In the Land of Expanding Toll Roads, TxDOT Gets Going on Grand Parkway

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DALLAS — A new section of the 180-mile, $6 billion toll road that loops around the outer Houston metro area known as the Grand Parkway could break ground this fall after winning approval from the Texas Transportation Commission.

The project, also known as State Highway 99, has been under consideration for more than three decades and is considered controversial because some critics see it as promoting growth in an area that is now sparsely settled. But advocates see it as a solution to future congestion and a corridor for cargo from the Port of Houston.

“Development of the Grand Parkway is a priority for the Houston area and for the state of Texas,” said Ned Holmes, a member of the TTC board. “Development of the Grand Parkway will alleviate congestion on multiple roadway segments on the state’s list of the 100 most congested, including six segments ranked in the 20 most congested.”

The tollway is also unusual in that the Texas Department of Transportation will be supervising the project rather than the Harris County Toll Road Authority. Harris County commissioners, who oversee the HCTRA, decided to pass on the project in January because key segments are outside the county.

The state will not issue bonds to finance the first section but expects to in later phases. Some parts are not expected to produce sufficient revenue to pay debt service from the outset but are expected to do so over the life of the bonds.

The Texas Transportation Commission, which supervises TxDOT and issues debt for its projects, carries triple-A ratings.

The first section that won the green light from TxDOT is expected to cover 14.1 miles, connecting Interstate 10 to U.S. 290 northwest of Houston. The TTC’s unanimous decision to advance the project allows the department’s staff to manage planning and to supervise contracts once funding sources are identified.

Initial funding of $350 million will come from the Texas Mobility Fund in the form of cash. The fund is made up of fees for driver licenses, driver records, certificates of title and vehicle inspections. Construction costs for segment E are pegged at $355 million, with an additional $64 million for engineering and right of way.

The low cost is due in part to the fact that the area where the four-lane highway will travel is relatively undeveloped, lowering right-of-way costs, according to TxDOT spokeswoman Karen Amacker.

While Harris County decided not to exercise its right of primacy to build the first section, other metro-area counties kept theirs and have two years to start planning. One section of the parkway in Chambers County is already operating southeast of Houston but has not yet been tolled.

Under a Texas law passed in 2007, local toll road authorities have the right of first refusal or “primacy” over toll projects in their region. Once rejected by the primary toll agency, the projects can be developed by TxDOT or private developers.

The Harris County Toll Road Authority, so far, has developed projects only in the county and has never worked with a private concession developer. The agency also develops its tollways without federal funds, reducing delays.

As TxDOT was taking on Grand Parkway, the HCTRA was nearing completion of its original Sam Houston Tollway. The final section of the nearly $1.5 billion tollway opened Saturday. It marks completion of the 88-mile “ring road” first conceived by Houston planning officials in 1952.

With about $2.6 billion in outstanding debt, Harris County’s toll revenue bonds carry ratings of AA-minus from Standard & Poor’s and Fitch Ratings, and Aa1 from Moody’s Investors Service.

Although the toll bonds carry the county’s tax pledge, in practice they are paid entirely from toll revenues. The toll road has no plans to ever use the county’s tax pledge to repay the bonds.

“The authority will need to diligently manage the growth to preserve financial flexibility and maintain debt-service coverage,” Fitch analysts noted last year. “While the authority’s five-year capital improvement plan of approximately $400 million is down significantly from its previously projected $4.6 billion CIP, it is possible that the authority may reinstate the long-term projects that have been delayed/suspended, which would likely involve a large debt component. Nevertheless, Fitch believes the authority’s slower approach to its CIP and as a consequence, reduction in expected future debt issuances, illustrates management’s proactive approach to maintaining its financial flexibility.”

Harris County, the third largest county by population in the nation, led Texas growth in the 2010 census, adding more new people than the next two Texas counties combined. Of the metro area’s 4.1 million people, about 67% live in Harris County, according to the census.

Outside of Harris County, the Fort Bend County Toll Road Authority in Sugar Land is the largest toll road operator in the metro area. The agency operates the Fort Bend Parkway and the Fort Bend Westpark Tollway. The authority was created in November 2000 when voters approved a $140 million bond issue for the two toll road projects.

The four-lane, 6.2 mile, Fort Bend Parkway Toll Road opened in 2004, linking the Sam Houston Tollway with State Highway 6 in the eastern part of the county. The second project, the Fort Bend Westpark, ties into Harris County’s Westpark Toll Road.

The patchwork of toll-road operators in the Houston area is different than in the Dallas-Fort Worth area system operated by the North Texas Tollway Authority. The NTTA operates in several counties and must deal with the often contentious demands of rapidly growing suburbs.

In the Austin area, TxDOT operates the Central Texas Turnpike System with two major tollways, State Highway 130 and SH 45 to the north. SH 130 runs north and south to the east of Austin, relieving congestion on Interstate 35. Except for one segment of the SH 130 roadway, all project components were completed ahead of schedule and under budget.

The Central Texas Turnpike System carries triple-B plus ratings. The system issued more than $1 billion of revenue bonds in 2002 for the start-up project, earning higher ratings because of the backing of TxDOT. The department also operates tollways in the Laredo area in South Texas and in Tyler in East Texas.

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