Private tollway contract a done deal

State, Cintra-Zachry last week signed 50-year lease for Texas 130 extension to Seguin.

March 29, 2007

By Ben Wear, AUSTIN AMERICAN-STATESMAN STAFF

The Texas Department of Transportation and Cintra-Zachry last week quietly signed a final contract for the company to build and operate the Texas 130 tollway southeast of Austin for 50 years.

The signing of that long-term lease agreement March 22 almost surely exempts that project from a two-year freeze on so-called concession agreements proposed by state Sen. Robert Nichols, R-Jacksonville. Legislation for that moratorium is pending.

Nichols' bill was inspired by provisions in the Texas 130 agreement he says will cost the state heavily during the contract's duration if competing free roads are built or the state attempts to buy back the road. If nothing else, Nichols said Wednesday, the signing should spur changes in what the Legislature will allow in such long-term toll road leases.

"That contract is a done deal, and any errors in it will have to be fixed a half century from now," said Nichols, a former member of the Texas Transportation Commission. "It's a good example of why we just can't delay reform in this arena. You're trying to catch a runaway train."

Cintra-Zachry, made up of Spanish toll road operator Cintra, San Antonio-based Zachry Construction Co., and Hastings Funds Management, an Australian investment firm, probably will begin buying rights of way this summer along the road's Mustang Ridge-to-Seguin, 41-mile route. Cintra-Zachry will cover design, land and construction costs, but the state will retain ownership of the land.

Cintra's Austin-based director, Jose Lopez, said Wednesday the tollway is expected to open by late 2011, joining a 49-mile section that the state is building. The state opened about 29 miles of that road, from Georgetown to U.S. 290 in East Austin, late last year and the rest should open by the end of this year. Taken together, Texas 130 will give drivers a 90-mile bypass of Interstate 35 congestion from north of Georgetown to Interstate 10 east of San Antonio.

The state will get at least $25 million upfront under the agreement, and a minimum of 4.65 percent of the road's toll revenue initially. That split could increase to 50 percent if the road brings in enough cash. The maximum toll for passenger cars would start at about 14 cents a mile, and be inflated annually by the percentage of growth in gross state product per capita.

Nichols said he is concerned about so-called noncompete and buyback provisions in the contract. State officials defend those provisions as typical of such contracts elsewhere, and fair to Cintra-Zachry given the financial risks it is taking.

The contract sets out a zone extending several miles on each side of the road and stipulates the state would have to pay Cintra-Zachry if improvements to state roads in that area (or new state roads) drew business from the tollway. It exempts free two-lane frontage roads that will be built alongside the tollway from Mustang Ridge to Lockhart (where the road will essentially replace existing U.S. 183), and any improvements to I-35. But adding more frontage lanes would trigger compensation.

If the state wants to take back the road early, the contract requires it to pay "fair market value." Nichols says that would be a huge number, one subject to legal wrangling, and that Cintra-Zachry instead should have been promised only a fair rate of return on its investment.

Nichols said the Legislature can prevent future private road contracts from exposing the state to such financial risks.

"There's a rollout of a dozen or more of these things pending, some of which are much larger," Nichols said. "So it's the responsibility of the members of this body to try to get ahold of it and fix it, and fix it right."