Secret agreement handed private toll firm control of public roads

How sad that this happened just days before we celebrate Texas Indepenence Day, March 2.

City hands control over public roads to private firm
By Terri Hall
March 1, 2017

In a stunning betrayal of open government, the Cibolo City Council voted 6-0 to approve a 50 year development agreement with Texas Turnpike Corporation (TTC) granting it the exclusive right to build, operate and maintain what’s been dubbed the Cibolo Parkway — a tollway linking I-35 to I-10 through mostly rural farmland northeast of San Antonio. The agreement was negotiated behind closed doors and was kept secret from the public until it was approved last night.

Even worse, the city council gave TTC the rights to develop a project the taxpayers have already paid for, the expansion of FM 1103, the city’s primary connection to I-35. By doing so, they’ve granted a private corporation a virtual monopoly over the existing non-toll competitor to its private toll road. TTC can intentionally slow down the free option to force more cars onto its for-profit toll road by manipulating speed limits, access points, and stop lights. It’s a developer’s dream and a commuter’s worst nightmare.

The city tried to reassure residents there is no non-compete clause, prohibiting or penalizing the city from building any competing free roads. The agreement may still bind the Texas Department of Transportation (TxDOT) and the county from expanding free roads. But who knows since no member of the public could see it before the council voted on it? So while the city touts it’s protected taxpayers from a non-compete provision, it handed TTC control of the adjacent competing free lanes of FM 1103, achieving a form of a non-compete out the gate.

The agreement offers no way out for the city, except an eventual buy out opportunity after the road gets built. But those buy out agreements are just as thorny as these complex development contracts. Most private toll road developers require the public entity to pay them for any future loss in toll revenue, often making it more expensive to buy them out than the original cost to build it.

One has to wonder how any elected official could green light approval of a project before a toll feasibility study has been performed, the environmental review complete, or final route selected. It’s worse than putting the cart before the horse, it’s putting special interests above the public interest. The company insisted on having an irrevocable agreement in place with the city before it invested $10-$12 million for the feasibility study. Nice work if you can get it, but what about the taxpayer?

No formal public hearings were hosted by TxDOT to notify residents of the proposed project, so unless you happen to look at the city council agenda every two weeks, a resident had no way of knowing what just happened, much less have the ability to stop it since the majority of it was done behind closed doors with a private entity.

Throwing landowners under the bus
Cibolo has become a bedroom community of San Antonio, but before homes stacked the landscape, Cibolo’s roots were decidedly agricultural with farming and ranching dating back to Texas’ days as a republic. The mayor and council weren’t afraid to show their intentions when public discussion about this possible private toll road began to surface last year. Their primary interest is in economic development, which is code for flipping farmland into a commercial tax base. The city acted so desperate for new economic development, it signaled to TTC that it would sell out its current residents for the promise of a higher tax base from its new ones.

The southern boundary of the city that was most recently annexed occurred over the objection of many landowners. Now their worst fears have been realized as a private developer who cozied up to the mayor and council got himself an iron clad contract to mow them over and change their way of life. Roads are disruptive to the native landscape and often split farms in half. Many will not be able to continue farming or even have the ability to access the other side of their property without an overpass (built at the developer’s expense, which isn’t going to happen in most cases). That’s the city’s intent – to drive out the farmers and welcome in big box stores generating lots of sales tax for it to spend. New residents, more traffic, and, they hope, more riders for the toll road.

Eminent domain for private gain
The city has agreed to use eminent domain to take land from its residents and confer it to a private entity for private gain, not for a legitimate public use. While the road is open to the public (so is a mall or restaurant) if they pay a toll, this arrangement is for a private toll road whose corporation will use the city’s police force to become its private toll collector and speed enforcer.

John Crew Public WerksWhile the politicians argued eminent domain would only be used as a last resort, that’s the club TTC’s CEO John Crew needs to get landowners to sign over their land in negotiated settlements. We’ve seen it used prolifically — sign on the dotted line for the amount we’re offering or we’ll take it with eminent domain and pay you even less.

Numbers don’t add up
In town of just 25,000 residents, it’s hard to conceive of how any toll road could be profitable. The city must be banking on literally hundreds of thousands of new residents to make the numbers work. Cities with populations over a million and lots of urban congestion have toll roads that can’t pay for themselves. It just doesn’t add up that this little city will provide enough users to pay back $125 million plus interest, plus profit over 50 years. No elected official has any control over the eventual toll rates that will be charged. So there is no cap or limit. While the consultants tried to say the free market would keep rates in check, roads by their very nature are a monopoly. Just ask the residents in Ft. Worth and Dallas who are paying a private Spanish firm in excess of $20/day in tolls to get to work if they think that’s market rate or reasonable.

But numbers and data don’t matter. The city council seems to think they’re getting something for nothing — even if the toll road goes bankrupt, they get it back at a fire sale price. But the private company knows how to make money even when a toll road goes bankrupt. They put in very little of their own money and borrow the rest. The developer makes their money on the front end so that when it goes south, it’s the bond holders who are at risk, not the developer. If the road goes into bankruptcy, the road will remain operational, but control then gets handed to the bond investors in bankruptcy court where a bunch of the debt gets written down and off the books and the investors hire another operator, starting the process all over again. Control does not revert back to the public or the city. Only if the city exercises its buy out option would the residents get it back under public control.

Taxpayer money in play
The city manager and its lawyers bragged the city had no financial risk in the deal, yet, ironically, the city had to hire extra legal and engineering consultants to review the agreement, which is, of course, at taxpayer expense. There’s more to come since next up is negotiating the formal operating agreement. Policing of this private toll road will also be done by city police. While the developer is supposedly responsible for paying to hire the extra personnel, who is responsible for those public employees’ pensions, benefits, etc.? I’d bet money it’s the taxpayers. Who will collect the tolls and what enforcement does the private company have access to? If it’s anything like the SH 130 tollway, TxDOT does the toll collection and state law allows a user’s vehicle registration to be blocked for failure to play tolls, even when it’s for a private toll road.

The city, like TxDOT, loves to claim the road and right of way is still technically owned by the city and hence the public, but that’s only so the private toll company can use the public’s policing and enforcement powers for its for-profit toll enterprises. For tax purposes, these corporations show ownership and depreciate it like an asset.

Then there’s the tax money it would take to buy out the private developer at some point in the future. No matter how you slice it, Cibolo residents just got sold out by their elected officials. They’ve lost control of FM 1103, the ability to determine the toll rates, the route, the exits, the overpasses, the toll collection procedures, and a whole bunch more. Taxpayers will be paying for extra consultants and legal haggling for the foreseeable future. Accountability at the ballot box will now be your only recourse. Sadly, there are no remaining pain-free options.

Note to Trump: Key states tossed pro-toll incumbents

Link to article here.

Trump take heed: Toll roads a factor in Florida, North Carolina, and Texas election
By Terri Hall
November 9, 2016
Selous Foundation for Public Policy Research

With the historic election of Donald Trump to the American Presidency, it signals a total repudiation of the political establishment by the working class. You could call it the election of the American worker. But analysts would be remiss if they failed to overlook how toll roads played a part in several races in key states.

One of the most notable races is for governor in North Carolina — must-win state for Trump that went red. Yet, Republican Governor Pat McCrory is in a nail biter photo finish to retain his seat in a state that went Republican last night. The very real threat by Democrat Roy Cooper who claimed victory Wednesday morning, though most still believe the race too close to call, is in part due to McCrory losing support among his base thanks to his approval of the controversial public private partnership (P3) toll project on Interstate-77 in Charlotte.

Citizens lost their battle in the courts and the legislature to stop the state from handing the public’s vital interstate over to the control of a private, foreign corporation in a 50-year deal.

Then, the focus turned to Governor McCrory to cancel the contract. Cooper, the current Attorney General, said in the Charlotte Business Journal in August that McCrory would have “to admit now that he cut a bad deal for North Carolina. He should stop stalling and cancel this contract that never should have been signed to begin with.” McCrory didn’t budge to his own peril.

In Florida, another must-win state that went red for Trump, former House Transportation Committee Chairman, Congressman John Mica lost his seat to newcomer Stephanie Murphy. While some blame his defeat on redistricting bringing in more minority voters to his suburban district, Mica lost touch with his base due in part to his longstanding support for toll roads, particularly P3s. Mica brought tolls to I-4 using congestion pricing, forcing drivers to pay a premium to drive during peak hours. The hidden tax hurts suburbanites harder than urban dwellers since they experience longer commutes and pay more in tolls. He failed to stop the toll bloodletting when taxpayers revolted. So the untold story in this race is about the rise of the middle class worker struggling to make ends meet amidst stagnant wages, staggering health premiums, and ever growing taxes.

In Texas, a state without which no Republican can win the White House, Dallas State Representative Kenneth Sheets also became tone deaf to his conservative base on toll roads. The Dallas-Ft.Worth metroplex is ground zero for toll managed lane projects and soon will boast the largest managed lane network in the country. Taxpayers are none too happy. Though Sheets didn’t go all-in for tolling, he cozied up to the establishment, played footsy with too many controversial bills, scored poorly on legislative report cards, and lost his base. As a result, Sheets lost his seat to Democrat Victoria Neave, who said tolls are a hidden tax and should not advance without local support.

Now back to Mr. Trump. Days before the election, Trump announced his plan to rebuild our crumbling infrastructure without raising taxes by harnessing the private sector. Voters in these key states know that’s code for P3s and toll roads. They’re not fooled into thinking tolls are not a tax. Their pocketbooks have already been sufficiently raided enough to know the dangers of handing the sovereignty over our public roads to private for-profit companies who are given a blank check to charge punitive tolls during congested periods.

Trump’s anti-free trade message resonated because it hurt the American worker. Tolls likewise, hurt the American working class — and hard. Considering these three must-win states for a Republican president just tossed incumbents over toll projects, voters trust Mr. Trump will read the tea leaves and advance a transportation vision and policy that’s pro-freedom, pro-taxpayer, and pro-worker. Voters need to watch closely who he appoints as Transportation Secretary.

Former governors like Rick Perry made road privatization and tolls the centerpiece of his transportation policy for 14 years, and he’s vying for a position in the new Trump administration. Perry would be a disastrous choice considering Texans just elected a new Governor Greg Abbott who campaigned against toll roads and has made a marked departure from privatization. Americans expect Trump to surround himself with like-minded advisers who will set a course consistent with his campaign message. Millions will be watching and waiting.

BOMBSHELL: Senators find out tolls charged on roads that are paid for

Sparks fly as senators discover numerous toll roads with no debt on them, prompts call to remove tolls
By Terri Hall
September 15, 2016

It’s not often that the very sleepy subject of transportation offers a fiery discussion, but yesterday’s Senate Transportation Committee meeting did not disappoint. In a rare olive branch extended to grassroots anti-toll advocacy groups, Texans Uniting for Reform and Freedom and Texans for Toll-free Highways, Chairman Senator Robert Nichols invited them to address the committee about one of its interim studies – a study on the elimination of toll roads.

Just the title evokes strong emotions on both sides of the issue, and those emotions were in plain view Wednesday. Texas Department of Transportation (TxDOT) Executive Director James Bass laid out the numbers of how much it would cost to retire tolls on roads built with state funds. Let me say that again, toll roads that were built with state money. That means gasoline taxes and other state funds were used to build the road, but Texas drivers are being charged again, through tolls, to use it — a double tax scheme.

An early pay-off would cost $24.2 billion, while the existing debt as of January 1, 2016, was $21.6 billion. That’s what building roads with debt begets. It costs far more than paying cash, anywhere from 40% more to 100% more. TxDOT now spends over $1 billion a year in payments to cover its debt. If the toll bonds stay on course to the final pay-off dates, the cost mushrooms to $39.9 billion.

The use of public funds to, in essence, bail out toll projects that cannot pay for themselves with the toll revenues only, was the subject of much consternation by the conservatives on the committee. Senator Lois Kolkhorst has twice authored the bill to make tolls come off the road when the debt is repaid. She was quick to jump in and grill Bass on the Loop 375 Border West Highway toll project in El Paso.

Bass called it a unique financial arrangement, and Kolkhorst, visibly irritated, responded, ’Well, explain that ‘unique’ arrangement.”

First, the entire project is paid for state funds. Not one penny of debt is owed, yet drivers will be be charged tolls to use it (it’s currently under construction). The project is jointly owned by the state and the Camino Real Regional Mobility Authority (or RMA), even though the RMA put no funds into the project. In fact, the state gave them $500 million in Texas Mobility Funds which granted the RMA ownership in proportion to that dollar amount, and the state paid the $130 million balance of the $630 million project with gasoline taxes. So the state gave away over 80% ownership to an unelected toll authority who will reap over 80% of the toll revenues for a 100% paid for highway.

It’s no wonder the senators suffered from shock.

“So we paid the RMA for their ownership. That’s a pretty good deal,” Kolkhorst quipped sarcastically.

“Let me get this straight. The state of Texas put money into a project and then gave half of the ownership to an RMA where they will forever in perpetuity get half of the revenue?”

Bass corrected her and said it was actually more than half the ownership and revenue.

“So this is what I don’t understand and this is the problem. The road is paid for. Now we’re going to create a toll road for the people of El Paso, and I’m just going to say this okay, because all of that is tax money, and that’s worse than I’ve ever seen…this is not right,” Kolkhorst expressed with frustration.

“At what point do you say, we shouldn’t toll this because it’s paid for? At what point do we say there’s no debt on this road, it’s paid for, and, by the way, you get to pay for it again, AND to add insult to injury, the people that paid for it never get the money back? Does that make sense to anybody in this room? This is what frustrates lawmakers like me when we try to give TxDOT money… It’s more expensive to build a toll road, so we paid more for it than we would have it had been non-tolled,…so enough!”

Senator Bob Hall echoed her frustration and pursued it further, “There are numerous toll roads that have no debt on them, and they’re still being tolled.”

Camino Columbia in Laredo, Cesar Chavez in El Paso, SH 130 (the state-operated northern 49 miles from Georgetown to Mustang Ridge) and SH 45 in the Austin area, the Katy Freeway managed toll lanes and the entire Metro High Occupancy Toll (HOT) lanes in Houston, parts of the Grand Parkway around Houston (segments 1-2A), the DFW connector, and the I-30 managed toll lanes (in fact most all of the managed toll lanes) in Dallas all have no debt and should have the tolls come down immediately. Every one of those lanes was built with state and federal funds, no debt is owed, and yet officials charge tolls simply to profit off of congestion and as a means to manipulate people and traffic.

Hall keyed in on Bass’ statement that several of the toll managed lane projects in Dallas-Ft. Worth had no debt and charged tolls to ‘control traffic through pricing.’ That’s a staggering admission for a highway department run by a conservative governor who prides himself on lowering taxes and taking on government overreach.

Hall insisted TxDOT drop such a punitive approach that seeks to control people, punish and discriminate against the poor, and use something that’s cheaper to implement and doesn’t cost the driver anything, like today’s technologically advanced ramp metering.

Senator Don Huffines chimed in with similar sentiments concluding tolls “are segmenting society between those who can afford tolls and those who can’t and it’s bad policy.”

Public testimony brought in the taxpayers’ perspective and gave a glimpse into the rage over tolls being charged on roads that are paid for. The GOP platform has a plank to remove tolls when the debt is repaid as well as a plank opposing the use of any public funds to build, subsidize or otherwise bail out toll projects. The Democratic platform also opposes toll roads. That’s the tip of the iceberg, though. A group of outraged citizens are preparing a class action lawsuit over the abusive toll collection practices that are are imposing fines and fees that financially ruin people and that allows unelected toll authorities to impound vehicles and block vehicle registration.

Many Texans are paying upwards of $300 a month in tolls just to get to work. Since the privatized toll projects opened, one has gone bankrupt, SH 130 (segments 5 & 6), and two in the Dallas-Ft. Worth metroplex use dynamic or ‘congestion pricing’ (where the toll is based on the level of congestion) to soak the traveling public, charging up to $50 a day in tolls.

Perhaps the most surprising concessions of the day came from Nichols’ himself. Known as the most ardent opponent of removing tolls in order to keep paying for road maintenance, Nichols actually advocated removing tolls from the Camino Columbia toll road. Tolls are generating ten times the cost of maintaining it.

Taking tolls off Camino Columbia would “to me, be a no brainer…you could pull the tolls down tomorrow if you wanted to,” suggested Nichols.

Nichols also asked TxDOT to study the effectiveness of HOV lanes. HOV lanes have come under fire as many of them now have a toll element for single occupant vehicles known as High Occupancy Toll (HOT) lanes, which are highly underutilized and actually make congestion worse on the surrounding general purpose lanes. He suggested the Department look at pre-HOV traffic data and post-HOV traffic data to actually see whether or not HOV lanes have successfully changed behavior and encouraged more carpooling or simply captured those who were already carpooling.

If it hasn’t actually successfully changed behavior, “I have a real problem with it,” expressed Nichols. “Police have more important things to do than count heads in an HOV lane.”

The research is virtually unanimous already. According to Jack Mallinckrodt’s study The Best Evidence of HOV Lane Effectiveness, he determined, “In all the known complete transportation modeling studies that have quantitatively evaluated (overall congestion and/or polluting emissions), optimal performance occurs in the natural, unrestricted Mixed-Flow operational mode. In all these cases, any attempt to preferentially restrict the natural free distribution of traffic, whether by HOV or HOT (High Occupancy Toll) operation, made overall congestion and emissions worse… And the findings are essentially unanimous in saying that under typical conditions, maximum transportation benefit…is afforded by unrestricted, mixed-flow, rather than HOV operation.”

HOV/HOT lanes may very well be on the ropes in Texas. House Transportation Committee Chair Joe Pickett shares Nichols’ distaste for HOV lanes calling them ineffective and a waste of capacity in a growing state. Pickett also argues they make congestion worse, which studies confirm, like the one recently conducted by Inrix that concluded congestion on the general purpose lanes got worse after the HOT lanes opened.

This is good news for congestion weary, toll weary commuters who are tired of being the guinea pigs of urban planners, who delight in imposing road scarcity to manipulate people out of their cars and into a bus or carpool. Conservatives clearly got the message that tolls play into the hands of social engineers who want to control the populace, and that tolls are abusive and double taxing Texans, which threatens the sustainability of the Texas economic miracle.