A bill quietly moving through the Texas legislature could greatly hinder Texas ability to build new roads and increase costs to toll-payers for years into the future.
Public-Private Partnerships (PPPs) are one of the few transportation funding options available to transportation decision makers since raising the gas tax to the levels needed to build and maintain roads is simply unacceptable to most Texans. Investment in Texas roads by private companies often in collaboration with public-pension funds and other funding partners is good for all Texans.
While these roads are most often built as a toll road the users of the road get relief from massive congestion years sooner than under other antiquated funding methods and those who do not use the toll road still benefit by having less congested free" (gas-tax funded) roads. Ultimately all Texans prosper as people goods and services move more freely.
Senate Bill 17 by Senator Nichols (R-Jacksonville) relates to the procedure for deciding whether a local state or private entity will build a given road in Texas. More importantly it provides for the government to be able to buy-back a private-company-built transportation project at a predetermined price if the road proves to be a success.
On the surface SB 17 appears to protect the publics" investment and create a systematic process for deciding how public-private partnerships are developed. However the bill greatly increases the amount of risk a private company would face when developing a road in Texas and it therefore increases the overall cost to develop the project. This cost is necessarily passed onto road users in the form of higher tolls. Put simply the private company faces all of the downside and potential risk associated with the road but will enjoy none of the upside if the road turns out to be a success. Worse yet it penalizes an efficient well run company that provides a valuable service to Texas toll payers because that success could possibly be taken away by a government entity.
When looking at buy-back provisions it is important to note that there is a far more preferable solution to address the fear that the public will not enjoy the fruits of a successful project. That can be done through a revenue/profit sharing model that was recommended by the Texas Legislative Study Committee on Private Participation in Toll Projects. Arguments that toll roads are guaranteed to reap huge profits for investors at the expense of taxpayers are simply false. According to a study by Robert Poole of the Reason Foundation who also served on the Legislative Study Committee:
No toll road agreements guarantee any return on the private investment. The private company is assuming all of the financial risk if the toll road does not meet traffic expectations. If the lure of potential future profits is a major concern for citizens governments can negotiate to share any future profits in exchange for smaller upfront payments."
Similarly the executive summary from the SB 792 Study Committee which looked at private investment participation in road building noted When the underlying aim is to prevent windfall profits stringent buyback provisions add an additional level of risk to a private party. While this can be calculated the price tag may be so high as to risk making Texas unattractive compared to other states."
While toll roads are not a solution for every transportation project it is important that we consider all possible funding options as ways to fight congestion. Partnering with the private sector is one way the state can leverage transportation dollars to get transportation projects built years sooner than they otherwise would be.
Not only are PPPs one of the few hopes to getting new construction projects started this decade but they are also a fair and responsible use of scarce transportation dollars. Private sector involvement ensures that roads will only be built where they will be used and that the drivers actually using the roads and benefitting from shorter commute times are the ones to pay for them.
Another aspect of SB 17 receiving close scrutiny deals with primacy or the process for determining who gets the first opportunity to develop a project.
While not only cumbersome and inefficient this 4-step process assumes the state or a local public entity such as the North Texas Tollway Authority has the ability to finance a large long-term toll project and relegates private investors to the position of builder of last resort" which eliminates competition. A provision such as this that yanks the welcome mat out from under private investment in Texas should not be tolerated by lawmakers or Texans.
Texans for Safe Reliable Transportation will continue monitor this SB 17 and support fiscally responsible and fair transportation legislation. For timely updates on current legislation related to transportation financing visit www.TSRT.com.
A bill quietly moving through the Texas legislature could greatly hinder Texas ability to build new roads and increase costs to toll-payers for years into the future.
Public-Private Partnerships (PPPs) are one of the few transportation funding options available to transportation decision makers since raising the gas tax to the levels needed to build and maintain roads is simply unacceptable to most Texans. Investment in Texas roads by private companies often in collaboration with public-pension funds and other funding partners is good for all Texans.
While these roads are most often built as a toll road the users of the road get relief from massive congestion years sooner than under other antiquated funding methods and those who do not use the toll road still benefit by having less congested free" (gas-tax funded) roads. Ultimately all Texans prosper as people goods and services move more freely.
Senate Bill 17 by Senator Nichols (R-Jacksonville) relates to the procedure for deciding whether a local state or private entity will build a given road in Texas. More importantly it provides for the government to be able to buy-back a private-company-built transportation project at a predetermined price if the road proves to be a success.
On the surface SB 17 appears to protect the publics" investment and create a systematic process for deciding how public-private partnerships are developed. However the bill greatly increases the amount of risk a private company would face when developing a road in Texas and it therefore increases the overall cost to develop the project. This cost is necessarily passed onto road users in the form of higher tolls. Put simply the private company faces all of the downside and potential risk associated with the road but will enjoy none of the upside if the road turns out to be a success. Worse yet it penalizes an efficient well run company that provides a valuable service to Texas toll payers because that success could possibly be taken away by a government entity.
When looking at buy-back provisions it is important to note that there is a far more preferable solution to address the fear that the public will not enjoy the fruits of a successful project. That can be done through a revenue/profit sharing model that was recommended by the Texas Legislative Study Committee on Private Participation in Toll Projects. Arguments that toll roads are guaranteed to reap huge profits for investors at the expense of taxpayers are simply false. According to a study by Robert Poole of the Reason Foundation who also served on the Legislative Study Committee:
No toll road agreements guarantee any return on the private investment. The private company is assuming all of the financial risk if the toll road does not meet traffic expectations. If the lure of potential future profits is a major concern for citizens governments can negotiate to share any future profits in exchange for smaller upfront payments."
Similarly the executive summary from the SB 792 Study Committee which looked at private investment participation in road building noted When the underlying aim is to prevent windfall profits stringent buyback provisions add an additional level of risk to a private party. While this can be calculated the price tag may be so high as to risk making Texas unattractive compared to other states."
While toll roads are not a solution for every transportation project it is important that we consider all possible funding options as ways to fight congestion. Partnering with the private sector is one way the state can leverage transportation dollars to get transportation projects built years sooner than they otherwise would be.
Not only are PPPs one of the few hopes to getting new construction projects started this decade but they are also a fair and responsible use of scarce transportation dollars. Private sector involvement ensures that roads will only be built where they will be used and that the drivers actually using the roads and benefitting from shorter commute times are the ones to pay for them.
Another aspect of SB 17 receiving close scrutiny deals with primacy or the process for determining who gets the first opportunity to develop a project.
While not only cumbersome and inefficient this 4-step process assumes the state or a local public entity such as the North Texas Tollway Authority has the ability to finance a large long-term toll project and relegates private investors to the position of builder of last resort" which eliminates competition. A provision such as this that yanks the welcome mat out from under private investment in Texas should not be tolerated by lawmakers or Texans.
Texans for Safe Reliable Transportation will continue monitor this SB 17 and support fiscally responsible and fair transportation legislation. For timely updates on current legislation related to transportation financing visit www.TSRT.com.
