A report to be sent to the US Congress by the governing body on transport policy in Texas calls for an end to limits on tolling and for federal law to explicitly recognize the role of equity capital as an investment source. It also wants the federal tax code amended to exempt partnership distributions and dividends from income tax - extending the exemption in designated 'private activity bonds.'

The report called "Forward Momentum: Recommendations to reduce congestion, enhance safety, expand economic opportunity, improve air quality, and enhance the value of Texas' transportation assets. A report to the 110th Congress, 1st Session" dated January 25 2007" is presently in "Comment Draft" form.

"Transportation is in need of additional sources of capital," says the paper, acknowledging the easing of some restrictions in the last federal financing bill SAFETEA-LU.

"We must now take the next step by urging Congress to allow for expanded means such as equity capital...Pension funds, both public and private sector, have $7b of capital and comprise the largest potential source of investment for future transport projects."

Call for investor equity to be recognized as source of capital for roads

They then say they want federal law amended to recognize the role of private equity capital as a source of capital for roads. Also they propose amending the federal tax code to exempt partnership distributions and dividends from income tax. Income and distributions from government owned and not-for-profit toll authorities are already exempt from federal income tax.

The report says that the transport funding bill SAFETEA-LU's provisions on Private Activity Bonds (PABs) provide no guidance on whether there are limits on the use of revenues generated by PABs. It says there are unanswered questions regarding limits on arbitrage, on use of PABs to acquire right of way, and questions whether PABs can be used to buy existing infrastructure.

"These limitations could significantly limit the ability of departments of transportation to fully utilize PABs for projects such as SH121," says the paper. TxDOT will pursue amendments to the law to remove limits on use of PAB money.

It also says that despite relaxations in SAFETEA-LU "federal law still severely curtails states' ability to use tolling to meet their financing and mobility needs."

Since the value of federal gas tax based grants has steadily decreased it says "states cannot be denied reasonable and efficient funding solutions such as tolling." (OUR COMMENT: Limp prose. Of course states "can" be denied reasonable and efficient funding solutions. They are. That passage should read: "states MUST not be denied..." Better still: "If the federal government continues to block the ability of the states to fund their needs by its restrictions on tolling it will have to answer to voters as being a part of the problem of inadequate roads and congestion.")

End pilot project status of tolling interstates

The paper says federal law should remove the "pilot program status" of toll financing exemptions to give states "as many opportunities as possible for new funding alternatives."

It proposes toll revenues be freed of restrictions they be reinvested in the particular road.

It also calls for states to be able to buy back interstate segments by reimbursing the federal government its past contributions.

The contact for comment is cmueller@dot.state.tx.us

TOLLROADSnews 2006-12-22