NTTA wages protracted fight with TxDOT to get TX161 below market price

North Texas Tollway Authority (NTTA) continues a protracted effort to gain a toll concession on State Highway 161 (TX161) for about $500m less than investors are willing to advance. NTTA says the project is worth $1200m or about $300m more than the $900m that the 18km (11 mile) highway will cost to build. TxDOT thinks a concessionaire would put up about $1700m for the project.

If the present value of toll surpluses is worth $1700m then at a construction cost of $900m, the concessionaire would pay $800m in an upfront concession fee that could be used to support other roads in the region. Jose Lopez of Cintra has said his company has valued TX161 at $1700m and would pay a fee of $800m as compared to NTTA's proposed $300m payment.

TxDOT has so far stood firm against "leaving money on the table" with NTTA's offer. However despite the much smaller offering the Regional Transportation Council - representing local government officials - recently voted by a slim majority to accept the much smaller offer by the regional government toller.

State DOT officials also say NTTA's offer is a weak one because it is conditional on favorable traffic and revenue studies, engineering cost estimates and financial planning which will take many months.

NTTA also wants the concession to be perpetuity like the old bridge charters, whereas a private sector concession would be for 50 years, after which the road would revert to the state.

Under the SB792 law passed last summer by the state legislature local government toll authorities have a right of first refusal to do toll roads. But they are required to agree with TxDOT on a market valuation of the project so its future potential can generate an upfront concession fee in a simulation of private sector concessioning.

The market valuation process with NTTA has been one long protracted conflict that has missed deadlines, and delayed a start on construction.

The 18km (11 mile) north-south highway would serve an area in the south center of the Dallas Fort Worth region/ There has been a sense of urgency about getting the road built because the Dallas Cowboys football team is moving to a new stadium that needs the 8 lane highway to handle traffic.

NTTA has called an emergency meeting of the board of directors on Sunday afternoon on TX161.

COMMENT: SB792 shows the shortcomings of a political compromise. The law in this matter was a noble attempt to devolve some power to local wishes while retaining a check on special interests. There was a need to respect regional government while preventing a reversion to the bad old days of the regional toll authority being granted an exploitative monopoly on lucrative local toll franchises in perpetuity. If the local toll authorities were to get franchises they should pay for the privilege and a "market valuation" process would determine the amount of the concession "fee" they would pay for the concession - the present value of toll surpluses over construction cost.

It was a fair concept, but it isn't working. Thousands of manhours of senior people have been spent in protracted negotiations, but the process seems skewed toward producing deadlock. NTTA is determined to exploit the new law to get a toll franchise at well below market value.

All TxDOT can do is say no. Under the existing law without agreement on a valuation it apparently can't take over the proposed project and toll finance it itself, or conduct a simple competitive concession procurement without local acquiescence. In case of deadlock over valuation the road can't be toll financed at all. It can only be built with taxes, and since there aren't any taxes that means a needed road that motorists would gladly pay tolls to use doesn't get built.

The market valuation process was supposed to be a facsimile of the process of getting market value from the local toll authority. The SB792 "market valuation" fiasco over TX161 shows there is no substitute for real competition between real bidders - private and public - to establish market value and prevent it being co-opted by monopoly interests like NTTA.

NTTA is a rather efficient and well managed toll authority as state toll authorities go. But it has a monopoly mentality. It thinks it has some god-given right to valuable local toll franchises at no charge or well below their market value, and unfortunately state law now gives it the power to obstruct the process unless it gets its way.

Texas law needs to be rewritten to provide for open competition between self-financed public and private entities for toll concessions.

TOLLROADSnews 2008-04-19 COMMENT ADDED 14:30