Interim Legislative Study on Highway Construction Privatization
Interim Legislative Study on Highway Construction Privatization
Senate Bill 792 is the transportation bill passed by the 80th Texas Legislature in May, 2007. Senate Bill 792 placed a moratorium on private toll road contracts, prohibited a toll project entity from selling a toll project to a private entity, and established a legislative study committee.
Since the stated legislative intent of the moratorium is to establish a “cooling off “ period in order to re-evaluate the implications of privatizing highway construction and operation, a critical element of Senate Bill 792 is the legislative study committee mandated by the bill.
According to the bill analysis, the legislative study committee must be composed of nine members, appointed as follows: (1) three members appointed by the Lieutenant Governor; (2) three members appointed by the Speaker of the House of Representatives; and (3) three members appointed by the Governor.
The legislative study committee’s charge is to conduct public hearings and study the public policy implications of private tollway contracts, known as comprehensive development agreements (CDAs). The committee is also charged with the task of examining the public policy implications of selling an existing and operating toll project to a private entity.
Finally, the committee is mandated to deliver a report of their findings to the Legislature no later than December 1, 2008.
Summary of Senate Bill 792
Senate Bill 792 places a moratorium on private toll road contracts, or comprehensive development agreements (CDAs), between a toll project entity and a private party that allows the private party to operate or collect revenue from the toll. Some specific projects and areas of the state were exempted.
There are no Central Texas highway projects specifically exempted from the moratorium. Work on the southern section of State Highway 130 has moved forward because the contract was signed months before Senate Bill 792 passed.
Senate Bill 792 also creates a new process allowing the Texas Department of Transportation (TxDOT) and local toll road agencies to evaluate money that can be generated from new toll roads through a market valuation of public infrastructure. However, the bill prevents any new contracts to be signed using this new process for two years.
On December 6, 2007, Governor Rick Perry named his three members to the legislative study group. They are Bob Poole, Jr. , Director of Transportation studies for The Reason Foundation; Johnny Johnson, former chairman of the Texas Transportation Commission; and Grady Smithey, Jr. , who served on the Duncanville City Council for 18 years.
Earlier in the year, Speaker of the House of Representatives Tom Craddick appointed the following State Representatives to the study group: Representive Larry Phillips (R-Sherman), Vice Chairman of the House Transportation Committee; Representative Aaron Pena (D-Edinburg); and Representative Wayne Smith (R-Houston), the House sponsor of Senate Bill 792.
Lt. Governor David Dewhurst’s appointees are: committee chair Senator John Carona (R-Dallas), the Senate Transportation and Homeland Security Committee Chairman; Senator Tommy Williams (R-The Woodlands); and Senator Robert Nichols (R-Jacksonville).
December 2008 Update
The Interim Legislative Study Committee on Private Participation in Toll Projects met three times in 2008, inviting testimony on investing in roads through pension funds, the impact of oil supply on CDAs, lessons learned from the State Highway 130 project, etc. Click here for links to the agenda and written testimony provided at the three committee meetings to date.
The Committee's final report emphasizes that the state must embrace private finance of transportation in order to address the funding shortfall, but it must be only one of several financing tools to consider. The report recommends a more limited scope for Texas public-private road-building partnerships.
Specific recommendations include:
- Replacing the current Market Valuation process of SB 792 with the Public Sector Comparator model and process in order to establish the threshold level of value for private participants to meet or exceed.
- Ending upfront concession payments and replacing them with revenue sharing options to limit a private company’s potential windfall profits.
- Keeping public-private partnerships available to both the Texas Department of Transportation (TxDOT) and local toll agencies.
- Creating a centralized entity to provide technical and process expertise to TxDOT, Metropolitan Planning Organizations, and Regional Mobility Authorities/Toll Authorities.
Written with assistance from the University of Texas-Dallas’ Center for Financial Strategy Innovation, the report contains dissenting comments from some members of interim committee who do not agree with all recommendations. As it lays out many transportation financing arguments, this document can serve as guide to the transportation debate during the legislative session convening January 13, 2009.
Final reports from the Senate and House Transportation Committees to be considered during the upcoming legislative session were also completed in December 2008.
Resources
Legislative Study Committee Report on Private Participation in Toll Projects with recommendations for the 81st Legislature (December 2008)
Senate Transportation and Homeland Security Committee Interim Report including recommendations on highway construction privatization (December 2008)
House Transportation Committee Interim Report including recommendations on highway construction privatization (December 2008)
