Analysis:
House loses faith in transportation policy

April 19, 2007

by Christine DeLoma

The House April 10 overwhelmingly voted no confidence in the Texas Department of Transportation's Ric Williamson and Transportation chairman Mike Krusee (R-Round Rock).

The vehicle: a measure to halt the widely unpopular Trans-Texas Corridor toll road plan.

It's not often that a sitting committee chairman sees the state policy he has worked hard to create get prospectively dismantled in a matter of hours.

House members approved a two-year freeze on private toll road projects. The move came only hours after Krusee and Williamson, in a committee meeting, defended the state's policy of allowing TxDOT to enter into comprehensive development agreements (CDA) with private developers to build and operate toll roads in the state.

"We think the path we're on is based on common sense," said Williamson.

TxDOT has come under stiff criticism for using the tools the Legislature gave it four years ago to help finance and speed up road construction. Yet many lawmakers, including Rep. Lois Kolkhorst (R-Brenham), argue that when they voted for Krusee's 2003 omnibus transportation bill they never dreamed that TxDOT would be pursuing dozens of multi-billion dollar contracts with private developers to build toll roads.

"This is an issue about how Texas will build roads in the future and whether the profits of those roads paid by Texans will stay here in Texas to build more roads that we control or whether the profits are siphoned off to go to investors in Spain, Wall Street, and other areas," Kolkhorst said. She also said the moratorium did not exclude the construction of all told roads - only private toll roads.

Krusee said if the moratorium is finalized, lawmakers will be faced with having to find new revenue to construct roadways.

"TxDOT will tell you we're going to run out of money to give to cities for new mobility projects, for new highway construction," Krusee said. "We're out of money in 2013, five years."

He urged members to support an increase in the gasoline tax.

It's a matter of trust

Over the past few months, lawmakers have expressed concerns to Williamson and the commission over the dozens of proposed comprehensive development agreements that are in the works.

Concerns include non-compete agreements that penalize the state for building or expanding roads near a private toll road, the 50-year length of lease agreements, expensive buy-back provisions, the lack of public disclosure of CDA's, and unregulated toll rates.

In addition, a Feb. 23 State Auditor's Office report on TxDOT's CDA with private consortium Cintra-Zachry, raised serious questions over how much money the Trans-Texas Corridor project would actually cost taxpayers.

The audit report also raised concerns over the non-compete clause in a draft agreement with Cintra-Zachry to complete the last two segments of the toll road, State Highway 130, from Mustang Ridge to Seguin. The provision would have required TxDOT to compensate the developer for lost revenues if the state built ancillary roadways near the toll road.

On Feb. 27, Transportation Commissioner Ted Houghton, reassured the House Appropriations Committee that no contracts had been signed so far that included non-compete clauses.

Despite lawmakers' worries, however, TxDOT went ahead March 22 and quietly finalized a 50-year CDA with Cintra-Zachry to construct and operate the last two segments of State Highway 130.

The contract's non-compete clause would penalize the state for building ancillary roads that compete with the toll road. The state would receive at least $25 million in upfront concession fees in return for allowing the company to build, operate, and collect tolls for the 41-mile road.

There is also resentment over what legislators see as TxDOT's meddling in local transportation planning issues and what some call the agency's take-it-or-leave-it attitude.

"TxDOT came into my community and threatened my community," said Rep. Joe Pickett (D-El Paso). "They said, 'If you don't do what we say, we will cut your funds'."

Other lawmakers say local officials have been bullied by TxDOT into accepting the agency's plans for private contractors to build toll roads in their area. And many argue that local quasi-public toll road authorities have a proven track record and can build the roads cheaper as well as keep the toll rate as low as possible.

Yet the state's current policy doesn't encourage TxDOT to award projects to the lowest bidder. By using CDAs, TxDOT can extract significant up-front payments from private vendors that can be used for roads. So instead of the project's going to the lowest bidder, it now goes to the highest.

Many lawmakers from Harris County and the Dallas-Fort Worth area cite the low tolls versus up-front payment debate as one of the sources of friction between the agency and local leaders.

Changing transportation policy

Kolkhorst managed to garner 111 co-sponsors to HB 2772, legislation that would place a two-year moratorium on private equity CDAs. Despite widespread support, Krusee had not given her bill a public hearing in his committee.

Nonetheless, Kolkhorst took the language from HB 2772 and attached it as an amendment to HB 1892 by Rep. Wayne Smith (R-Baytown) on the House floor.

"This is us tapping the brake, looking before we leap into contracts. that last 50-plus years," said Kolkhorst.

In addition to the two-year moratorium on CDAs, the measure would create a study commission to look into the many toll road issues giving lawmakers heartburn.

Smith's bill allows the Harris County Toll Road Authority (HCTRA) the right of first refusal for proposed toll road contracts within the region. It also allows HCTRA to enter into comprehensive development agreements and prohibits TxDOT from decreasing the county's highway formula funding.

HB 1892 would also allow HCTRA to acquire access to the state's rights of way without having to pay TxDOT the $1.23 billion it wants for the use of the state's land.

Earlier this year, former Sen. Jon Lindsay (R-Houston) called TxDOT's price tag for the right of way "highway extortion." The bill was also amended to allow the North Texas Tollway Authority (NTTA) similar rights.

Many Tarrant County legislators expressed concern that Kolkhorst's moratorium would squash the planned State Highway 121 that runs through several counties in North Texas. In order to address those concerns, the bill was amended to exclude projects within that area.

Among other amendments: creating an exemption for managed lane projects in which a portion of an existing highway is converted into a toll lane; prohibiting political contributions by contractors to county judges or commissioners; and allowing federal audits of non-profit toll road contracts.

Krusee did not give up his effort to derail Kolkorst's amendment and Smith's bill. He twice called points of order on the bill, both of which Speaker Tom Craddick overruled.  He also offered several unsuccessful amendments to put restrictions on the Harris County Toll Road Authority.

Rep. Fred Hill (R-Richardson), the only other nay vote on the final bill, tried to make the bill unpalatable to members by placing an amendment on it that would allow other urban counties to acquire state assets such as access to rights of way in order to build roads without having to pay TxDOT.

Rep. Larry Phillips (R-Sherman), who voted against the bill on second reading, amended it to include all 254 counties under the provision. This move gave Krusee a chance to argue against voting for the bill because it allowed all counties to "seize TxDOT assets" and would make it harder for the agency to sell bonds.

Despite the many amendments to HB 1892, Pickett urged members to vote for the bill so that the issue could move forward in the Senate, where the CDA moratorium has wide support.

If the measure is approved by both chambers the Legislature may have enough time to vote to override a gubernatorial veto. Although Gov. Rick Perry hasn't indicated he would veto the specific measure, he has tried in recent weeks to drum up support for TxDOT's use of CDA's. 

"You get a chance to decide whether you trust TxDOT or trust yourself as a legislator.," said Smith before the vote. The House approved the bill 123-17 on second reading. On April 11, the measure passed on third reading, 137-2, with Krusee and Hill voting nay.