In a recent blog post, I offered a cautionary warning to Texas legislators seemingly bent on driving out privately financed roads:
If it wants to share some monumental congestion and infrastructure problems with California, Texas should do exactly what it seems to be doing right now—-innovate then quickly retreat on PPPs, sitting by for decades afterward fiddling while the congestion problems burn ever brighter and become ever more expensive to solve.
In the two weeks since I wrote that, it appears that the "fiddling" is already underway. Ben Wear at the Austin American-Statesman reports today that (emphasis mine):
Despite what amounted to a written promise in August by the state's top three leaders to stop sending about $1.2 billion of transportation dollars to the Texas Department of Public Safety every two years, the 2010-11 state budget passed by the Senate last week removes only a tiny slice of that "diversion." Then Tuesday, the House Appropriations Committee, when it approved its take on the budget, chopped away all but a small piece of $2 billion of TxDOT money that was in the Senate version.
Efforts to raise money for moving freight rail lines out of urban areas have generated little momentum this session. And, in what has become something of a trend the past few sessions, efforts have gone nowhere to increase the state's gasoline tax — frozen at 20 cents a gallon since 1991 — or allow it to float with inflation.
The net result of this, some legislators say, is a state transportation kitty artificially propped up with borrowed money, steeped in debt payments and potentially headed for disaster. The state, according to a study released in December, needs to spend about $14.3 billion annually on transportation over the next 22 years. The Senate's two-year TxDOT budget is $17.1 billion, or about $8.6 billion each year.
"The fact that we only reduced diversions by a mere $21 million tells me that folks here in the Capitol are not yet ready to take this issue seriously," said state Sen. John Carona, R-Dallas, chairman of the Senate Transportation and Homeland Security Committee. "We're about 24 to 36 months from TxDOT basically saying we can't do any new roads."
Sen. Carona is absolutely right. And to his credit, he sponsored SB 404 (which passed the Texas Senate this week) that would end the current moratorium on privately-financed toll roads by extending the state's authority to implement such projects by an additional six years. Unfortunately, this bill has a counterproductive companion bill in SB 17 (also passed the Senate this week), which would mandate contractual poison pills that will drive off private infrastructure investors and virtually ensure big-government monopoly control over Texas' transportation system.
It's a classic case of "what one hand giveth, the other taketh away." And at some point the Texas legislature needs to realize that you can only shoot yourself in the foot so many times before you can't walk anymore.
Put differently, strike one was imposing the moratorium in 2007. Strike two was the political interference in the contract for State Highway 121, which resulted in politicos undermining a competitively bid procurement process. Both of these sent shockwaves through the private infrastructure investment community, shaking its faith in the business climate in Texas and sending up huge red flags of political risk (which is akin to financial kryptonite).
Strike three is now looming large with the Senate passage of SB 17. With that vote, it's no wonder that private infrastructure investors are starting to think about lining up for the exits. The kicker is that strike three is happening after politicians recently witnessed a remarkable demonstration of what the private sector is bringing to the table in the Metroplex, making roughly $6 billion worth of congestion busting projects feasible that the state otherwise couldn't afford.
In my opinion, a number of Texas legislators have made a huge mistake in allowing themselves to be captured emotionally and politically by a disproportionately vocal, but unfortunately misguided, coalition of anti-toll activists. These activists are very proficient at complaining about toll roads, but when you ask them the logical next question of "what's your better solution, then?," you’ll generally get one of two answers:
- they change the subject, because they’re so fixated by toll road myths or conspiracy theories that they fail to grasp the intricacies and complexities of the real world of transportation finance; or
- they respond, "just raise the gas tax."
When Texas legislators hear, "let’s just raise the gas tax," they should interpret that as code for "let’s dig our hole even deeper and do more of the status quo." BTW, that’s the same status quo that’s utterly failing all across the country at delivering what we truly need to compete in the 21st century economy.
Tinkering around with the gas tax is the equivalent of rearranging the deck chairs on the Titanic. It’s just not a viable solution, because you'll never be able to muster the political will to raise the gas tax anywhere close to the level it would actually take to close the funding gap. Even legislative proposals to let citizens vote to impose new transportation taxes and fees on themselves can run into this same political reality.
Texas would need several magnitudes higher than the current tax rate to close its infrastructure gap. That will never happen, so what's left if Texas takes private financing off the table? Not much. With the increasingly constrained funding on the horizon, Texas (like many states) will barely be able to maintain the roads it already has, and it won't be building the new ones needed to keep people, goods and the state economy moving. Then Texas grinds to a crawl and loses its economic edge.
Texas legislators need to do some soul-searching. If they truly believe that we’re actually getting good results from our government-monopolized education system, our government-run social welfare systems, our government-controlled housing market, and today, our increasingly government-run economy, then it would be perfectly consistent to double down and give government exclusive monopoly control on Texas' transportation system.
But we all know government's abysmal track record in those areas. The phrase "good enough for government work" exists for a reason. The idea that transportation is the one magical area where government will actually get it right for once is pure fantasy.
The simple fact is this: the government is failing at delivering transportation infrastructure, and Texas needs an infusion of money to solve this problem and keep the state moving. The private sector offers that, as the state's own legislative study committee recently concluded. Texas legislators may be tempted to lock private toll roads in a last-resort, "only use in case of emergency" box, but before they do so they should realize that the emergency is already here.