Failed toll road in Laredo results in the emergence of non-compete agreements

See Express-News article here.

Ever wonder why private investors would dare throw their money into these monstrosities after the Laredo toll road failure? Look no further than the non-compete agreement. We can be guaranteed that NONE of these CDAs (see definition here), or public-private partnership toll contracts, will be free of non-compete agreements. These multi-billion dollar deals simply won’t happen unless the government, ie- TxDOT, agrees NOT to improve or expand free lanes or build any other new FREE roads to compete with the private toll revenue cash cow revenue stream! That ensures gridlock on free roads from now on. Toll roads don’t solve congestion, they manipulate it for profit!

Laredo road was tollway gone wrong
Patrick Driscoll
Express-News Staff Writer
07/09/2006

More than a year after state officials bought and reopened the failed Camino Colombia Toll Road near Laredo, taxpayers still are footing the bill.

But Texas Department of Transportation officials remain optimistic.

Eventually, the 22-mile tollway will make enough money to cover operation and maintenance costs, and someday the state will get back the $20 million it paid for the road, said Amadeo Saenz, an assistant director for TxDOT.

“I’m comfortable that we are going to get our money back,” he said.

The Camino Colombia Toll Road opened in October 2000 after a decade of cobbling together political backing and $90 million from private investors.

Motorists paid $3 a car and $16 a truck to skirt Laredo and travel quickly from the Colombia Solidarity Bridge to Interstate 35.

But investors’ dreams of getting rich from truck traffic generated by the North American Free Trade Agreement soon faded.

Maybe 75 trucks and 400 to 500 cars a day used the two- and four-lane road in the first year instead of the projected 1,500 trucks and 300 cars, said Peter Samuel of Toll Roads News.

Revenues probably were about 6 percent of what was expected.

“That 94 percent undershoot must be one for the record books,” he said.

The fiasco was billed as Texas’ first privately financed toll road in the interstate era, and was nearly the nation’s first. Today, as the state turns increasingly to toll roads to speed up highway construction and ease traffic congestion, Camino Colombia is a poster child for how wrong toll plans can go.

Figuring out why the numbers were so bad leads to a list of actions and inactions involving federal, state, local and even Mexican authorities as well as the operators:

Wrangling over truck inspections has postponed a NAFTA provision to let Mexican truckers drive into the United States instead of switching trailers at the border, and the rural Camino Colombia was built for such a direct shot.

Investors knew another bridge closer to Laredo would open months before their toll road did, but they didn’t know local politicians soon would get federal and state grants to build a free road directly linking the competing bridge to I-35.

Investors also banked on officials designating the Colombia Solidarity Bridge as the area’s only hazardous cargo crossing, which would have fed steady truck traffic to the toll road, but it didn’t happen.

Mexico’s failure to build a better road connection on its side of the Colombia Solidarity Bridge.

The Camino Colombia Toll Road tanked in its first year, and by January 2004 was auctioned back to the bank for $12 million. Four months later, the bank sold the road to TxDOT.

The toll road’s president, Carlos Benavides, said he should have worked harder to get solid agreements with government officials, especially Laredo leaders, to ensure promises were kept and timelines on competing projects were more predictable and forgiving.

“That is what’s required in all these projects,” he said. “You have to have that support because you can’t compete against government.”

Samuel of Toll Roads News concurred, saying investors probably should have sought a non-compete agreement.

“In a way, (government) competed away the traffic from the investors,” he said.

Avoiding a repeat

TxDOT officials didn’t have such problems corralling competing projects when they sold their first toll bonds.
When $2.2 billion in bonds went to market in 2002 to help fund the first 49 miles of Texas 130 east of Austin, they included a non-compete clause to keep investors happy.

TxDOT agreed not to build road projects that would threaten projected traffic on Texas 130, which limits what can be done to I-35. Exceptions include projects for maintenance, safety, passenger rail and anything already planned for the next 25 years.

Of course, it’s easy for an agency to predict and control a toll road’s competition when most of the competing projects will come from that agency.

“We knew exactly what projects were coming on line — TxDOT controlled many of those,” said Phil Russell, director of the agency’s turnpike division. “We knew what the deal was and Wall Street gained some comfort.”

Companies vying to build and operate state toll projects could enjoy the same protection, officials have said.

State officials gave such a nod last year when a consortium led by Cintra of Spain and Zachry Construction Corp. of San Antonio signed a contract to develop plans for the Trans Texas Corridor leg that will parallel I-35.

“They need to have an expectation that they can get a profit,” Texas Transportation Commission Chairman Ric Williamson said at the time.

The Trans Texas Corridor is a 4,000-mile network of toll lanes and rail lines that Gov. Rick Perry is pushing to be built across the state this century.

Numerous other government toll projects are planned in Texas cities, including more than 70 miles in San Antonio on Loop 1604, U.S. 281, I-35, Bandera Road and Wurzbach Parkway.

While non-compete agreements may help toll projects succeed, another lesson from Camino Colombia is that there are many ways to mess up, cautions David Stall of CorridorWatch.org, a critic of the Trans Texas Corridor.

“Everybody used their best crystal ball to get it right and they didn’t,” he said. “There are just an awful lot of variables and there’s a lot of projections.”

Matter of time

Though TxDOT’s first toll bonds were for Texas 130, which opens in stages later this year and next year, murky predictions and fate decided its first toll road would be the Camino Colombia. The agency reopened the tollway in September 2004 and started charging tolls two months later. However, the truck fee is $8, half of what it used to be, while the car fee is just $2.

Average traffic in 2005 was 418 vehicles a day, no higher than five years ago, but numbers this year are 29 percent higher than last year.

From November 2004 through March 2006, TxDOT collected $712,000 in toll fees, enough to cover $514,000 in operation costs but not enough for another $780,000 in maintenance.

When the profits are supposed to start rolling in isn’t known, Saenz said. But it’s just a matter of time before Mexican truckers are allowed to drive beyond a border zone, and just a few years away before Mexico opens a new road linking Monterrey to the Camino Colombia.

TxDOT officials aren’t worried about how long that takes, because they feel they got a bargain — paying $20 million for a road they say would cost $35 million to build. Though $90 million was invested, a large chunk was used to construct interchange ramps that were given to the state.

And as traffic grows around Laredo, the nation’s largest inland port, the road will be needed and even worthy of taxpayers’ continued investment, Saenz said.

“We probably would have built that road sometime in the future,” he said.

Leave a Reply