Texas Monthly, Paul Burka: "We are headed for the worst public fiasco in my lifetime"

His Way or the Highway

Now that Rick Perry has won another term, his transportation plan moves on down the road. What kind of a toll will it take on Texas?

December 2006
by Paul Burka, Senior Executive Editor
Texas Monthly Magazine

Every day I can look out the window of my office in downtown Austin and watch traffic creep along Interstate 35, half a mile away. The time of day doesn’t seem to matter, nor does the weather: morning or evening, wet or dry, the snarl persists. Part of this is due to the unwieldy design of the downtown exit and entrance ramps, but the main reason is the volume of traffic, much of it commercial. I dread the drive to Dallas, which I last made on the Friday afternoon before the Texas-Oklahoma football game – surely the worst day of the year for such a trip. It took me forty minutes to negotiate the eighteen miles from downtown to the suburb of Round Rock, and much of that time was spent idling in a canyon of eighteen-wheelers.

The announcement several years ago that the Texas Department of Transportation - TxDOT, as it’s widely known – would build a toll bypass known as Texas 130 east of Austin was cause for celebration. Texas 130 was particularly welcomed by community leaders in the fast-growing town of Pflugerville, which abuts Austin to the northeast. The annexation, years earlier, by Austin of a strip of land along I-35 had kept Pflugerville from reaping the taxes generated by the high-dollar commercial property along the freeway frontage. Now, with the completion of another brand-new toll road, Texas 45, which will tie into the bypass, Pflugerville could lookforward to development along the flanks of the new highway, which would relieve homeowners from bearing the principal responsibility of paying for city services. But when TxDOT announced the design of Texas 45, it has no Pflugerville exit and no frontage road, and that made the adjacent property unattractive for development. What was the reason for this oversight? It was no oversight, according to state senator-elect Kirk Watson, who, as mayor of Austin, had served on the board of the federally mandated regional mobility planning organization for the Austin area. “TxDOT,” he says, “wanted to maximize its toll revenue.”

A single nonexistent exit on a single yet-to-be-completed highway is of little consequence in the big picture of transportation policy in Texas. And yet the missing Pflugerville exit is emblematic of why so many Texans are upset about that policy and why it became an issue in the governor’s race: The importance of roads is not merely to make sure that you and I can get from point A to point B rapidly and safely. Roads create wealth. They multiply property values. They bring economic development. They improve the quality of life. Bust as Texas turns more and more to toll roads, critics of TxDOT fear that the tail is wagging the dog, that the funding mechanism has become an end in itself, and that a mammoth stage agency has lost sight of its duty to serve the public and instead serves its own ends.

This is not going to be a screed against toll roads or against Rick Perry’s multi-highway Trans-Texas Corridor plan, through the opponents have made some legitimate points. Existing highways built with tax dollars ought not to be converted to toll roads; this is double taxation. Commuters should not be forced to tithe for the privilege of using a freeway overpass, as TxDOT wanted to do on another Austin expressway – conjuring up the memory of Ludwig of Bavaria, who built his medieval castle on an island in the Rhine, the better to extract tolls from passing boatmen. Yet toll roads are an essential part of our transportation future. The current revenue stream, which depends on a twenty-cents-a-gallon tax on gasoline, one fourth of which goes to education, is not enough to meet the state’s needs. Without toll roads, gridlock will continue to strangle Texas cities.

All of the rhetoric over whether to toll or not to toll has obscured a much bigger issue, which is privatization of transportation. TxDOT’s plan for toll roads is to surrender public control of these roads by entering into “comprehensive development agreements” (known as CDAs) with private companies, such as the partnership between Cintra, a Spanish company, and Zachry construction in San Antonio, which is building the first link in the Trans-Texas Corridor, an alternative to Interstate 35 known as TTC-35. Cintra-Zachry paid $1 billion to TxDOT for the right to collect tolls for the next fifty years. I’m not going to make a xenophobic argument, as Carole Keeton Strayhorn did in her gubernatorial campaign, that this is a land grab by foreign companies. It doesn’t really matter whether the company operating the toll road is American or European or Qatari. What matters is whether the arrangement protects the public interest. Here is what John Carona, a Republican state senator from Dallas who is the new chairman of the Senate committee that deals with transportation, has to say on the subject: “Within thirty years’ time, under existing comprehensive development agreements, we’ ll bring free roads in this state to a condition of ruin.”

It may seem as if the system of granting a concession to private companies in return for money, like restaurants at an airport, is a great idea – “free money” that TxDOT can use to build other toll roads, enter into still more concession agreements, and build still more toll roads, as if the agency had succeeded in creating a perpetual- motion machine to finance roads in perpetuity. But alas, there is no free money, and there is no perpetual-motion machine. The private companies that will build and operate the toll roads are in business to make a profit. In order to ensure that profit, they must have people who want to drive on their roads. And – here’s the rub – in order to be sure that people will want to drive on their roads, the CDAs with TxDOT will contain non-compete clauses that prohibit to TxDOT from building new roads or upgrading existing highways. Any improvement to an existing highway that is not already planned at the time TxDOT enters into the contract is prohibited. That billion-dollar concession limits TxDOT’s ability to improve nearby secondary roads. How about adding extra lanes? Sorry, prohibited by the CDA. An HOV express lane? Not a chance. This is why Carona says that free roads will be reduced to ruin. TxDOT will no longer be able to respond to the transportation needs of the state, other than to say: If you don’t like the traffic, use the toll road.

Oh, I almost forgot. About that free money. It may be free for TxDOT, but it isn’t free for you and me. The billion dollars represents the present value of future toll revenue. TxDOT finds it attractive for the same reason that buyers of lottery tickets ask for the “cash option.” They want their money up front – so they can use it now, so that it won’t be eaten up by inflation – rather than have it dribble in over twenty years (or fifty). Meanwhile, the private toll road operator wants to get that billion dollars back. And the way the company will get it is by raising its tolls over fifty years, largely unrestrained by the public sector. Tolls will be market based – that is whatever the traffic will bear. In effect, TxDOT’s free money amounts to a tax on our children and grandchildren.

Concession agreements are not the only way to build toll roads, just the most expensive one. (Carona likens it to “renting to own.”) In fact, toll road authorities have functioned in Houston and Dallas for years by using the conventional method of building the roads: issuing revenue bonds that will be paid off with toll revenues over a period of twenty to thirty years. When major league baseball first came to Arlington in the seventies, I drove to games from Dallas on the Dallas-Fort Worth Turnpike. In twenty years (1957-1977) the bonds were paid off and the turnpike became a free road, Interstate 30. It remains free today. The Dallas North Tollway followed a similar pattern, except that when the original section, from downtown to Interstate 635, was paid off, tolls continued to be collected so that the tollway could be extended farther north. The Harris County Toll Road Authority has built 101 miles of toll roads, including a section of the Sam Houston for which I gladly pay $1.25 four times in order to drive to my hometown of Galveston without having to contend with Houston traffic. This method of financing is, in the long run, far cheaper for the public than concessions and higher tolls. In the past, TxDOT cooperated with these local authorities – for instance, by making right-of-way available – but since Rick Perry has been governor, a much more aggressive department seems to regard the local toll agencies as competitors. The North Texas Tollway Authority wanted to build Texas 121, for example, but TxDOT stepped in and forced the NTTA to cede control of the project, thereby allowing TxDOT to do another concession agreement. The NTTA will be allowed to collect the tolls, but that is all.

How did we get to this point, and what can we do about it? For years, state budget writers have been dipping into the pot of money that is earmarked for highways to fund the Department of Public Safety, on the theory that state troopers are responsible for highway safety. This poly diverted $700 million from road building in the current biennial budget. At the same time, lawmakers have refused to raise the gasoline tax since 1991. In a Republican era, any kind of tax increase isunthinkable, even if its purpose is to further the case of free roads. TxDOT played politics too, putting more projects on its approved list for future construction than it could afford; now it uses the length of the wish list to win the support of local transportation planning organizations for toll roads, warning communities like Austin and El Paso that their only other option is to wait 25 years for free projects.

The final step was that the 2003 legislative session, when Republicans controlled all the levers of power – House, Senate, governor – for the first time. Major bills were rushed through the Legislature with little debate or discussion. One of these was the omnibus transportation bill that authorized concessions and other mammoth changes in the way we build highways. Few lawmakers knew what was in the bill. The Senate gave it only cursory inspection. The result was a scheme in which TxDOT will be taking in billions of dollars from the private sector with no oversight by the Legislature, no responsibility to say how that money will be used, and no assurance for the public that free roads, as well as toll roads, will benefit from that money. Governor Perry has strongly supported transparency, accountability, and oversight in public education. He could do the state and the public a great service by insisting on the same standards for highways. Otherwise, we are headed for the worst public fiasco in my lifetime.