Texas senate passes controversial bill to reform toll road contracts

A bill to grant public entities rights of first refusal for toll road development projects and mandate up-front re-purchase prices for concessions passed the senate by a 29-vote margin. The bill's sponsor, Robert Nichols, also backed a two-year moratorium on PPPs in 2007.

The Texas Senate voted 30 to 1 Monday to pass a controversial bill that would reform the way private toll road contracts are issued in the US’ second most populous state.

Senate Bill 17 gives local tolling authorities and the Texas Department of Transportation the option to develop toll road projects before the private sector is invited to do so. 

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.

The bill has some observers nervous that it will scare off the private sector from infrastructure investment in Texas if it is signed into law.

“At the very same time that government is failing badly at delivering the infrastructure we need to meet the demands of the 21st century world, Texas legislators are trying to concentrate the eggs in government's basket,” Leonard Gilroy, director of government reform at The Reason Foundation, a free-market think-tank, wrote on his blog in response to the bill’s passage out of committee.

State Senator Robert Nichols, who sponsored the bill, disagrees.

“Private financing should be an option to build new roads, but only when public entites cannot meet that need. State and local entities will build and operate a road in the public's interest, not the shareholder's,” Nichols said in a statement.

The bill was referred out of the Texas Senate’ s Committee on Transportation and Homeland Security two weeks ago by a vote of 8 to 1. It passed the senate with no major amendments.

A companion bill – House Bill 2929 – is already under consideration in the Texas House, but it is expected that the Representative sponsoring the bill – Republican Wayne Smith of Baytown – will scrap that bill and push for the senate version instead.

“We went ahead with Smith to make sure that if something happened with Senate Bill 17, we would have another vehicle to move it along,” a spokesperson for Nichols told InfrastructureInvestor.

The bill is contingent on another bill being enacted into law – Senate Bill 404. That bill, which also passed the senate today, will extend the state’s authority to enter into comprehensive development agreements, a form of public-private partnership authorized in 2003 but cut short by a moratorium in 2007.

Nichols sponsored the bill that enacted the moratorium.