Non-compete clauses ensure toll operators will be richly rewarded

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Noncompete clauses ensure toll operators will be richly rewarded
By Carlos Guerra
San Antonio Express-News

Ever wish you weren’t right?
In 1997, the notion of selling off publicly owned infrastructure to private sector operators was coming into its own.

After the city hired a consultant to determine the value of the publicly owned CPS Energy, it raised red flags.

CPS consistently charges some of Texas’ lowest utility rates while providing a significant chunk of the city’s revenue, I argued. Profit motives can produce wondrous results. But uncontrolled, they can also produce costly disasters.

Some things — especially those that efficiently deliver services that are essential — are best kept in the public sector to assure accountability and to prevent gouging.

“We would never consider selling Loops 410 and 1604, Interstates 10, 35 and 37 to private investors,” I wrote at the time. “Does anyone doubt that they would not turn them into toll roads and render us subject to their price demands?”

But hey, what did I know.

Despite massive public opposition, by 2004, plans for a massive system of privately operated toll roads were already well developed at the Texas Department of Transportation. Agency officials answered critics of toll-road proposals by insisting that toll roads were absolutely necessary. They were, in fact, inevitable because the state’s fuel taxes simply weren’t generating the revenue for badly needed highways.

And besides, they said, free, un-tolled alternative lanes will always be provided for those who don’t — or can’t — pay.

They did, however, concede that private-sector operators would receive some sort of “noncompete clauses” to assure investors that their toll roads would actually be profitable.

When pressed for details, they said that public roads already planned for construction over the next 25 years could still be built or improved. But if roads that compete with toll roads were built or widened, the state would have to reimburse operators for the lost revenues.

As transportation writer Patrick Driscoll reported Monday, TxDOT very quietly inked a deal in March with a consortium composed of Spanish financial behemoth Cintra and San Antonio-based Zachry Construction to build a 40-mile section of Texas 130 and collect tolls on it for 50 years.

The four-lane road will be built roughly parallel to I-35 from Austin to Seguin. In time, it will be part of a statewide system of pay-as-you-go lanes that will supposedly fund construction of other highways.

Details of the contract’s noncompete agreement, however, provide disturbing insights into what is likely to be part of future public-private deals.

In essence, a complex system that will richly reward TxDOT has been set up to encourage drivers to take toll lanes and fines the state for encouraging them to use free lanes.

An essential element of the noncompete agreement involves manipulating speed limits on both Texas 130 and I-35. Through either of the options, the state gets more money for setting higher speed limits for the toll lanes and keeping current speed limits, or even lowering them, on the free lanes.

If TxDOT sets the speed limit on the toll roads at 70 mph, for example, it will get a $25 million payment upfront. But if it allows traffic to zoom on tolled lanes at 80 mph, it will get $92 million, and $125 million for allowing 85 mph. This, however, is only part of this convoluted tale.

Under a second option, TxDOT will also receive a significantly larger percentage of the tolls collected if it allows higher speed limits on the toll road.

In year eight of the 50-year contract, for example, the agency will get only 4.65 percent of the first $82 million collected, and 9.3 percent of the next $47 million that comes in.

If, on the other hand, it allows traffic to move at 80 mph, those percentages will rise to 9.05 percent and 18.1 percent, and to 11.05 percent and 22.1 percent for allowing 85 mph.

Since TxDOT is also empowered to set speed limits on highways that are not tolled — such as I-35 — guess what is likely to happen on that highway?