The Legislative Study Committee on Private Participation in Toll Projects, created as a provision of the so-called toll moratorium bill – SB 792 – from the 80th legislative session, it’s being reported has finished and will soon release it’s report, (which was supposed to be ready no later than December 1, 2008). From Quorum Report yesterday:
QR has obtained a draft of the soon to be released interim report of the Legislative Study Committee on Private Participation in Toll Contracts:
An interim report on public-private partnerships to fund roads – probably the first objective review of Texas toll road policy that shuns the rhetoric of last session’s debate – recommends a more limited scope for Texas public-private road-building partnerships and the end of up-front concession payments. It also dismisses some of the solutions suggested by lawmakers to fill the money gap for road construction.
If you’ve followed the toll road policy debate at all, this 128-page report is a fascinating read. Not only does the report capture many of the arguments presented during the interim on financing road construction – would indexing the gas tax, for instance, make a significant difference in Texas road funding? – it also makes some specific recommendations to attempt to smooth the state’s progress on P3 (Public-Private Partnerships) toll roads.
Not all recommendations were met with enthusiasm. In fact, a number of letters – voicing various points of dissent on the interim committee on the issue – were included with the report, indicating the strength of feelings on the issue.
And today Ben Wear had more at Short Cuts, Mixed verdict on public-private partnerships:
Among the conclusions in the report:
- Although the transportation money crunch could be help through some “conventional” ways to raise funding — raising the gas tax and then indexing it inflation, ending or reducing “diversions” of gas tax money to other state uses, getting more of Texas’ federal gas taxes returned to the state — some use of private toll road contracts will be necessary.
- However, very few road projects are 100 percent “toll viable” — meaning, profitable and thus enticing to the private sector — so “toll roads and (public-private partnerships) will not take over the state.”
- Private toll roads are more likely to be done on-time and on budget, and are more likely to be managed more efficiently once they open.
- So-called “non-compete” clauses, which trigger payments to private companies when government expands roads nearby and thus cut toll road traffic, are necessary in order to enable toll road operators to borrow money to build them.
- Setting an up-front amount for the state to buy back a profitable toll road might diminish or eliminate the private sector’s interest in Texas tollways.
- Large up-front payments to the state “can over-leverage a project and set it up for failure … revenue sharing mitigates these problems and is a more financially sound option.”
It’s key to remember that this committee was not charged with figuring out how to fix our state’s road financing problem. But instead with determining whether or not PPP’s are worthwhile, and if so how they should be done. From the six conclusions presented above there appears to be some major clashes. Those listed fourth and fifth, would have been deal breakers for PPP’s last session. The “non-compete” clauses the private entities need had to be removed last session if a bill was to have any hope of passing. The “buy back” provisions were also important to a bills passage if it was to include PPP’s. So it’s not surprising several of the legislators are dissenting from the report.
The committee, let’s remember, is comprised of 7 Republicans, a Democrat, and a Randian. Of those nine members three are from the Texas House, three are from the Texas Senate, and three are private citizens. Three of the six legislators quoted in Wear’s post are not in agreement with the upcoming report.
State Sen. Tommy Williams, R-The Woodlands, and state Rep. Wayne Smith, R-Baytown, submitted a joint letter talking the committee’s “irreconcilable disagreement on some matters.” The report’s tone, they wrote, could be interpreted to say that because measures such as raising the gas tax and ending funding diversions would not solve the entire funding problem, “they should be deemphasized. The only solution that is presented is that the state must embrace private finance to close the funding shortfall.”
Furthermore, Williams and Smith wrote, the report “appears to overstate the advantages of private finance” and unfairly characterizes aspects of government-run toll road operations.
Williams and Smith carried the main toll road legislation in the 2007 session.
State Sen. Robert Nichols, R-Jacksonville, a former member of the Texas Transportation Commission, also had problems with parts of the report. His three-page letter said that the report implied that giving local toll authorities first-shot at toll road projects (known as “primacy” in the debate) is a bad thing. He disagrees. Furthermore, Nichols said, the report is incorrect in arguing that private toll road operators would do a better job of maintaining roads.
That this committee will not recommend against PPP’s altogether in the final report is not a surprise. But it seems odd from what’s being reported that as many as two-thirds of the members of the committee will dissent from the report.
No less than six of those members submitted what amount to dissents from at least some of what the report itself has to say.
It makes one wonder whose point of view, or ideology, took precedence when the report was written. Toll roads, and not necessarily private toll roads, can be a solution in a specific circumstance. Toll roads, public or private, are not the solution to our state leadership’s neglect of Texas’ transportation infrastructure for the past 15 years. That, hopefully, appears to be one of the main takeaways from the report. I have not read the full report, and am looking forward to it. Should be an interesting read.