Committee recommends end to PPP moratorium in Texas

The nine-member Legislative Study Committee on Private Participation in Toll Projects argues that the state should allow PPPs for toll roads to go forward without a right of first refusal for local tolling authorities to develop them. The committee included Bob Poole, director of transportation studies at the Reason Foundation.

The Texas Legislative Study Committee on Private Participation in Toll Projects is recommending to the state legislature that it end its 18 month-old moratorium on public private partnerships (PPPs) in toll road projects.

The committee concluded that none of the conventional alternatives for closing the state's transportation funding gap, such as raising the state's motor fuel tax or issuing more bonds, would be sufficient over the long haul. As a result, private sector participation in the form of PPPs for new projects is necessary, the committee argued.

“PPPs are not the answer to everything but they definitely have a role to play and it would be foolish for Texas to cut itself off from this tool,” Bob Poole, one of the nine members of the committee, told InfrastructureInvestor.

In May 2007 Texas Senate Bill 792 imposed a moratorium on any new PPPs and created the committee to look into private participation in toll road projects. The committee's policy recomendations will be taken into consideration during the state's next legislative session, which begins in January.

The committee also recommended that the legislature should do away with the right of first refusal for project delivery by local tolling agencies, such as the North Texas Tollway Authority (NTTA). That right of first refusal means that the private sector can only get involved in a project when a local tolling agency has waived its right to deliver the project. The committee decided that this unnecessarily limited competition and collaboration for project delivery.

The right of first refusal was also enacted by Senate Bill 792. It followed a high-profile bid by the NTTA to develop a portion of Texas' State Highway 121 after a consortium consisting of Spanish toll road developer Cintra and JPMorgan Asset Management had already been awarded a $2.8 billion, 50-year contract to do so. The Texas Transportation Commission eventually backed the NTTA over Cintra/JPMorgan.

In place of the right of first refusal, the committee recommended a public sector comparator approach, already in use in places like Australia, whereby the state would run a dual-track process to price and assess the value of a project being delivered by a public agency versus a public-private collaboration. At the end, both outcomes would be compared and the one that delivers the taxpayers the better value for their money would win, Poole explained.

Poole, director of transportation studies at California-based public policy research institute Reason Foundation, was the only non-Texan on the committee. He would not wager a guess as to whether the legislature will enact the committee's findings.

“We've given it our best shot. We'll see where they take this from now,” he said.