Texas calls special session to consider PPP legislation(2)

Less than a month after convening their legislative session, Texas Governor Rick Perry is recalling legislators to the state’s capitol for a special session to consider extending the state’s ability to pursue public-private partnerships (PPPs) beyond its deadline at the end of August, among other unfinished legislative priorities.

Legislation to extend the PPP deadline died earlier this month in a conference session between the house and senate as the two chambers sought to iron-out a common version of a larger transportation bill to send to the governor for his signature.

Texas’ current PPP programme was established in a 2003 when the legislature authorised the state’s transportation agencies to enter into comprehensive development agreements (CDA) – a type of PPP contract – with the private sector for development of and investment in certain kinds of infrastructure projects. 

The Texas legislature set a moratorium these PPPs in 2007 after their use sparked political controversy. Unless the legislature votes to extend the 31 August dealine, the moratorium will, in effect, continue.

Before the moratorium, the state had initiated several large projects under the PPP programme like the recently signed $2 billion development of the North Tarrant Expressway in Dallas-Fort Worth with private and public sector capital. 

Texas' legislature also will consider sunset review legislation at the special session. Under Texas’ sunset act, state agencies are subject to periodic review by the legislature and must shut down absent review legislation to keep them going.

When the state convened its regular 2009 legislative session earlier this month, the existence of five state agencies – including TxDOT – was left in limbo since the legislators failed to agree on sunset review bills to extend their lives beyond their expiration dates later this year. The bill extending the PPP programme was included in the transportation sunset review.

TxDOT’s sunset date is the end of August. The next regular legislative session is in 2011.

The governor also called special attention to legislation allowing the department to issue general obligation bonds – debt securities backed by taxpayer dollars – for highway improvement projects. Voters have already approved the issuance of the bonds. The creation of a Texas Transportation Revolving Fund to provide financial assistance for transportation projects will also be considered during the special session.

But the special session could also bring back other transportation-related legislation that some say could stifle investment in the state’s transportation infrastructure. The sunset review legislation also included the text of a bill that would have limited the use of CDAs by granting public entities the right of first refusal for developing toll road projects before they are tendered to the private sector. It also requires private sector operators to set a purchase price up front for their concessions if the state ever needs to terminate the contract early, as opposed to paying fair market value, and limits the duration of non-compete clauses to 30 years.

Opponents of the legislation – which could get resurrected during debate on the TxDOT sunset review bill – say it would disincentivise the private sector from investing in Texas.

The special session starts at 10am this Wednesday, 1 July.