after the Texas Transportation Commission agreed last year to set aside $135 million in Proposition 14 funds for the project.

Texas Mobility Fund

Voters created the Texas Mobility Fund in 2001 by constitutional amendment as a revolving fund to pay for roads.

About $6.3 billion has been committed, which will cost $12.1 billion to repay over 30 years. The money comes from a variety of state sources, as directed by lawmakers, including driver's license and title fees.

At times during the past four years, mobility fund dollars have been shipped to Tarrant County to help with projects including improvements to I-35W south of downtown, U.S. 377 north of Keller and East Loop 820 right-of-way purchase.

But transportation commissioners have sometimes been criticized for steering the fund toward toll projects. Last week, the commission learned that $340 million in unspent mobility funds could be used on Grand Parkway in Houston, a multibillion-dollar toll loop project that will likely bring in private equity as well.

Pass-through financing

Cities and counties pay for road work, and the Transportation Department reimburses the costs over several years based on a formula. The state is asking local entities to submit projects for $282 million in pass-through financing this year.

In the Metroplex, Hudson Oaks and Weatherford are using $7.9 million and $52.4 million, respectively, to improve the Interstate 20 corridor west of Fort Worth.

In the Dallas area, the North Central Texas Council of Governments applied for $63 million in pass-through funding for Interstate 30 managed lanes, and Denton County applied for $41 million to expand Farm Road 1171 from Shiloh Road to I-35W.

Colleyville applied last year for $25 million in pass-through funding for Texas 26 improvements and is negotiating with the Transportation Department and Tarrant County to get the work done through a variety of funds.

Reinvestment zones

El Paso and Forney have approved projects that use investment zones to capture property taxes and use that money to pay for road work. Pickett has filed a bill that would give cities more flexibility to create reinvestment zones.

In Fort Worth, supporters of a proposed commuter rail line from southwest Fort Worth to Grapevine, Dallas/Fort Worth Airport and possibly as far east as Carrollton, Addison, Dallas and Richardson would like reinvestment zones expanded to include development around future rail stations.

Gordon Dickson, 817-390-7796

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