FORT WORTH - Texas' new highway finance law placed a two-year chokehold on private development of toll roads, but it also cleared some obstacles standing in the way of turnpikes developed by existing agencies, transportation executives told The Bond Buyer's Texas Public Finance Conference yesterday.
"With all the discussion of public-private partnerships, a lot of people lost sight of the value of the public agencies already in operation," said Susan Buse, chief financial officer of the North Texas Tollway Authority.
SB 792, passed in the final days of the Texas Legislature's 80th Session last May, made sweeping changes in how highways and tollways are funded, placing a two-year moratorium on privately owned tollways. Exceptions were made for projects already in the works in the Houston, Dallas-Fort Worth, San Antonio, and El Paso areas.
The new law, signed by Gov. Rick Perry in June, gave right of first refusal on toll projects to existing agencies, such as the NTTA in the Dallas suburb of Plano, the Harris County Toll Road Authority in Houston, or regional mobility authorities, including new RMAs such as El Paso's.
In the process of drafting the legislation, the NTTA was granted the right to bid for a $5 billion project that had already been awarded to a private developer, the team of Spanish toll-road consortium of Cintra and investment banker JPMorgan.
Since winning that contract last year, the NTTA has issued $3.3 billion of bond anticipation notes - the largest such deal in history - to provide up-front payments to regional governments for the concession to build the State Highway 121 tollway. The authority expects to take out the Bans with long-term bonds within months.
In the process of winning the contract, the NTTA and other toll agencies learned some lessons from the negotiation process, according to Buse.
"One of the things we learned from the proposals of the private sector is that raising toll rates no longer appeared to be political suicide," she said.
SB 792 also provided a new process for valuing proposed tollways, a "template" that the NTTA is applying to projects still in the proposal stage, State Highway 161. The market valuation study is underway. The results will allow the authority to decide whether to accept the project.
In Houston, the HCTRA is negotiating with the Texas Department of Transportation on terms for the Grand Parkway toll project that will loop the metro area.
For the first time, the HCTRA must factor the cost of building a highway loop around the area in areas where development and traffic have not yet arisen, said Edwin Harrison, director of financial services for Harris County.
"What you have to do is take revenue from the portions that do make sense to fund portions that don't make sense right now," Harrison said. "We're in negotiations with TxDOT now, and we're just real curious how that's going to go."
One benefit for the HCTRA from SB 792 was getting the authority to represent seven counties in the planning area for toll roads, Harrison said. Previously, each of the seven counties was considered a local tolling entity.
In Austin and San Antonio, tolling has met much more political resistance than it has in the state's two largest metro areas, Dallas-Fort Worth and Houston.
"We have no toll roads today," said Terry Brechtel, executive director of the Alamo Regional Mobility Authority in San Antonio. But that will change with the development of a tollway north of downtown designed to relieve congestion. After battling lawsuits, environmental issues, and public opposition, the Alamo RMA is developing a bond deal for the $430 million project.
"By July, we'd like to be closing on our bond transaction," Brechtel said.
In Austin, plans to build toll lanes on U.S. 290 south of the city were "very contentious," said William Chapman, chief financial officer of the Central Texas Regional Mobility Authority.
The $504 million project began with an environmental study in 1990, was proposed as a toll project in 2004, and won Texas Transportation Commission approval in 2005. But last year, TxDOT withdrew funding, and the eastern section of the project was placed under the private toll moratorium.
"The loss of TxDOT equity made it nearly impossible to finance 290 East and other proposed projects solely using traditional funding methods," Chapman said.
To get the project back on track, the agency is looking for a bridge loan of up to $50 million to continue engineering and other work, while seeking long-term financing through revenue bonds, grants, and non-traditional sources such as pension funds and special districts.
In its request for strategic partners for long-term financing, the authority has already received 11 proposals, Chapman said. In addition to major investment banks, the private development team of Cintra-Zachry has submitted a proposal. The development team is already working on a section of the massive Trans Texas Corridor near Austin, a potentially $200 billion network of roads and rail lines that has generated grassroots opposition from landowners and environmental activists.
Under the theory that TxDOT has been operating under, projects such as the TTC are badly needed in a growing state, and using private development for sections of highways while the state publicly funds another part of a project helps speed highway construction, said Edward Pensock, director of corridor planning for the Texas Turnpike Authority.
In building roadways for a rapidly growing state, he said, the question becomes: "How do you do that without taking generations?" q