Texas legislature fails to fund roads despite surplus and 26% spending increase

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It’s a wrap: Legislature drops boom on taxpayers with more tolls, fees
By Terri Hall
May 30, 2013

Despite high hopes that lawmakers would address the chronic road funding shortfall at the outset of the 83rd session of the Texas legislature, Texas taxpayers only saw $534 million of $1.2 billion in diversions of gas tax returned to roads (for the next two years) with a reliance on more toll roads to fill the remaining $4 billion annual funding gap. That’s only one-eighth of the money needed.

While Texas Governor Rick Perry, Lt. Governor David Dewhurst, and Speaker of the Texas House Joe Straus promised to end gas tax diversions and make transportation funding a priority, the Texas legislature went home without addressing one of the core priorities of state government - funding the Texas state highway system - in spite of an $8 billion surplus heading into the session. Indeed, the legislature spent it all and increased spending 26% for the biennium spurring grassroots watchdog groups like tea parties to ask Perry to veto the budget and supplemental spending bill, HB 1025.

Katy bar the door
The first indicator road funding was in trouble was when the base proposed budget didn’t allocate any new money to roads. Then, SB 1110 (authored by Sen. Robert Nichols), a bill that heists property tax appraisal increases for transportation projects expands the use of Transportation Reinvestment Zones (TRZ) from strictly freeways to toll roads, rail, transit and hike and bike trails, passed easily early in the session indicating that a tax grab at the local level was likely going to be the preferred method of funding roads. The bill also lifts the ban on using sales tax in the zone for projects.

Later, two similar bills to create Energy TRZs in areas hit hard with road damage due to oil and gas exploration also passed, HB 2300 (authored by Rep. Jim Keffer) which authorizes road utility districts run by unelected boards to enter into bond indebtedness without a public vote and SB 1747 (authored by Sen. Carlos Uresti). The budget, SB 1, also allocated $450 million to aid the shale oil areas. A third bill to expand TRZs to ports also passed in the final week of the session.

Before ending a drop of any gas tax diversions or passing any other road funding bills, lawmakers passed the most controversial method of road finance - public private partnerships (P3s) known as Comprehensive Development Agreements (CDAs) in Texas. SB 1730 (authored by Sen. Robert Nichols) authorizes nearly two dozen projects to be sold-off to private toll operators in sweetheart deals for a half century. P3s erode state sovereignty over public infrastructure, allow private corporations the power to charge punitively high toll taxes to use public roads, contain non-compete clauses that penalize or prohibit expansion of free routes, taxpayer subsidies and other taxpayer guarantees ensure the private developer never loses money on the deal.

As the primary financing mechanism for the radioactive Trans Texas Corridor (TTC) mega-land grab, Texans pressured the legislature to put a moratorium on P3s in 2007 and the blanket authority to enter into P3s expired in 2009. The TTC was repealed from state statute in 2011. However, a short list of projects were grandfathered in since 2007 and the list has now swelled to 23 projects today - 20 roads, 3 bridges (all 3 involve international border crossings or ports of entry, putting much of the control over Texas trade in the hands of a few private developers).

Once again, the Texas legislature chose to push the obligation to fund state highways down to the local toll authorities and outsource the taxing to private entities. Perhaps worse was HB 3650 authored by Rep. Linda Harper-Brown and pushed by Kiewit (a U.S.-Canadian owned company awarded the DFW Connector project) that sought to repay the private entities with taxpayer money through any revenue available to the State Highway Fund, thus putting ALL Texas taxpayers on the hook for the private toll roads, not the toll users. This form of P3 is known as the ‘availability payment’ model where no risk is transferred to the private sector and taxpayers retain 100% of the risk and burden for the financing of the project, while the private developers walk away with all the profit. The clock ran out for the bill on the final day to pass House bills.

But the emphasis on tolling didn’t stop with P3s. The legislature passed HB 2585 (authored by Rep. Linda Harper-Brown) to give toll authorities access to state money to pay for the right-of-way (ROW) for its toll projects. Since a toll is supposed to be a user fee, the Texas Department of Transportation (TxDOT) required local toll entities to pay for the ROW which was then included in the cost of the toll. But toll authorities, facing toll projects that aren’t financially toll viable since all the toll viable projects have already been built, decided to pursue taxpayer subsidies for their projects. There was a big battle over who should keep paying for the ROW in 2007, but there was nary a peep in 2013.

One key ‘user fee’ model upheld
Given the reality of a lack of toll viable projects and the massive debt burden it faces, the North Texas Tollway Authority (NTTA) also sought sweeping new powers to dump its successful ‘user fee’ model of toll roads financed strictly with revenue bonds (and no taxpayer money), pursuing heaps of taxpayer money to subsidize its loser projects from property taxes to new taxing districts. Thankfully, Dallas State Representative Yvonne Davis made sure SB 1018, authored by Sen. John Carona which passed the senate, died in the House Transportation Committee.

However, the NTTA, along with other toll authorities and TxDOT got its way on the toll collection bill, SB 1792 authored by Senators Kirk Watson and Ken Paxton. Toll violators can now have their car registration blocked and their car impounded by toll entities. Toll agencies wanted their own courts to try such cases, but citizens managed to change the bill to give the more impartial Justice of the Peace Courts jurisdiction over such matters.

With the passage of SB 1489 (authored by Sen. Kirk Watson), Regional Mobility Authorities (toll authorities or RMAs) will also now have the ability to jointly administer projects outside its jurisdiction if the local government entity in that area approves. So this expands the authority of RMAs into regions that Texans may not wish to have toll roads if their county commissioners approve it. It is not restricted to a county adjoining an RMA. An RMA can now build and operate any toll projects for any county in the State of Texas and even the Mexican States.

Highway robbery: freeways converted to tollways
Showing its fondness for tolling and just how far its willing to go to thumb their noses at both the Democratic and Republican Party platforms, the legislature passed SB 1029 authored by Sen. Donna Campbell that gives TxDOT a blank check to convert free lanes already built and paid for into toll lanes -- a DOUBLE tax. The original filed bill would have removed all the loopholes in statute, but it was gutted in committee and replaced with the final loophole-laden bill that keeps five loopholes -- the first one giving TxDOT virtual unlimited authority to convert free lanes to toll lanes if it simply designates the project as ‘toll’ prior to going to contract. One of the loopholes taken out removes the accountability to the public by nixing the public hearing, public vote, and approval by the county commissioners. So the bill actually makes the current statute worse, not better.

Lawmakers are already touting passage of SB 1029 as a victory for taxpayers that eliminates the ability to convert free lanes into toll lanes. But such deception isn’t new since the House sponsor, Transportation Committee Chair Larry Phillips, lied to his colleagues when it came to a floor vote saying the bill eliminated the remaining loophole that allows free roads to be converted to toll roads, when, in fact, it keeps 5 loopholes.

Politicians aren’t above lying to get a bad bill passed -- it’s as old as politics itself. But considering it’s a one page bill, lawmakers are without excuse. A quick read of the bill clearly exposes the exceptions.

Some to get free ride, others fee hikes
Lawmakers did expand the program to allow certain veterans to ride tollways free in HB 1123 (authored by Rep. Abel Herrero). But others will get hit with a vehicle registration fee. HB 3126 authored by Rep. Eddie Lucio III will raise the fee $20 in Cameron County if voters approve. HB 1198 (authored by Rep. Richard Raymond) will raise the fee $10 upon voter approval in Cameron, El Paso, Hidalgo, and Webb counties -- so Cameron County could get slammed with a double whammy since two separate bills to raise its vehicle registration fees passed.

However, HB 1573 (authored by Rep. Ruth McClendon and Rep. Roland Guiterrez) will increase the vehicle registration fee in Bexar County $10 WITHOUT the requirement of coming to the voters. Indeed the fee hike is required to go to the Regional Mobility Authority (the toll authority), that will undoubtedly use it to subsidize area toll projects that aren’t toll viable (like US 281 and Loop 1604). So San Antonians have the worst fee hike bill to come out of the session. The Governor said he wouldn’t support ANY fee hikes, so we’ll see if vetoes these fee hike bills.

Only the good die young
A slate of pro-taxpayer, pro-property rights bills died. HB 3363 (authored by Rep. Lois Kolkhorst) to take toll off roads when they’re paid for and HB 20 (also authored by Kolkhorst) to allow landowners to repurchase property taken by eminent domain if not used for the public use it was taken for within 10 years, HB 2870 (authored by Giovanni Capriglione) to repeal the statute that keeps toll viability studies SECRET from the public, HB 80 (authored by Rep. David Simpson) to prohibit invasive patdowns at airports, and a series of bills to make transportation boards elected or subject to sunset review or to broadcast their meetings over the internet didn’t even make it out of committee. SB 507 (authored by Senators Kirk Watson and Kevin Eltife) to put more public protections in place for P3s on government facilities passed the Senate but died in the House.

SB 1253 (authored by Sen. Judith Zaffirini)and HB 1054/SB 1029 (authored by Rep. George Lavender & Sen. Donna Campbell) that would have prevented free highway main lanes from being converted to toll lanes or from being downgraded to slower roads with lower speed limits or to frontage roads with added traffic signals and slower speeds got gutted in committee and eventually died without protecting Texans. But SB 1029 passed despite the language defeating the purpose of the original bill and the opposition to the loopholes.

Two competing bills, one by Rep. Tryon Lewis, HB 2748, and the other, HB 3547, authored by Rep. Rene Oliveira, to address who determines whether or not a pipeline meets the statutory requirements as a common carrier ‘public use’ with eminent domain authority, died without any protection for landowners against eminent domain by private pipeline companies outside of expensive court battles. The Texas Supreme Court decision in Texas Rice Land Partners v. Denbury Green Pipeline Company that granted landowners the right to challenge the common carrier status of a company, as well as the Keystone XL Pipeline brought the issue to the forefront of the property rights debate in Texas.

Lewis’ bill was the pipeline industry’s attempt to completely upend the Denbury Green decision by having the Railroad Commission (regulates oil & gas in Texas) make the FINAL determination about common carrier status and hence eminent domain powers, which would prohibit landowners from court challenges. Oliveira’s bill would have put the more unbiased State Office of Administrative Hearings in charge of the determination and would still allow landowners their day in court if they disagreed with the decision.

SB 655 (authored by Sen. Brian Birdwell) was about the only property rights bill that passed, tightening up remaining statutes in the special districts local laws code and the water code to repeal eminent domain for the more general ‘public purpose’ to the stricter ‘public use.’

HB 3459 (authored by Rep. Craig Eiland on behalf of Land Commissioner Jerry Patterson) also passed, but it’s anything but pro-property rights. The legislation guts the Texas Supreme Court decision in favor of property owners along public beaches known as the Severance v. Patterson case. This bill would force the condemnation of private homes (WITHOUT COMPENSATION) along public beaches if storms or other ‘evulsive’ events move the public beach line onto private property. It violates the Texas Constitution and invites more expensive court battles at landowners’ expense.

So it’s NOT a pretty picture for taxpayers, landowners, or travelers in Texas. The legislature failed to allocate all of the existing taxes already collected on vehicles and gas to roads (totaling $4 billion a year in existing taxes not going to fund roads), opting instead to push the responsibility of building and maintaining state highways down to the local taxpayer at a far greater cost. Toll will cost motorists 20 cents a mile up to 80 cents a mile in new taxes on driving, not counting the local property and sales taxes that will be confiscated to address state highways.

There’s talk of another special session to address budgetary issues, if Perry vetoes the budget. With enough public pressure, transportation -- the lifeline of our daily living and commerce -- will be properly funded and Texas can regain a pay-as-you-go, debt-free state highway system as Texans want and deserve.