Beating A Path To SH130: Private Roads, Public Interest

The Texas Turnpike Authority (TTA) has yet to put out a request for proposals on SH130. In fact, until its meeting in South Padre earlier this month, the agency didn't even have any contracting rules in place. But that didn't stop a consortium of private companies, calling themselves Road and Bridge Builders Inc. (RBB), from submitting a proposal to design and build the road under the auspices of a public-private partnership with the TTA. Headed up by construction giant H.B. Zachry of San Antonio, the team also includes toll specialists HNTB Inc., but no financial or public relations firms have yet been added to the group. Executive Director Pete Davis says the TTA has entered into "exploratory discussions" with RBB, who have predicted that by taking advantage of options available under the public-private partnership plan, they could build the highway in five years (instead of 15 or 20), and at a savings to the state of $250 million, though they have not specified how.

But having private investors take the lead in road projects of this nature can open the door for decisions being made for the wrong reasons: private financial gain, as opposed to the economic vitality of -- or the need for -- the toll road.

Private toll roads were the norm 100 years ago, but were gradually phased out with the growth of the interstate system. The resurgence in private road-building over the last decade is a legacy of the Reagan-Bush era's massive push toward privatization (see also school vouchers, prison construction, and now Social Security), which, depending on whom you ask, will either be the salvation of our nation's public infrastructure, or the last gasp of our 50-year effort to democratize the allocation of resources in this country. Time will tell, but the record on road privatization has been checkered at best.

The 1991 federal highway bill allowed federal money to be used on toll projects, and encouraged experiments with privatization, as did accompanying state legislation in many states, including Texas. The most cautionary example of what can go wrong with privatization in this arena has been the Dulles Greenway near Washington, D.C., which was built with private funding and then opened to traffic counts so low that fares had to be dropped, twice, just to avoid having the project go into bankruptcy. A privately developed toll road in California has also had to be refinanced to avoid default; the culprit was overly rosy predictions of traffic numbers, which depended in part on devel-opment along the route that never materialized.

According to Hank Dittmar of the Washington, D.C.-based Surface Transportation Policy Project (STPP) -- who spoke in Austin recently at a forum on community planning -- turning design and construction over to a private firm saves time because it allows a number of procedures normally followed by state agencies to be circumvented. For example, state policy dictates that the design and construction phases of a project should be completed sequentially, and by different contractors. The intent is to ensure that the builder does not cut corners, but instead follows the specifications of the designer. Under the design-build method to be employed by Road and Bridge Builders (RBB), however, the same firm does both, and construction begins before the design is complete. Many federal regulations, however, such as environmental impact and minority contracting rules would still apply since federal highway funds are to be used.

Other factors also come into play when private firms are invited to help finance a public project. Vicky Waddy, spokesperson for RBB, has said that her group may advance some of the money for the project, to make up for the capital shortfall haunting Pete Winstead's dreams (see story). This private money could be repaid later through tolls, STPP's Dittmar explains, or through another common method: by guaranteeing private investors "co-development" opportunities along the corridor. This type of arrangement actually gives designers an incentive to encourage sprawl-type development along the route as they plan the highway, since this will serve as an important source of revenue for the project (not to mention increasing traffic counts on the new road, which will help pay off the TTA bonds). Welcome to the future of road-building. "Private investors don't make value judgments," Dittmar says. "That's why we should decide where the roads go," he says, "not Wall Street." -- N.B.