Guerra: Non-compete agreements are the devil in the toll road details

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Carlos Guerra: With toll roads, the devils in the details could be astounding
Web Posted: 03/16/2006 12:00 AM CST
San Antonio Express-News

Two decades of white-knuckle drives to Austin on Interstate 35 are proof that highway work isn’t a quick endeavor. But what few realize is that planning started years before construction, and Texas Department of Transportation planners have never stopped altering and tweaking their plans.

It makes sense. Big highway projects can cost hundreds of millions of dollars and permanently change communities.

But other things to consider are that a major highway built to nowhere will, in time, make it somewhere because a highway goes there. Big roads can defy the laws of supply and demand. Planners often warn against trying to “build your way out of congestion” because building a highway might actually increase demand and necessitate even greater expansion.

Phillip Russell, director of TxDOT’s Turnpike Authority Division, is now busily working on details for Texas’ regional toll roads and the Trans Texas Corridor.

With new powers granted by the Legislature, TxDOT’s dependence on fuel taxes to fund road building will decline as reliance on tolls — collected by the state and private-sector concessionaires — increases.

Private-sector money, TxDOT officials say, will accelerate regional projects and fund construction of the Trans Texas Corridor, whose 1,200-foot-wide right of way — with tolled lanes, rails for commuter and cargo trains, and right of way for utilities — will crisscross the state.

But the conceptual map, which depicts the potential quarter-mile-wide routes within 50-mile-wide swaths, has so worried farmers, ranchers, wildlife conservationists, water rights activists and environmentalists that they have coalesced to oppose the project, and toll-roads in general.

“You have to understand that the Trans Texas Corridor will be built as needed and as private-sector funding makes it feasible,” Russell says, adding that, so far, TxDOT has awarded only one TTC contract, a $3.5 million pact with Cintra-Zachry to develop plans for the first leg, which will eventually link Oklahoma and Mexico.

All toll road contracts, Russell emphasizes, will include an option for Texas to buy the road back, a seemingly pointless gesture because if the state can’t afford to build the roads now, how will it afford to buy them back? Russell is also frank about why investors would want into such deals.

“Are they willing to take all this risk out of the goodness of their hearts? Of course not,” he says. “Clearly, they want a return and they want to be paid back.”

He also is clear about another little-mentioned element likely to be part of toll road bond issues: Underwriters will probably require limits on options for people who choose not to pay tolls.

“Wall Street wants to know they’ll get paid,” he says of the no-compete clauses, but adds that discussions with potential investors lead him to believe that the bankers will allow Texas to build competitive commuter rail and roads “already on our 25-year plans.”

But with that reassurance — and realizing how inexact planning can be — TxDOT’s planners better have the finest crystal balls available, because such constraints mean that regardless of unforeseen changes, only those toll-free roads already in the plans will be allowed over the next 25 years.

And since toll road bonds won’t mature for 40 years, after year 25 it would be 15 more years before the state could build competing roads for people to take toll-free.

Do we really want this?

To contact Carlos Guerra, call (210) 250-3545 or e-mail