Topping rights & devolution put fed-$s in jeopardy - feds again on HB1892
Posted Fri, 2007-05-11 11:03
Federal Highway Administration (FHWA) chief counsel James D Ray has written again to TxDOT detailing how the toll concession bill HB1892 contains provisions that put federal support for Texas highways in jeopardy. The procurement process for a SH121 concession detailed in HB1892 providing NTTA with topping rights "seems to directly contradict" the requirements of US law requiring fair and open competition. In addition the bill's devolution provisions enhancing the powers of local authorities could reduce so much TxDOT's authority it would be unable to implement the federal-aid highway program, possibly triggering a cut-off of all federal support for highways in Texas.
Ray notes that his comments only apply to portions of the Texas highway program for which federal grants or loans are sought. He says that the State of Texas "must tell us how it will continue to comply with its responsibilities under the state-federal relationship."
The topping rights provision (Section 5) of the Texas bill allows the NTTA to top a concession proposal already competed and selected under the competitive procurement process. HB1892 Sec 5 states that NTTA can "submit a commitment to the (RTC) which is determined to be equal to or greater than any other commitment submitted prior..." and if its "financial value is determined to be equal or greater... then the (Texas Transportation) Commission shall allow (NTTA) to develop the project."
The bill says doesn't spell out who does the determining of the value of the NTTA bid versus the already selected bid, or a process by which that determination is to be made.
TxDOT and FHWA disagree in interpreting TTC's discretionary power
TxDOT in a letter to FHWA say they think the TTC has the discretion to accept or reject a topping bid by the NTTA.
FHWA counsel James Ray disagrees: "Our reading of the proposed law indicates the (TTC) Commission will not have that latitude, but we (are) eager to hear TxDOT's interpretation." (Ray's grammar cleaned up) Ray says that subsection (a) "directs the Commission to award the project to NTTA" if it is determined to be of greater value than that obtained in the competitive procurement process.
(Maybe TxDOT thinks the bill allows value determination can be made by the TTC giving it discretion, whereas FHWA sees the MPO as empowered to determine the value of the NTTA offer. TOLLROADSnews)
Forget the TIFIA loan and any future fed-$s
Ray then asserts: "If the Commission were to comply with this provision as written and as read by the FHWA, then it would clearly violate the dictates of federal law regarding the competitive procurement process. See 23 USC par 112. A fair and open competition is a fundamental requirement applicable to the obligation of all federal funds by FHWA. The competition requirement applies equally to the competitive procurement of public-private partnerships. See 23 CFR par 119(a). If the project were awarded to NTTA in accordance with the legislative directive in HB1892 and as your letter sets out as Option #1, FHWA would be legally compelled to withdraw all federal funding from the SH121 project. This specifically includes the TIFIA loan made available for this project as well as other potential federal funding."
The federal highways lawman says TxDOT is free to cancel the current procurement in which Cintra was selected but not yet finalized for a concession but that it "may not directly award the project" to NTTA based upon the terms of its concession style bid to top Cintra. It may cancel and allow NTTA to go forward with a traditional public toll road financing.
"(T)here must be a clear demarcation between the NTTA (concession) submission in the SH121 procurement process and the decision to award NTTA this tollway project, and the future structure of and project specifics must reflect that this new procurement is indeed a new and different procurement."
Public authorities may not bid under federal regs (Joe Brimmeier take note)
Ray's letter says no public entity is allowed to bid against a private firm for a highway project. He cites 23 CFR par 635.112(c): "No public agency shall be permitted to bid in competition or enter into subcontracts with private contractors." Also 23 CFR par 635.103.
NTTA may not compete for concessions on any SH121, SH161 or any other procurement.
Ray concedes that the Special Experimental Pprocess (SEP) SEP-15 could allow a NTTA bid but FHWA would have to consider the details of the bid and consider whether it was suitable before supporting it on this basis.
Ray says the handling of SH121 will only affect federal action on that project. Acceptance of NTTA's bid will result in the withdrawal of the TIFIA offer since it will constitute a breach of fair and open competition, and regulations against public entity bids.
However his letter proceeds to say that other aspects of HB1892 raise concerns about how TxDOT can provide legally required assurances of control over projects through which federal funds flow.
23 USC par 302 requires that a state receiving federal funds must have a DOT with power to control roads getting federal aid dollars. This has been federal law since the 1920s and "is fundamental" to the federal-aid highway program, Ray writes. State DOTs carry the legal responsibility to ensure that all federal-aid projects comply with federal requirements. The recent SAFETEA-LU (Amendment to Sec 106) adds to requirements for accountability and oversight by the state DOT.
The state "may not delegate the ultimate responsibility" for ensuring federal requirements are met.
Ray says the FHWA review of HB1892 suggests local entities will have primary responsibility to plan, construct, operate and maintain transport projects, adding: "This could easily be interpreted to remove (TxDOT) authority..." The same is implied in regional mobility (toll) authorities having "primary responsibility" as stated in HB1892Â section 10 228.012 for toll projects within their boundaries" and the authority in sections 12, 18 and 28 to enter into toll concessions. The provisions of the bill allowing counties to do projects "without state approval, supervision or regulation" and that local entities shall have "all powers of the department related to Texas Transportation Corridors" is also cited as problematic if federal funds and permits are required.
Lege's addons won't hack it
The FHWA letter notes add-ons to the bill requiring compliance with federal law and regulations, but expresses doubt about the effectiveness of this under the proposed strong devolution of powers.
Implementation would be difficult. Failure by a single local entity to comply "could expose the entire state program to sanctions," says the letter.
HB1892's grant of authority to local entities to use state right of way without approval (6 amending 284.004) is in breach of federal law and regulations because any change in access is subject to federal approval and cannot be done by a state unilaterally.
"As part of that approval process TxDOT must opine on the wisdom of (FHWA) approving that request," the letter says.
Unless a waiver is grated by the federal government the federal share of net revenues from sale or lease must be dedicated to Title 23 (transport) purposes. Grants of right of way at no charge as envisaged in HB1892 that result in less money for Title 23 purposes would be illegal under federal law, the letter says.
It concludes by asking TxDOT and the state's legal staff to examine HB1892 and report on how TxDOT could meet its obligations under federal law.
Text of 6-page Ray letter to TxDOT dated May 10
TOLLROADSnews 2007-05-11
Federal Highway Administration (FHWA) chief counsel James D Ray has written again to TxDOT detailing how the toll concession bill HB1892 contains provisions that put federal support for Texas highways in jeopardy. The procurement process for a SH121 concession detailed in HB1892 providing NTTA with topping rights "seems to directly contradict" the requirements of US law requiring fair and open competition. In addition the bill's devolution provisions enhancing the powers of local authorities could reduce so much TxDOT's authority it would be unable to implement the federal-aid highway program, possibly triggering a cut-off of all federal support for highways in Texas.Ray notes that his comments only apply to portions of the Texas highway program for which federal grants or loans are sought. He says that the State of Texas "must tell us how it will continue to comply with its responsibilities under the state-federal relationship."
The topping rights provision (Section 5) of the Texas bill allows the NTTA to top a concession proposal already competed and selected under the competitive procurement process. HB1892 Sec 5 states that NTTA can "submit a commitment to the (RTC) which is determined to be equal to or greater than any other commitment submitted prior..." and if its "financial value is determined to be equal or greater... then the (Texas Transportation) Commission shall allow (NTTA) to develop the project."
The bill says doesn't spell out who does the determining of the value of the NTTA bid versus the already selected bid, or a process by which that determination is to be made.
TxDOT and FHWA disagree in interpreting TTC's discretionary power
TxDOT in a letter to FHWA say they think the TTC has the discretion to accept or reject a topping bid by the NTTA.
FHWA counsel James Ray disagrees: "Our reading of the proposed law indicates the (TTC) Commission will not have that latitude, but we (are) eager to hear TxDOT's interpretation." (Ray's grammar cleaned up) Ray says that subsection (a) "directs the Commission to award the project to NTTA" if it is determined to be of greater value than that obtained in the competitive procurement process.(Maybe TxDOT thinks the bill allows value determination can be made by the TTC giving it discretion, whereas FHWA sees the MPO as empowered to determine the value of the NTTA offer. TOLLROADSnews)
Forget the TIFIA loan and any future fed-$s
Ray then asserts: "If the Commission were to comply with this provision as written and as read by the FHWA, then it would clearly violate the dictates of federal law regarding the competitive procurement process. See 23 USC par 112. A fair and open competition is a fundamental requirement applicable to the obligation of all federal funds by FHWA. The competition requirement applies equally to the competitive procurement of public-private partnerships. See 23 CFR par 119(a). If the project were awarded to NTTA in accordance with the legislative directive in HB1892 and as your letter sets out as Option #1, FHWA would be legally compelled to withdraw all federal funding from the SH121 project. This specifically includes the TIFIA loan made available for this project as well as other potential federal funding."
The federal highways lawman says TxDOT is free to cancel the current procurement in which Cintra was selected but not yet finalized for a concession but that it "may not directly award the project" to NTTA based upon the terms of its concession style bid to top Cintra. It may cancel and allow NTTA to go forward with a traditional public toll road financing."(T)here must be a clear demarcation between the NTTA (concession) submission in the SH121 procurement process and the decision to award NTTA this tollway project, and the future structure of and project specifics must reflect that this new procurement is indeed a new and different procurement."
Public authorities may not bid under federal regs (Joe Brimmeier take note)
Ray's letter says no public entity is allowed to bid against a private firm for a highway project. He cites 23 CFR par 635.112(c): "No public agency shall be permitted to bid in competition or enter into subcontracts with private contractors." Also 23 CFR par 635.103.
NTTA may not compete for concessions on any SH121, SH161 or any other procurement.
Ray concedes that the Special Experimental Pprocess (SEP) SEP-15 could allow a NTTA bid but FHWA would have to consider the details of the bid and consider whether it was suitable before supporting it on this basis.
Ray says the handling of SH121 will only affect federal action on that project. Acceptance of NTTA's bid will result in the withdrawal of the TIFIA offer since it will constitute a breach of fair and open competition, and regulations against public entity bids.
However his letter proceeds to say that other aspects of HB1892 raise concerns about how TxDOT can provide legally required assurances of control over projects through which federal funds flow.
23 USC par 302 requires that a state receiving federal funds must have a DOT with power to control roads getting federal aid dollars. This has been federal law since the 1920s and "is fundamental" to the federal-aid highway program, Ray writes. State DOTs carry the legal responsibility to ensure that all federal-aid projects comply with federal requirements. The recent SAFETEA-LU (Amendment to Sec 106) adds to requirements for accountability and oversight by the state DOT.
The state "may not delegate the ultimate responsibility" for ensuring federal requirements are met.
Ray says the FHWA review of HB1892 suggests local entities will have primary responsibility to plan, construct, operate and maintain transport projects, adding: "This could easily be interpreted to remove (TxDOT) authority..." The same is implied in regional mobility (toll) authorities having "primary responsibility" as stated in HB1892Â section 10 228.012 for toll projects within their boundaries" and the authority in sections 12, 18 and 28 to enter into toll concessions. The provisions of the bill allowing counties to do projects "without state approval, supervision or regulation" and that local entities shall have "all powers of the department related to Texas Transportation Corridors" is also cited as problematic if federal funds and permits are required.
Lege's addons won't hack it
The FHWA letter notes add-ons to the bill requiring compliance with federal law and regulations, but expresses doubt about the effectiveness of this under the proposed strong devolution of powers.
Implementation would be difficult. Failure by a single local entity to comply "could expose the entire state program to sanctions," says the letter.
HB1892's grant of authority to local entities to use state right of way without approval (6 amending 284.004) is in breach of federal law and regulations because any change in access is subject to federal approval and cannot be done by a state unilaterally.
"As part of that approval process TxDOT must opine on the wisdom of (FHWA) approving that request," the letter says.
Unless a waiver is grated by the federal government the federal share of net revenues from sale or lease must be dedicated to Title 23 (transport) purposes. Grants of right of way at no charge as envisaged in HB1892 that result in less money for Title 23 purposes would be illegal under federal law, the letter says.
It concludes by asking TxDOT and the state's legal staff to examine HB1892 and report on how TxDOT could meet its obligations under federal law.
Text of 6-page Ray letter to TxDOT dated May 10
TOLLROADSnews 2007-05-11
| Attachment | Size |
|---|---|
| US-TxDOT1892.pdf | 1.59 MB |