Commentary

As Major Cities Try to Combat Traffic Congestion, Texas State Legislature Limits Their Options

The Texas state legislature enacted new laws aimed at curtailing the use of tolling and public-private partnerships.

In its 2017 session, the Texas state legislature enacted new laws aimed at curtailing the use of tolling and public-private partnerships.

First, they declined to approve any of the 18 projects proposed by the Texas Department of Transportation (TxDOT) as public-private partnerships (P3s), which was, in effect, a two-year moratorium since the legislature meets only in odd years.

Second, they prohibited TxDOT from investing any state equity in P3 projects, allowing it only to make loans to concessionaires, which, of course, would make financing more difficult. This was in addition to promises from Gov. Greg Abbott that none of the new funding approved by voters in 2015 (Propositions 1 and 7) would be used for tolled projects.

TxDOT and local officials in much of the state fought to save these projects, most of which involved express toll lanes, such as those already providing congestion relief in Austin, Dallas, and Fort Worth. The Texas Transportation Commission and TxDOT developed a workaround that would use the new monies generated by Propositions 1 and 7 for the general-purpose lane portions of such projects and retain conventional P3 financing for the priced lanes.

Dubbing that an “accounting trick,” grass-roots populist groups demanded that Gov. Abbott rein in the transportation commission and TxDOT. Ten days later, the governor issued a statement saying that while TxDOT was doing a good job on congestion-reduction, “We want them to do that in a way as I promised, and that is without adding more toll roads.”

Since the governor appoints all the members of the Texas Transportation Commission, they voted unanimously on December 14 to remove all toll projects from the 2018 Unified Transportation Program. At least for now, that kills planned mega projects to add express toll lanes to I-35 East in Dallas, I-35 through Austin, and many others.

The irony in these actions is the stunning success of the public-private partnership express toll lanes projects in Dallas and Fort Worth. The North Tarrant Express (NTE) has reduced congested time in the general-purpose lanes by 60 to 73 percent while increasing average speed by 10 to 15 percent. Similar congestion reductions are being achieved on the LBJ project in Dallas. These results falsify the propaganda from populist groups such as Texans Uniting for Reform and Freedom (TURF) and Texans for Toll-Free Highways.

For example, in November 2017, these groups urged the governor to take action, calling the express lanes unaffordable for the “working class” and claiming that an average $5 toll each way $50/week) would cost $135,000 over a person’s lifetime. But that is not how most people use express toll lanes. Figures from NTE and LBJ show that most users’ bills average between $5 and $15 per month. Regular commuters on those expressways choose the toll lanes for some trips and average $35 per month. And as we see on express toll lanes around the country, on LBJ and NTE only 15 percent of the cars are luxury brands. Toyota, Ford, and Honda are the most common vehicles in toll lanes.

TURF and its allies also claim that Texans don’t want more toll lanes. They also present all new projects as if they force drivers to pay tolls, when in fact all of these projects add new capacity to congested corridors, leaving motorists free to choose whether the time savings and reliability of the toll lanes are worth the price for any given trip. That should undercut the constant repetition of these group’s favored term: “toll taxes.” They use this loaded phrase all the time, and it has been parroted by Tea Party legislators that these groups helped elect. But it’s a lie. There is a large legal history on the difference between a toll (a user fee) and a tax (government revenue), most recently reflected in a unanimous decision of the Virginia Supreme Court in 2013.

As for the alleged unpopularity of tolled projects, that, too, is incorrect. One year after NTE’s completion, 70 percent of users of the overall highway (general purpose and electronic toll lanes) gave it a favorable rating. And users of the LBJ rated that corridor even higher one year after project completion, at 76 percent. Local officials in Austin, Dallas, Houston, and elsewhere support continued use of tolling and P3s for much-needed congestion-relief projects. Liberty County officials and citizens strongly support the toll-financed completion of the last 50 miles in the Grand Parkway, the Houston metro area’s outer beltway. In Montgomery County, north of Houston, there is major support for completing the 249 Tollway. And officials in the Dallas-Fort Worth Metroplex are agonizing over how to complete the majority of the long-planned network of express toll lanes—without either tolling or P3 procurement—as are Austin residents and officials desperate for long-term congestion relief on I-35 through downtown.

Fortunately, there is a ray of hope in Texas.

A pro-tolls, pro-P3 group, Texans for Traffic Relief (TTR), was unveiled in November, headed by lobbyist and former conservative activist David White. Its website supports utilizing all available resources to fund roadway projects, empowering local communities to decide how they want projects done, ensuring that taxpayers are protected in the event of a P3 project bankruptcy, and opposing the tolling of existing roadways. TTR applauded a decision of the State Republican Executive Committee to include language regarding tolling on the March Republican primary ballot.

To be effective, TTR and its allies need to present a positive case for toll-financed P3 projects. That includes not only much-needed congestion relief but also the importance of drawing large amounts of private capital into the Texas highway system. Two under-appreciated benefits of P3 projects are financial. First, under the revenue-sharing provisions built into Texas P3 agreements, if tolled projects do better than projected, TxDOT will garner increasing shares of gross toll revenues in the out years. Second, to the extent that these projects are profitable, they will pay state and federal corporate taxes. Cintra estimates that on the NTE and LBJ projects, the net present value of such tax payments (through 2062) is $3.5 billion.

But in addition, proponents need to counter the propaganda of TURF and its allies. They will need to counter false or misleading assertions such as:

  • Tolls are taxes;
  • Guaranteed profits at taxpayer expense;
  • Taxpayer bailouts in case of bankruptcy;
  • Most of the funding is from government, not investors;
  • Loss of “sovereignty” over highways;
  • Express toll lanes create scarcity of road space; and,
  • Unaffordable tolls.

Unfortunately, many of the legislators enacting anti-toll and anti-P3 provisions evidently believe those incorrect assertions.

Unless these claims are countered effectively, there is little chance of a resumption of P3 projects in Texas.

This column first appeared in Public Works Financing. 

Robert Poole is director of transportation policy and Searle Freedom Trust Transportation Fellow at Reason Foundation. Poole, an MIT-trained engineer, has advised the Ronald Reagan, the George H.W. Bush, the Clinton, and the George W. Bush administrations.

Surface Transportation

In the field of surface transportation, Poole has advised the Federal Highway Administration, the Federal Transit Administration, the White House Office of Policy Development, National Economic Council, Government Accountability Office, and state DOTs in numerous states.

Poole's 1988 policy paper proposing privately financed toll lanes to relieve congestion directly inspired California's landmark private tollway law (AB 680), which authorized four pilot toll projects including the successful 91 Express Lanes in Orange County. More than 20 other states and the federal government have since enacted similar public-private partnership legislation. In 1993, Poole oversaw a study that coined the term HOT (high-occupancy toll) Lanes, a term which has become widely accepted since.

California Gov. Pete Wilson appointed Poole to the California's Commission on Transportation Investment and he also served on the Caltrans Privatization Advisory Steering Committee, where he helped oversee the implementation of AB 680.

From 2003 to 2005, he was a member of the Transportation Research Board's special committee on the long-term viability of the fuel tax for highway finance. In 2008 he served as a member of the Texas Study Committee on Private Participation in Toll Roads, appointed by Gov. Rick Perry. In 2009, he was a member of an Expert Review Panel for Washington State DOT, advising on a $1.5 billion toll mega-project. In 2010, he was a member of the transportation transition team for Florida's Governor-elect Rick Scott. He is a member of two TRB standing committees: Congestion Pricing and Managed Lanes.

Aviation

Poole is a member of the Government Accountability Office's National Aviation Studies Advisory Panel and he has testified before the House and Senate's aviation subcommittees on numerous occasions. Following the terrorist attacks of Sept. 11, 2001, Poole consulted the White House Domestic Policy Council and the leadership of the House Transportation & Infrastructure Committee.

He has also advised the Federal Aviation Administration, Office of the Secretary of Transportation, White House Office of Policy Development, National Performance Review, National Economic Council, and the National Civil Aviation Review Commission on aviation issues. Poole is a member of the Critical Infrastructure Council of the Los Angeles Economic Development Corporation and of the Air Traffic Control Association.

Poole was among the first to propose the commercialization of the U.S. air traffic control system, and his work in this field has helped shape proposals for a U.S. air traffic control corporation. A version of his corporation concept was implemented in Canada in 1996 and was more recently endorsed by several former top FAA administrators.

Poole's studies also launched a national debate on airport privatization in the United States. He advised both the FAA and local officials during the 1989-90 controversy over the proposed privatization of Albany (NY) Airport. His policy research on this issue helped inspire Congress' 1996 enactment of the Airport Privatization Pilot Program and the privatization of Indianapolis' airport management under Mayor Steve Goldsmith.

General Background

Robert Poole co-founded the Reason Foundation with Manny Klausner and Tibor Machan in 1978, and served as its president and CEO from then until the end of 2000. He was a member of the Bush-Cheney transition team in 2000. Over the years, he has advised the Reagan, George H.W. Bush, Clinton, and George W. Bush administrations on privatization and transportation policy.

Poole is credited as the first person to use the term "privatization" to refer to the contracting-out of public services and is the author of the first-ever book on privatization, Cutting Back City Hall, published by Universe Books in 1980. He is also editor of the books Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington Books, 1981), Defending a Free Society (Lexington Books, 1984), and Unnatural Monopolies (Lexington Books, 1985). He also co-edited the book Free Minds & Free Markets: 25 Years of Reason (Pacific Research Institute, 1993).

Poole has written hundreds of articles, papers, and policy studies on privatization and transportation issues. His popular writings have appeared in national newspapers, including The New York Times, The Wall Street Journal, USA Today, Forbes, and numerous other publications. He has also been a guest on network television programs such as Good Morning America, NBC's Nightly News, ABC's World News Tonight, and the CBS Evening News. Poole writes a monthly column on transportation issues for Public Works Financing.

Poole earned his B.S. and M.S. in mechanical engineering at Massachusetts Institute of Technology (MIT) and did graduate work in operations research at New York University.