2006.06.28

Texas Department of Transportation (TxDOT) is about to sign its first toll concession agreement - for a Cintra-Zachry joint venture to build an additional 65km (40mi) of TX130 between southeast Austin and I-10 at Seguin at a cost of $1.3b. The draft concession agreed between TxDOT and Cintra-Zachry goes to the Texas Transportation Commission tomorrow (June 29) for formal approval. The text is not publicly available now but should be by Friday, a TxDOT official told us.

Meanwhile they say the agreement which gives Cintra-Zachry the right to toll for 50 years in return for fully funding $1.3b of project costs provides for an upfront concession fee of $25m payable by Cintra-Zachry to TxDOT plus a share of profits. TxDOT say they could receive $1.6b in profit share over 50 years, although there is no detail yet on the precise profitsharing agreement. (Normally profitsharing provides for the state to get a specified portion of profits beyond a specified rate of return on capital.)

A TxDOT statement says: "Cintra Zachry will be responsible for the financing, design, construction, operation and maintenance over 50 years. The state will be responsible for the customer service and business operation of TxTag (the Texas transponder brand)."

They say the new segment of TX130 will be "an all electronic toll collection system allowing motorists to travel at highway speeds without stopping at toll plazas."

Texas Transportation Commission, the department's governing body, has to approve a toll setting procedure for the concession. The concession agreement is conditional on gaining environmental permits, which TxDOT should occur before the end of this year.

Concession will be contiguous with public TR

The 65km (40mi) of the Cintra-Zachry operation will be a continuation southward of the 80km (50mi) of TX130 tollroad currently under construction and planned to be operated on the traditional public authority TR model with TxDOT raising the funds and taking all the traffic and revenue risk. Under the concession title to the assets created by Cintra-Zachry will be held by the state, but Cintra-Zachry will have the right to run a toll business on their road for 50 years provided they abide by and fulfil the terms of the toll concession contract.

TxDOT in background materials say:

"Cintra-Zachry competed for the right to sign the TTC-35 Master Development CDA. The commission determined that Cintra-Zachry offered Texans the best value, and as a result, are entitled to negotiate for projects such as SH 130. Such projects must be within the TTC-35 corridor or projects that connect to or support TTC-35.

"Central to the negotiations has been TxDOT's desire for effective and substantial risk transfer to the developer. Key risks transferred to the developer include: construction cost overruns, construction delays, traffic and revenue risks, and financing risk.

"The proposed agreement would have Cintra-Zachry paying the cost for all rights-of-way for the project. This will have the effect of relieving Travis, Caldwell, and Guadalupe Counties from the burden of having to dedicate local financial resources for this purpose, and instead allows them to direct resources to other vital projects.

"The CDA establishes conditions and imposes caps on the rate of toll increases that Cintra-Zachry may charge motorists to use the road.

"As with all other state highways, property owner rights will be protected. Cintra-Zachry will pay the costs of right of way and acquire it in the name of the state. If an agreement on the purchase of property cannot be reached, only the state can initiate eminent domain proceedings. It should be made perfectly clear that land can not be acquired by the state for private sector developments such as hotels, golf courses, industrial parks, etc. Also, the State also may not remove water from land and redistribute it to other areas.

"As with every other single road on the state and federal highway system, SH 130 will be fully owned by the State of Texas. Cintra-Zachry will pay to build it and operate it for a 50-year period.

"TxDOT will make the agreement available upon its signing on Thursday, June 29th, 2006. "TxDOT will also post the commitment letter and the facility agreement on the department's website. In crafting the agreement on SH 130, TxDOT conducted rigorous negotiations to ensure that Texans receive the best possible value for the taxpayers. We encourage the public to scrutinize this agreement and get a first-hand look at the ways in which the Texas Department of Transportation is meeting our goals to reduce congestion, enhance safety, expand economic opportunity, improve air quality, and increase the value of our transportation assets." Ends quotes from TxDOT materials

NOTE: TxDOT uses the term Comprehensive Development Agreement (CDA) to cover all kinds of contracts to develop roads with the private sector, including toll concessions. Other CDAs merely involve project development work. Some CDAs involve project development work commitments plus the opportunity for exclusive negotiating rights to a toll concession, some to project development plus rights to negotiate design-build with TxDOT doing financing itself or separately as a concession. If that is confusing, well, it is.

TOLLROADnews 2006-06-28