While many states have tapped private capital to build roads and bridges, Texas has shown less enthusiasm for alternative funding mechanisms, allowing expiration of the Dept. of Transportation’s and Regional Mobility Authorities’ right to enter into new comprehensive development agreements (or CDAs).
“The moratorium greatly limits TxDOT from procuring new CDAs to deliver highway projects for which there is insufficient funding available from traditional sources,” says TxDOT spokesperson Karen Amacker.
CDAs are agreements between private companies and public entities that allow for design and construction of roads and other infrastructure. In the case of concession agreements, they provide financing, operation and maintenance through a private firm, enabling an agency to access private capital to supplement state funds and often speeds up construction of roads.
In concessions, the private developer typically takes a revenue risk and has the right to collect some or all of the revenue from a toll road.
The December 2008 “Report of the Legislative Study Committee on Private Participation in Toll Projects” concluded that “public-private partnerships are a significant tool to help address the state’s large and growing highway funding gaps. It is extremely important to keep the PPP option open to both TxDOT and local toll agencies.”
However, the Texas Legislature chose not to extend TxDOT’s ability to enter into the agreements. In a July press statement, Texas Lt. Gov. David Dewhurst said that after talking with regional mobility authorities, senators decided the issue was not pressing.
“We didn’t see the urgency for CDAs to be extended at the present time,” Dewhurst said. State Sen. John Carona, R-Dallas, and Senate Transportation and Homeland Security Committee chair, added that there would be plenty of time to fully address the issue when the Legislature next meets in regular session. That will be in 2011.
“The Legislature at this point thinks the public-private partnerships and CDAs are not as cost effective, but they haven’t been willing to come up with the money to replace the private capital that has been available,” says Thomas L. Johnson, executive vice president of Associated General Contractors of Texas in Austin. “This dialogue has to go on for the next six to eight months, until the next legislative session, and then there will be some resolve.”
Johnson describes it as a multifaceted issue, with anti-toll folks preferring an increase in fuel tax and letting TxDOT build roads traditionally. When the bill passed in 2007, supporters indicated it addressed concerns about tolls and putting infrastructure under the control of private entities.
“We have members that are on both sides of the issue,” Johnson says. He adds that some AGC members perform CDA work and favor the option, while those who do not have a problem with them.
CDAs let TxDOT leverage its money to build new capacity, but that takes away funds that could be used to maintain existing roads, Johnson says. The department has a limited number of resources, he says.
Johnson says that in 2009 TxDOT let less than $3 billion on traditional projects, including maintenance work. Yet the 2030 Committee Texas Transportation Needs Report, issued in February 2009, indicates the state must spend $4 billion annually to preserve pavement on its roads.
“It’s a no-win situation,” Johnson says. “The Legislature has to define the role of the Texas Dept. of Transportation. Is it to address congestion in the metropolitan areas as well as maintain the existing system? If so, legislators will have to give the department the revenue to do it. It cannot be all things to all people.”
Due to exemptions in the law, TxDOT has been able to proceed with several CDAs—concessions and design-build—and can continue to until Aug. 31, 2011, for projects that do not include private financing.
“All of them that anybody really wants to move forward with were on the exemption list,” Johnson says. “That’s a false issue, and one of the reasons the Senate decided not to extend the CDA requirement.”
TxDOT CDA projects under construction
TxDOT partnered with SH 130 Concession Co., a joint venture between Cintra of Spain and Zachry American Infrastructure of San Antonio, in June 2006 to finance, design, build, operate and maintain for more than 50 years segments five and six of SH 130 between Austin and Seguin, representing a $1.3-billion private investment. Construction began at the northern end of the 40-mi stretch in April 2009. The state will share in the toll revenue once the road opens in 2012.
Most recently, the $1-billion DFW Connector (SH 114/SH 121) broke ground in February. Scope includes rebuilding portions of four highways, two interchanges and five bridges to decrease the amount of weaving necessary when driving the highway and enhance mobility and, ultimately, air quality. Completion is scheduled for 2014.
The American Recovery and Reinvestment Act funded the first $250-million, 8.4-mi, design-build contract for the DFW Connector, awarded to NorthGate Constructors, a joint venture between Kiewit Texas Construction of Fort Worth and Zachry Construction Corp. of San Antonio.
“We identified as much as we could build [with the stimulus funds],” says TxDOT spokesman Tony Hartzel. “We determined how much came and the best proposal to build as much as we could afford.”