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Austin toll system requires massive taxpayer bailout Print E-mail
Written by Terri Hall   
Tuesday, 02 August 2011
Link to article here.

The Austin toll roads are deep in a debt spiral and require a massive taxpayer bailout -- 70% MORE than the already egregious subsidies they planned on -- and what's Transportation Commissioner Ted Houghton's answer? Sell the LOSER toll roads to private, even foreign, toll operators like Cintra. What private company in their right minds would want a toll system that is already losing money and not covering its debts? What can a private company do to "market" the road, as Houghton suggests, that would bring tens of thousands more cars per day to volunteer to extra taxes to get to work (work that's already scarce, for pay that has been in decline, while gas prices continue to rise)? NOTHING, there's never going to be enough people who have the discretionary funds to pony-up the bucks to keep these toll roads solvent.

Plus, there's not a whole lot that's proprietary about operating a toll road. Electronic tolling was supposed to be a panacea, only to create a billing nightmare (like spending 48 cents to mail a bill for a 25 cent toll) and toll collection nightmare. Lowering the toll rates may attract more traffic, but likely nowhere near enough to get these roads in the black. Plus, that's not what happens with road privatization. The private toll operators charge significantly higher toll rates like 75 cents per mile versus 10-12 cents per mile on public toll roads (because they have to make a profit, when government does not) and they steadily increase toll rates. These are government-sanctioned monopolies, not free market.

None of these projects are solvent without massive taxpayer subsidies and non-compete clauses that penalize or prohibit expansion of free roads surrounding the tollways (to guarantee congestion on free roads and manipulate more traffic onto the toll roads). Selling our public roads to private corporations is code for public money for private profits.The Central Texas Turnpike System used $500 million in public money to prop-up the roads on the front end, now we're shoveling $100 million more into it on the back end as we sink further into a  sea of red ink. Yet TxDOT still paints a rosy picture of the future promising yet more taxpayer-funded projects (the controversial $250 million subsidy to prop-up the Formula One racetrack) to benefit developers and special interests, but that serve no necessary public use. This push for tolling is a massive FAILURE, and it's time to STOP this fiscally reckless agenda and return our state highways to a freely accessible public road system. Read more about the failure of road privatization here.

Central Texas toll roads need more state subsidies than expected

By Ben Wear


Monday, July 18, 2011

Tolls and other revenue have fallen more than $100 million short of covering debt and operating costs of the state's three-road Central Texas Turnpike System since the highways opened about four years ago. Texas Department of Transportation subsidies almost 70 percent more than originally predicted have made up the difference.

Those subsidies, covered primarily by state gasoline taxes that otherwise would be available for other road spending, should average about $38 million a year over the next decade and total about $750 million by 2042 , according to TxDOT documents. The system's first profitable year is not estimated to occur until 2030 , with some years in the red even after that because of major road rehabilitation expenses.

Toll revenue from the three roads — Texas 130, Loop 1 and Texas 45 North — after exceeding expectations in the system's initial years, has fallen about 6 percent below projections since September, a trend that could make those future subsidies even higher. TxDOT officials, in explaining the shortfall, point to the recession and its dampening effects on both travel and development near the tollways.

Revenue for the system comes mainly from tolls, but fines and investment income on reserves also provide some revenue.

The Texas Transportation Commission has not raised the system's initial toll rates, which, at about 12 cents a mile, are less than a third of what the Central Texas Regional Mobility Authority charges drivers on the 183-A tollway in Cedar Park .

At least one member of the Texas Transportation Commission, which governs TxDOT, said it is time for the agency to consider ceasing management of toll roads, instead leasing out even existing state toll roads to the private sector.

"Any dollar that we support that system with is a dollar that is taken out of the state of Texas to build and support other roads," said Commissioner Ted Houghton of El Paso, who has served on the commission since 2003 and has long advocated such agreements with toll road companies. "We need to get out of that business. Find someone who knows how to market those roads, to operate them and collect the tolls. We do it as a sort of side business."

Aside from the Austin roads, TxDOT runs toll roads in Tyler and Laredo. Local toll authorities are in charge of about a dozen other Texas toll roads.

TxDOT staff officials downplayed any gloomy implications of the recent revenue and spending numbers, arguing that ongoing efforts to cut operating and maintenance costs as well as prospects for greater traffic on the 66-mile system will steadily improve the situation.

"Moving forward, I think that the economy is picking up, and I see development such as the Formula One track and ancillary development around the track helping that," said Mark Tomlinson , TxDOT's turnpike director.

The F1 track, expected to open next June, will be about a mile east of where Texas 130 crosses FM 812 southeast of Austin. Several large residential and mixed-use projects are also planned for the Texas 130 corridor, but they won't be complete for 10 to 20 years.

Beyond that, Tomlinson said, the 2012 opening of the southern 40 miles of Texas 130, connecting the Austin area to Interstate 10 east of San Antonio, is likely to boost traffic and revenue. A private consortium headed by a Spanish toll road company is footing the $1.2 billion bill to construct that extension under a long-term lease with TxDOT.

"The picture's going to be pretty good for the future," Tomlinson said.

The turnpike system was TxDOT's first foray in decades into the pay-to-drive world. The agency in 2002 borrowed $2.2 billion on the bond market and, with an additional $500 million of its tax funds and a like amount of local tax money, built the tollways in Austin's northern and eastern suburbs.

The first segments of the system opened around Halloween in 2006 , inaugurating the toll road era in Central Texas, and the existing segment of Texas 130, which runs from north of Georgetown to Mustang Ridge, was completed in April 2008 . Texas 45 Southeast, a fourth tollway that links Texas 130 to Interstate 35 south of Austin, opened in April 2009 .

Texas 45 Southeast was built using tax money alone, with no borrowing, and is not technically part of the tollway system.

Toll revenue from the system exceeded 2002 projections for the first three years, boosted mostly by robust traffic on Texas 45 North, which runs 13.3 miles from Northwest Austin through Round Rock to Pflugerville. But Texas 130, which skirts the metro area's east side for 49 miles , has been below projections for about half of its short life. And the 3.5-mile Loop 1 tollway that sprouts from the north end of MoPac Boulevard, after a stronger than expected start, has seen lower than predicted revenue every month since September 2008 .

Overall system toll revenue slipped below the projected $6 million a month starting in September and has mostly remained under its expected level in the months since then. Revenue for the first six months of the 2010-11 fiscal year was $32.9 million , about 4 percent higher than the comparable period the year before but 9 percent below projections.

Expenses, meanwhile, have been almost double — about $50 million a year — projections outlined in the 2002 bond prospectus. That includes about $30 million a year to collect the tolls, process billings and pursue collections from late payers.

TxDOT has been working to lower those costs, Tomlinson said. The agency, he said, has shortened hours at the customer service center alongside Loop 1, installed equipment that scans photographs of license plates used to bill customers who don't pay with cash or have an electronic toll tag, reduced mailing costs and renegotiated its contract with a collections company.

And the agency has taken bids for a new contract for toll operations to be awarded this summer. Review of those bids, Tomlinson said, indicates that lower costs are on the way there as well.

"All toll operations have a ramp-up period," Tomlinson said. "And they'll all tell you that their costs are a lot higher in the early years."

The largest ongoing cost of the system, and the most predictable, is debt payments. TxDOT last year made $63.1 million in such payments, about $44.6 million to bond holders and $18.5 million to the federal government to service $900 million borrowed under a transportation loan program. The payments match projections in the original bond prospectus.

Those annual payments will grow through the years, TxDOT documents show, reaching a daunting $489 million in 2042. By that year, when the $2.2 billion in debt is scheduled to be paid off, TxDOT (using tolls by Central Texas drivers) will have made about $7.5 billion in payments.

Revenue likewise is predicted to balloon through the years, thanks to increased traffic and toll rates scheduled to rise every 10 years or so. The first toll increase is scheduled to occur in 2016 , officials said.

Bond documents show projected revenue of more than $500 million a year about three decades from now. Drivers, who through May had paid $224 million in tolls since the roads opened, will have paid almost $10 billion by 2042, bond documents show.

The flattening revenue in recent months shouldn't be seen as a sign that those estimates are wildly off, Tomlinson said, or that tax subsidies will be significantly larger than predicted.

"I don't think anyone would tell you Central Texas is going to stop growing," he said.

Last Updated ( Tuesday, 02 August 2011 )
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