Toll road bids running out of fuel

03/31/2007

Gary Scharrer, Austin Bureau

AUSTIN — Public wrath over private company toll roads has soured most Texas lawmakers on a 2003 law that started the controversy, but some of their leaders say they can't support a moratorium on it — at least not yet.

As they jockeyed over whether and how to slow down toll-road privatization, the state's first private toll highway contract, to build toll lanes between Austin and Seguin, was quietly signed just one day after a Senate panel held the only hearing so far on a moratorium bill.

The bill, which would put decisions on future contracts on hold for two years, is expected to pass out of a Senate committee this week but stay parked on the back burner as a last-resort measure while lawmakers look for compromise in the final two months of the session.

Lt. Gov. David Dewhurst has directed Senate Transportation and Homeland Security Committee Chairman John Carona to allow the panel to approve the bill, despite Carona's discomfort with it.

"I think a moratorium ought to be a last resort rather than a first response and, while I support a moratorium as a last resort, I believe it's much too early in the session," Carona, R-Dallas, said.

The veteran legislator said he has assurances that Dewhurst will give him time to try to draft legislation that calms the outrage over proposed 50-year state contracts with private companies to build and operate toll roads.

Critics are howling at contract provisions that restrict competing highways near the toll roads and contain prohibitive terms for buying back the roads in the future.

They say the specter of high toll rates combined with a loss of control over Texas highways has inspired broad, bipartisan support for a moratorium.

Sen. Robert Nichols, R-Jacksonville, has 27 of 31 senators backing his moratorium bill. On the House side, 111 of 150 members have signed up for Rep. Lois Kolkhorst's bill.

"It boils down to whether the 10th largest economy in the world (Texas) can build its own highways or if we're going to give private equities the chance to take all the profits from Texas," Kolkhorst, R-Brenham, said.

Investors will net a projected $300 million over the next 50 years for private company toll roads in major cities along the Interstate 35 corridor, Kolkhorst said.

"The real question is, do you want that $300 million just on one highway to be plowed into more highways in Texas, or do you want that $300 million to go to Wall Street and Spain? That's what it boils down to," she said. "That's a clear policy question."

Debate heating

Many lawmakers likely will defer to Nichols, who spent eight years on the Texas Transportation Commission before becoming a senator. He expects a moratorium to pass.

"We need to call a time-out. We need to fix this problem, and we need to fix it right," Nichols said. "The current plan removes the control of your future transportation system out of your own hands. It sells the future revenues at a discount, and it's designed to extract exorbitant toll rates."

Dewhurst called those rates "astronomical" but declined to discuss them because of confidentiality agreements with the private companies.

Decisions about the state's future highway system will be dictated by corporations instead of Texans unless lawmakers intervene now, Nichols said.

But Carona and House Transportation Chairman Mike Krusee, R-Taylor, are urging caution. Political dissent will scare off investors and increase the state's financing costs for building roads, they warn.

Texas is short "tens of billions of dollars" needed to build highways, Krusee said.

Publicly run regional toll authorities can build some of the roads but lack necessary bonding authority to build all of them, he said.

"Once we tell the capital market that Texas is closed for two years, will they ever want to come back? Because it's very expensive to make proposals," he said. "The capital market looks for willing partners and if Texas is not a willing partner, they leave."

A moratorium is shortsighted because it simply postpones a solution for two years, Carona said.

"What we need to focus on is a bill that takes care of the problems and allows us to meet our transportation needs," he said. "A moratorium stops the process, but no part of that bill addresses how you will fix the problem."

Carona also favors indexing the state's gasoline tax to keep pace with inflation. The state's 20-cent per gallon tax has not increased since 1991.

Texas' ongoing population boom requires "a massive road building project today — not two years from now," he said.

Done deal

The concession-development agreement to extend Texas 130 from south of Austin to Seguin was widely trumpeted last summer when the state and a group led by the Spanish firm Cintra and Zachry Construction Corp. of San Antonio settled on terms.

But not a peep was made when officials signed the contract March 22 at the Texas Department of Transportation office in Austin, across the street from the Capitol.

"We made an announcement in June, when we made a tough decision to do it," said Ric Williamson, chairman of the Texas Transportation Commission.

Awarding Cintra the construction fulfills a contract guaranteeing the firm at least one segment of the project, Kolkhorst said.

Cintra-Zachry will pay to build and operate the 40-mile, four-lane tollway and has pledged to give the state $25 million in up-front cash and a share of profits. The road could open in 2012, with toll fees set at about 15 cents a mile in today's dollars and increasing with annual growth of state domestic product.

But Kolkhorst said it's costing Texas $19 million in environmental and legal fees to get the $25 million, "so we're really not even going to net anything on that one."

Up next is a concession to make Texas 121 north of Dallas into a toll road, another Cintra project that has created an even bigger uproar. An agreement was unveiled in February and could be signed within three months, said José Lopez, a Cintra director in Austin.

"We would be very happy to sign tomorrow," Lopez said.

The North Texas Tollway Authority, which had agreed not to bid on the project, said it could have matched Cintra's upfront carrot of $2.1 billion and that for the rest of the 50-year contract they could have paid $4.2 billion compared to Cintra's $700 million.

Motorists will pay the $3.5 billion difference if the deal is signed, officials say.

In San Antonio, Cintra-Zachry is competing with a consortium headed by Macquarie of Australia to develop and operate toll lanes on 47 miles of U.S. 281 and Loop 1604 on the city's North Side. That contract could be signed as early as next year.

A moratorium on concession contracts could stall that work for a year or two.

"A lot of it depends on what the language actually says," said Clay Smith, a TxDOT engineer in San Antonio.

When Cintra-Zachry submitted a proposal in 2005 for the $2.2 billion project, about $630 million in public money was freed up for other uses. If environmental studies get federal clearance this summer, construction could start next year and finish by 2012.

San Antonio lawmakers say they're hearing plenty of complaints about toll roads from Bexar County residents.

"A lot of it is because of the lack of information," Sen. Carlos Uresti, D-San Antonio, said.

Sen. Jeff Wentworth, R-San Antonio, who supports a moratorium, emphasized that a two-year cooling off period would not affect toll roads built by public toll road authorities.

"We have to continue building highways. The people are coming whether we like it or not," Wentworth said, noting it took Texas hundreds of years to reach a population of 23 million but its population is expected to double over the next 30 years.

Carona can't promise that a consensus will emerge from negotiations on SB 1929, the moratorium bill, but he complimented Krusee and TxDOT officials for showing good-faith efforts to resolve nagging worries about long-term private toll road projects.

The moratorium option hovering over negotiations will help that process, he said.