Does the new toll road bill repeat 2003 mistakes?

May 23, 2007

by William Lutz / Lone Star Report

Throughout this session, the legislature has tried to assert itself and reclaim powers from the executive branch that the legislature rightly believes belongs to itself. In particular, the legislature wishes to reclaim its historic power of the purse – the powers clearly set forth in the Texas constitution regarding appropriations and financing.

Nowhere is the separation of powers issue more critical than at the Texas Department of Transportation.

In years past, the legislature was asleep at the wheel and passed a series of laws, most notably HB 3588 from 2003, that allowed the unelected Texas Transportation Commission to, in effect, raise taxes and spend public money – without approval of the legislature and with minimal public oversight.

A few days ago, the legislature passed HB 1892, which declares a moratorium on many of TxDOT’s more objectionable activities and transfers many of its powers to the local level. The bill passed with majorities well in excess of the two-thirds required to override a veto.

Gov. Rick Perry objects to the bill for a variety of reasons and has warned of a variety of measures, including a special session, if lawmakers override an expected veto of HB 1892.

To avoid a showdown, last Monday (May 14), Sens. Tommy Williams (R-The Woodlands) and John Carona (R-Dallas) announced they have reached a compromise with Perry on transportation, which the Senate passed as SB 792 later that evening, and the House approved, with some amendments, May 17.

The deal has some admirable features — it provides more authority for local toll authorities, it puts some new restrictions and a moratorium on many Comprehensive Development Agreements that rent state right-of-way to private companies under terms that allow the companies to gouge the public, and it puts new disclosure and transparency requirements on toll road projects.

But the deal stops far short of what is necessary to protect the motoring public and ensure rational, accountable transportation policy for the people of Texas.

First and foremost is use of privatization without justifiable competition. Markets are only more efficient than the public sector when companies can compete for business.

Comprehensive development agreements, however, are the exact opposite of competition. They grant a private company an exclusive franchise to build the road, and that monopoly power is reflected in the sky-high tolls that Texans have paid lately. Traditional competitive bidding for government-issued highway contracts appears to be better for consumers than granting one company a minimally-regulated monopoly. Recently, the wording of some CDAs were vague and unbusinesslike with respect to key issues such as tolling, rates of return and costs of buy-back. SB 792 addresses the latter issue, but ought to provide more protections for the motoring public from being fleeced by toll highwaymen.

A further flaw is it allows continuation of current policy, whereby the Texas Department of Transportation (TxDOT) may require up-front “concession fees” in exchange for building some new toll projects. The tolls that pay these concession fees are taxes, not user fees, because concession fees result in tolls over and above the amount required to build and maintain the road. Since the fees are paid back over time from toll revenue, it increases the burden of debt on our children and grandchildren.

In short, concession fees, which are continued by the “market valuation” language in SB 792, allow the government to raise taxes and do off-budget spending in a manner concealed to the public and without proper legislative oversight and authorization.

If lawmakers believe a tax increase is necessary to build the roads we need, they can and should do it directly. Carona himself has produced a series of convincing statistics that show that indexing the gas tax to inflation is cheaper for the motorists than the current over-reliance on toll roads.

Yes, high gas prices make gas tax indexing a tough sell, and the legislature would need to lay some groundwork, so that the public understands that gas tax indexing will result in less tolling, more money for roads, and the revenue will not be diverted to other purposes. But in the end, providing money to build and maintain highways is a legislative responsibility, not one of the unelected Texas Transportation Commission.

This is not a minor dispute here. The founders of both the United States and the Republic of Texas believed strongly that the power of the purse belongs in the hands of an elected House of Representatives and an elected Senate. The inconvenience of a special session is a small price to pay to preserve these critical elements of freedom.

To put it another way, there’s no need to cut this deal. The legislature is playing a poker hand with four aces, and there’s no good reason to fold.

Supporters of the current policy have tried to scare Texans into thinking that HB 1892 could affect federal highway funding. The U.S. Secretary of Transportation did not take that position when asked by U.S. Sen. Kay Bailey Hutchison, and the Democratic congressional leadership openly opposes renting public highways to private vendors.

Legislators shouldn’t yield to pressure from Perry, the toll road lobby, or any other source. In watching the compromise in SB 792 come together, it’s almost as if the legislature forgot how this mess got started in the first place.

In the waning days of the 2003 session, Rep. Mike Krusee (R-Round Rock) unveiled HB 3588 — a big, omnibus transportation bill written with assistance from the governor’s office that few understood. What is the legislature about to do — pass a big omnibus transportation bill written with Perry’s assistance that few understand.

In last week’s Lone Star Report, David A. Hartman reminded the legislature that “they are speaking for the majority of Texans who urge them not to waver.” To back down now merely invites other agencies to emulate the Texas Transportation Commission, which would be a victory of bureaucracy over public representation vested in the legislature.

In other words, lawmakers should think long and hard about whether they want to send SB 792 to the governor’s desk or whether – in the long term – this state is better off if they override a veto of HB 1892.