AUSTIN, TX - State legislators are looking into reforming the way private toll road contracts are issued. State Senator Robert Nichols' Bill 17, filed Monday, is devoted to this issue.
"Last session the Legislature realized there was an urgent need to fix the way private toll road projects were built, and we imposed a two year moratorium on them to create a better system," said Nichols. "This bill reflects the efforts of stakeholders who worked together to create a process to build new roads and protect the taxpayer."
The bill gives local tolling authorities and the Texas Department of Transportation the option to develop the toll project before a private company can. Senate Bill 17 prevents private companies from selecting only the best and most profitable projects and leaving the rest for public entities.
"It is important to establish a process for building new roads, but private financing for transportation projects should only be used as a last resort," said Nichols. "State and local entities will build and operate a road in the public's interest, not the shareholder's."
The bill also addresses concerns about private equity contracts, including setting a purchase price if the state ever needs to terminate the contract early and buy the project back from the private investor. Currently, private equity contracts call for the state to pay "fair market value" but do not specify how this value is determined. This could put the state on the hook for billions of dollars and a long legal fight.
Nichols' bill requires private companies to include a competitively priced pay schedule in their initial proposal specifying what the state would have the option to pay if it ended the contract early.
"Most people don't sign a cell phone contract without asking themselves what it would cost to end it early. It is just as important for the state to carefully consider its long-term contracts," said Nichols.
The bill also reigns in non-compete clauses, which require the state to compensate the private company for lost toll revenue if a competing public or private road is built nearby. Under Nichols' bill, the state could expand any interstate or build any pre-planned project without penalty. SB 17 also limits the non-compete clause to last no longer than 30 years after a road is completed, unlike the usual term of 50 years.
"Toll roads should ease congestion for drivers, not provide a disincentive to build more roads," said Nichols.