Texas Legislature Punts on Private Toll Roads

The Texas legislature closed its special session yesterday sidestepping the issue of extending the state’s authority to enter to agreements with private firms to finance, build and modernize transportation infrastructure, which will expire this year. I’ve written extensively regarding the need to preserve this valuable procurement tool, given the state’s massive infrastructure needs. Roughly 1,000 people move to Texas every day, as the story goes, and they bring cars and demands for goods and services with them. Port and freight traffic is projected to continue increasing as well, exacerbating traffic gridlock in and around the state’s major metro areas.

Given the threat this poses to the state’s long-term economic health, the legislature’s inaction on this issue is indeed perplexing, but it’s also a mixed bag, in my opinion. On the bright side, I’ve been told that the failure to extend this procurement authority will not jeopardize the private road contracts signed or in the procurement process to date, including the $2+ billion North Tarrant Express project (which just reached commercial close) and the New LBJ/I-635 Managed Lanes project. These megaprojects would not be feasible without private financing.

Further, given the volatility and political angst on the issue on display in the 2009 legislative session, a two-year breather—though short-sighted and a setback for the state’s efforts to sustain investor interest—may not be such a bad thing. The late architect of Texas’ embrace of private infrastructure financing, former legislator and Texas Transportation Commission Chairman Ric Williamson, acknowledged in a 2007 Reason Foundation interview that:

Even with the retrenchment of the last session—that was to have been expected. You can’t go as far, as fast, and as hard as we did without having some pushback from some of your citizens and from some of your policymakers. What we went though was entirely understandable and entirely expected. And it really is good for the system—it washes out the anger and lets it get to the side of the road, so to speak, where you can move on down the road.

Many observers hoped that the last two years would have provided ample breathing room, but for a variety of reasons it didn’t. For Texas’ sake, let’s hope that another two-year breather helps to calm the issue and let cooler heads prevail in the 2011 session.

On the downside, however, legislative inaction is just kicking the can down the road. Florida, Virginia North Carolina and others have a number of privately financed transportation projects in the pipeline. California, New York, Michigan, Arizona and other states have taken significant steps in the last seven months towards developing robust public-private partnership laws and programs to facilitate such projects. Texas was once far and away the vanguard in this field earlier this decade; now it puts itself in the position of sitting by and watching other states surpass it and render it less attractive to investors.

And it would be perfectly rational and understandable if some infrastructure investors rethink dedicating time and resources to Texas. Sure, there are a ton of needs and potential investment opportunities, but why take on the political risk of Texas when you can go to Cali, Florida and several other states where policymakers are opening their arms? Such passivity just seems downright out-of-character for Texas.

In their cooling off period, I would hope that legislators reassess the benefits of the projects undertaken to date in Texas and seriously confront the underlying reality I discussed in an April blog post:

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.

Reason’s Transportation Research and Commentary