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Wear: Free roads mean late

Category: Public Private Partnerships

Link to article here.

Wear: For roads, free can also mean late
By Ben Wear
Austin American Statesman
November 18, 2012

The late evening sight has become a familiar one for Southwest Austin residents over the past couple of years: blinking red and blue lights on police cars at the U.S. 290/MoPac Boulevard interchange, blocking off road sections because of work on the new flyover bridges overhead.
The flyover project, if you go back to the original time estimates by the Texas Department of Transportation, was supposed to be done by December 2011.

Now, TxDOT officials tell me, the seemingly endless $8.4 million project should be done early next month when the remaining incomplete flyover, the one connecting westbound U.S. 290 to southbound MoPac (Loop 1) will finally open.

That follows earlier predictions that it would be done last spring, then in September, October and both early and late November after a contractor bankruptcy and the rebuilding of a botched concrete pillar.

The construction, initially estimated to take 14 months, now is expected to last 26 months, an 86 percent overage. It offers an interesting, if also frustrating, lesson in the difference between toll projects and nontolled work.

Consider this: The $238 million construction of the 183-A tollway, which included building 11.6 miles of completely new four- and six-lane roads along with flyover connections to the Texas 45 North tollway, took less time than this project. So did the five-mile, $105 million extension of 183-A a few years later.

Both of those projects, with steep financial disincentives to the contractors for finishing behind schedule, opened to traffic precisely when they were projected to be complete.

The 41-mile extension of the Texas 130 tollway, which opened Oct. 24 to great hoopla because of its highest-in-the-nation 85-mph speed limit, debuted more than two weeks early. That project, which at $1.3 billion cost 155 times as much as these two humble U.S. 290/MoPac flyovers, took about 3 1/2 years to build.

Go back a few years, and work ended ahead of schedule on several sections of the initial 49 miles of the Texas 130 tollway, which was built for TxDOT.

The agency and its contractors, in other words, can really move their tails when they have reason to do so. And the toll revenue waiting at the end of construction has been a good incentive — as have looming debt payments.

Toll roads are mostly financed by selling bonds, although there is typically some tax money used as equity, like a down payment on a home. And the tab to begin paying back those bonds usually starts before construction is complete.

So TxDOT, or in the case of 183-A the Central Texas Regional Mobility Authority, typically borrows more than it needs for construction and uses that extra money to make the first year or two of bond debt payments. After that, it really needs the toll revenue to start rolling in. So the construction contracts have high-dollar penalties — $35,000 a day in the case of that 183-A extension contract and an astonishing $90,000 a day for the U.S. 290 East tollway now under construction — for finishing late. And the agreements also typically have large incentives — $45,000 a day on U.S. 290 East — for opening a road before the target date.

The flyover contract has penalties as well, but only about $1,000 a day. That tab has been accumulating since June 8 — the contract due date was months later than the publicly announced completion estimate — meaning that in the end TxDOT will probably pay about $150,000 less than it would have if the project had ended on time.

That’s real money. But not so large that a construction company — or in this case a surety insurance company that hired a second contractor after the first one went bankrupt and walked off the flyover job in July 2011 — would throw tremendous resources at the job to finish sooner.

So this is the math: We can have toll roads, which toll drivers in perpetuity and cost more upfront — since contractors, looking at the financial risk involved with those penalties, tend to submit higher construction bids — but that are completed quickly. Or we can have roads with no tolls that are built much more slowly and at a lower cost with tax dollars.

On the one hand, that trade-off has cost commuters an extra year of going through stoplights at U.S. 290 and MoPac. But on the other hand, they’ll never pay a toll to drive over those bridges when they’re done. That might be good math.