Pete's Principle

Ex-Chamber Head Winstead Takes Us to the Toll Road

Pete Winstead has seen Austin's path to the future, and it's a toll road. The former chair of the Greater Austin Chamber of Commerce was wearing a new hat earlier this month when he addressed the first ever Austin-San Antonio regional planning conference at Southwest Texas State University in San Marcos -- that of the chair of the newly formed Texas Turnpike Authority (TTA). "I had a dream about Austin," the former booster-in-chief told the assembly of CEOs and elected officials. "Perhaps it was a vision." Looking out over the sea of familiar faces -- bankers, real estate executives, construction contractors, and high-tech industry VIPs -- the corporate lawyer-turned-public servant must have felt very much at home. And Winstead's vision -- solving Austin's transportation woes through fast-track toll road construction -- was well received, especially by the conference's sponsors -- including transportation industry giants like Road and Bridge Builders Inc., Carter and Burgess, HNTB Inc. and others -- whose company logos formed a continuous bunting around the mezzanine of Bobcat Arena.

Not heard from at this particular convocation were the people who will actually be throwing the coins in the basket, but the word is definitely out among local politicians and business leaders -- it's "toll roads or no roads," as Winstead likes to say. Expect to hear that refrain in the months and years ahead.

Nominated by the governor last fall, the 57-year-old Rob Roy resident has yet to be confirmed by the Texas Senate (though he has the firm backing of local senators -- San Antonio's Jeff Wentworth and Austin's Gonzalo Barrientos -- who introduced Winstead at the planning conference). But true to his reputation, Winstead has hit the ground running, with a slew of Central Texas toll projects -- totaling
$1.45 billion -- already in the works. What could induce Pete Winstead, a senior partner in one of the region's top corporate law firms, Winstead, Sechrest and Minick (where he recently made headlines representing Michael Dell -- or more precisely, Michael Dell's house -- in the Austin billionaire's property tax dispute with Travis County), to make the jump not only into public life, but into the seemingly undesirable position of selling highways in Austin?

Winstead devoted the majority of his presentation in San Marcos to the likely source of his calling, the road he reverently termed the most important infrastructure project in Central Texas (and perhaps, he said, quoting Phil Gramm, the biggest in the state), and the sole reason many of the business reps attended the conference at all (judging from the mini-exodus following Winstead's address): State Highway 130. Topping -- indeed, dwarfing -- the list of toll projects is a slightly scaled-down version of the 89-mile, Georgetown-to-Seguin "reliever route" more commonly known as the MoKan Parkway. As a $655 million project (in its current incarnation), plus millions more in related "co-development" -- including real estate, housing, and retail in the new corridor -- MoKan is the linchpin to regional economic development as envisioned at the San Marcos conference, and there's no better person to sell it than Pete Winstead.

The Plan

For the last decade, nothing has been built in Central Texas without the head of the Texas Department of Transportation (TxDOT) Austin district, Bill Garbade, signing off on it. A career highway man from the old school, Garbade seemed a little uneasy at last November's first official board meeting of the new TTA. "We'd like to know what the chain of command will be," Garbade told the board of the new agency, "we're very structure-oriented." The TTA was formed in the last legislative session as a new division of TxDOT, and given authority to administer toll projects not under the purview of the already existing toll authorities in Texas, namely the North Texas Tollway Authority and the Harris County Toll Road Authority. With four of the six board members from Austin or San Antonio, the new division has a distinctly Central Texas orientation, although South Texas and the border are also in its jurisdiction. Winstead is joined by fellow Austinite Manuel Zuniga, the conservative construction contractor who was twice defeated in two consecutive bids for a seat on the Austin City Council. Representing San Antonio are businessman Sam Barshop, the former CEO of the La Quinta motel chain who is now in the strip-mall business, and Mary Q. Kelley, a corporate attorney involved in the re-development of Kelly Air Force Base in San Antonio.

At the November board meeting, held at the state highway building in Austin, Winstead asked Garbade to lay out three projects, each of which has been collecting dust on TxDOT's shelves -- in various stages of preliminary planning -- since the 1980s. In addition to SH130, these projects include: a two- or four-lane loop around downtown Cedar Park, known as US183-A; and a two-highway project collectively termed the Big "T," which involves a northern extension of MoPac and a conjoining eastern extension of SH45 (aka the outer loop) across I-35 and over to the new SH130 (see map). One version of the project has the Big "T" eventually linking up with 183-A (by extending SH45 further west along RM620) to form a continuous toll network that would connect all three projects. The Big "T" sits in the middle of the fastest growing section of Austin, and would finally connect MoPac with I-35, something commuters have long anticipated.

Over the last five years, traffic has increased exponentially on US183, essentially turning main street into a highway for the rapidly growing communities of Cedar Park and Leander. For years, Cedar Park officials have been carefully protecting right-of-way for a potential spur on the eastern edge of the city limits, knowing that the Texas Transportation Commission looks favorably on those who come to them with an offering of property in hand. After years of being snubbed by the commission, it looks like their foresight may finally be paying off. Preliminary toll feasibility studies done by TxDOT in 1994 show that 183-A and the Big "T" would produce toll revenues of about 75-80% of construction costs, making the projects feasible from the perspective of those who would be purchasing revenue bonds (issued by the TTA and guaranteed by future tolls) to fund construction. A general guideline followed by the industry is that a proposed toll road should be expected to recoup at least 50% of its construction costs in its first five years of collecting tolls, according to Pete Davis, executive director of the TTA. [Davis died Sunday, May 17, of an apparent heart attack.]

There's No Free Ride

Not that this means the projects would eventually be "paid off" and converted to free roads, however. That's the old way of thinking about toll roads, as Richard Ridings of the toll systems company HNTB explained to the board in November. Ridings gave his relatively uninitiated Texas audience (where a relatively small number of roadways are tolled statewide) a crash course in the building and financing of modern toll roads, a booming industry in a period of rapid change, especially since the passage in 1991 of the federal highway bill commonly known as ISTEA. Under the new paradigm for toll roads, according to Ridings (whose national toll systems company is part of a consortium bidding on the SH130 project), roads are thought of as a utility, like telecommunications, water, or electricity, in which you pay as you go for a service, without actually purchasing the infrastructure involved.

Another outdated (though reassuring to many) way of thinking -- according to Mike Weaver of the local transportation planning firm Prime Strategies -- is that tolls are a fee-for-service transaction in which roads are funded only by the drivers who use them. Weaver, who is also involved in the SH130 project, introduced the board to the concept of revenue cross-pledging; that is, using high revenue toll roads to fund poorer performing facilities with less drivers, or even to finance new facilities (or old ones dreamed of and forgotten). "This system will become an economic engine," Weaver predicted," to build more roads in Central Texas."

Why Now?

There are many states, particularly in New England and the Great Lakes regions, where you can't travel any significant distance (by Texas standards) without paying a toll. But while Dallas and Houston have experimented with toll roads for years on a limited basis, Central Texas has managed to do without this "economic engine" for at least the last 100 years or so. Why the push for toll roads now? A good deal has been made of the national shortfall in road funding, and estimates of the repair needs (not to mention new construction) of the country's roads and bridges run as high as $300 billion. But the so-called "shortage" of road funding should be kept in perspective -- in fact, highway funds are the only portion of the domestic budget that has continued to increase during the "balanced budget" era of the 1990s. The current highway bill before Congress would authorize approximately $27 billion for the next six years, or roughly one-third more than the last bill (ISTEA), which in turn represented a 30% increase over the preceding funding period.

And, thanks to some heavy wrangling by Sens. Gramm and Kay Bailey Hutchison, Texas will fare exceptionally well -- roughly $700 million more per year under the new bill than under ISTEA. So, as Hank Dittmar of the Washington, D.C.-based Surface Transportation Policy Project (who spoke in Austin recently at a forum on community planning) points out, the money is there, but it goes to projects that oversight agencies -- like the Austin Transportation Study locally, or the Texas Transportation Commission, which disburses federal funds to projects across the state -- consider essential.

But inevitably, not all projects get funded. And for the losers in the money chase, toll roads can be a way around this roadblock. As such, analysts like Dittmar view toll roads with a healthy skepticism. "While forcing new capacity to be paid for by those who use it is not a bad idea on its surface," Dittmar says, "you can't let it become willy-nilly building, nor can you allow toll authorities to subvert the normal policy-making process." This warning is particularly germane, Dittmar observes, when the private sector is involved in the process, as may very well be the case in Austin (see sidebar).

The Big One

"We'll need to know purty quick," Garbade told the TTA board in November, "if this toll business is gonna happen or not." The district engineer was primarily concerned about whether to continue negotiations already underway between his office and various contractors for environmental impact assessments of the various segments of MoKan/SH130. That project, originally hatched in the 1980s, was revived a few years ago, primarily by an economic development group called the Austin-San Antonio Corridor Council. After securing promises of right-of-way funding from Williamson and Travis counties, and special demonstration funds (about $25 million) in the new federal highway bill, MoKan backers nevertheless recognized that the money for a billion-dollar project simply was not forthcoming from the Texas Transportation Commission -- thus prompting its consideration as a toll road.

The response from Winstead (himself a former head of the Corridor Council and a backer of MoKan) was clear and characteristically ambitious. The chairman created a special office within the fledgling TTA (which has only five staff members in the whole division) to take over work on SH130, relieving Garbade once and for all, apparently, of responsibility for it (a pretty big unburdening -- perhaps how Captain Ahab might have felt, if the pursuit of the White Whale had suddenly been assigned to someone else).

Winstead's enthusiasm for the project, however, belies some less than reassuring preliminary reports on MoKan. "What wakes me up in a cold sweat," Winstead told the San Marcos conference, "is the initial toll road financial feasibility numbers," which show a capital shortfall ranging anywhere from $300 million on up to $416 million for the 58-mile, $665 million version of MoKan analyzed by TxDOT in 1997. The 58-mile tolled version of the highway features an east-west connector road bringing it back to I-35 near Buda, rather than continuing on the full 89 miles to Seguin as it does in other versions.

TxDOT planners felt that the lengthy, rural southernmost section made the project unfeasible as a toll road and so did not include it. But even under the best scenario for the shortened version -- in which all of the right of way is provided by local governments and TxDOT pays for all intersections (leaving just the actual toll lanes for TTA to fund) -- SH130 is only projected to recoup about 40% of its construction costs through toll revenues, according to the 1997 study. Undeterred, Winstead says the plan is still to build the entire length as a toll road, though he also has said it may be necessary to "tuck it in" somewhere along the route. The TTA hopes to secure funding from the Texas Transportation Commission for a more in-depth, bond-level analysis of toll revenues when the commission meets at the end of May.

Two Roads Diverged

"The second part of my nightmare," Winstead says, "is that I am unable to convince the people, particularly in East Austin, of some of the very important facts involved in the SH130 story." The facts in question have to do with the lingering question of alignment: Will TxDOT's technically preferred alternative, also called the western alignment (see map), result in increased traffic on East Austin arterials like Martin Luther King Blvd. and East Seventh, and can TTA be counted on to limit the number of interchanges in order to discourage people from cutting through the Eastside, both to and from downtown? Fearing an increase in noise, pollution, and the general disruption of their communities, a united front of East Austin neighborhood groups have endorsed an eastern alignment, which takes the highway around Walter E. Long Lake, rather than buzzing East Austin, as the preferred alignment does.

The alignment question is not a new one. Neighborhood concerns were raised at a series of well-attended public hearings called by TxDOT last summer. And the primary reason TxDOT considered an eastern route at all was due to pressure, mainly from the Austin legislative delegation, to consider a route less intrusive than the department's "technically preferred alternative." In fact, East Austin State Rep. Dawnna Dukes attached a rider to the TxDOT sunset bill during the last session that prohibits the route from passing within one mile of a school, effectively precluding the western alignment (though now that the project is under the TTA, there's some question about whether the language still applies). TxDOT planners have floated a number of reasons why the eastern route is unacceptable, focusing primarily on claims of lower traffic counts (and thus lower toll revenues), although they have also claimed that traffic will actually be worse in East Austin the further east the highway goes (you'll have to call TxDOT to get an explanation for that one).

Not everyone is buying the lower toll revenue argument. "It's only a difference of a couple of miles," points out Travis County Judge Bill Aleshire, who generally supports the project as a toll road. "I disagree that there'll be a huge drop-off in traffic if you go east," he says. "TxDOT is simply misinterpreting how drivers think." And Aleshire (who attended the San Marcos conference where Winstead spoke) particularly takes exception to Winstead's admonition to local officials about cooperation on the alignment question. Winstead told conference attendees that he "sometimes wakes up screaming" when he dreams that Central Texas is losing out in the federal money chase because "Austin is again fighting about whether we want a road at all, and where to put it."

In fact, as Aleshire emphatically impressed on Winstead after the conference, Austin is unified on the choice of an alignment for SH130. Both the Travis County Commissioners Court and the Austin City Council have unanimously endorsed the eastern route. Also supporting the eastern alignment are the neighborhood associations of Pecan Springs, University Hills, Tannehill, Stonegate, and Windsor Park, among others, according to Rep. Dukes, who attended a neighborhood summit on SH130. Dukes also points out that virtually all of the Austin legislative delegation (with the notable exception of Senator Gonzalo Barrientos) have spoken out in favor of the eastern alignment. "Pete's feeling is that everybody needs to agree with him," says Travis County Commissioner Margaret Gómez, "but maybe it's time for them to join our side."

Austin's congressman, Lloyd Doggett, agrees. While securing $16 million in special demonstration fund money for MoKan in the new federal highway bill (currently in conference committee), Doggett added a rider stipulating that the money could only be used to build along the eastern alignment favored by the neighborhoods and their local elected officials. Winstead and company felt strongly enough about their preferred alignment to take their case to Phil Gramm, who chastised Doggett for interfering with the federally regulated permitting process. Some have questioned Sen. Gramm's logic, however. "Gramm is always preaching local control," Austin Councilmember Daryl Slusher observes, "yet he wants the highway department to make this type of decision rather than the communities involved."

And TxDOT's own adherence to the process is not beyond reproach -- for several months, TxDOT's maps have shown only the preferred western alignment in the agency's presentations and press releases, despite the fact that an official route has yet to be chosen. Ultimately, the final decision rests with TxDOT, though the agency is hardly insulated from the politics involved.

"What we really need now is for business to get behind the political leadership on this," Aleshire concludes. "If you find unity in Travis County," he says, "then for god's sake use it."

M Is for Motivation

None of these projects -- 183-A, the Big "T," or MoKan -- is a sure thing. Pete Davis of TTA says that the two smaller projects are more likely to get underway first, following investment grade studies to be completed in the next year (funding permitting). Public hearings on the alignment for those two projects will also be convened over the course of the next year (the first, on 183-A, was held two weeks ago). MoKan is the least certain. Winstead has said he'll build the highway without Doggett's $16 million, if it comes to that. Why get into a pissing contest with your best friend in Congress (aside from Gramm, of course)? One reason may be the TTA's desire to use a portion of the technically preferred right of way (following the old MKT railway line) already purchased by local governments in the early 1990s, in anticipation of an earlier version of MoKan. (Of course, it's a violation of federal regulations to acquire right of way for a project involving federal funds before the final design and environmental analysis are complete, but that's another story.)

Another motivation -- suggested off the record by several area officials -- may be political pressure from the private landowners in the technically preferred alignment, who stand to gain considerably -- either through land sales or development opportunities -- if the highway comes through their property. One thing is certain -- sooner or later, when it comes time to actually buy that right of way, Pete Winstead will have to come back to the same local officials and voters he's fighting now, hat in hand, asking for the necessary funds. It's small wonder he's having trouble sleeping.

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