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Blog Texas Rebuff Of Winning Toll Road Bid Raises Concerns

By a vote 27 to 10, the North Texas Regional Transportation Council (RTC) recommended that the 26-mile SH 121 toll road project be awarded to the public North Texas Tollway Authority (NTTA) rather than to the private consortium of Cintra-JP Morgan Asset Management. The latter bidder had won the award in a competitive procurement process earlier this year.
The RTC decision has been widely condemned by the transportation community as wrong on substantive as well as fairness grounds. (See, for example, “A Tale of Two Texas Roads,” by Robert Poole of the Reason Foundation). A formal decision is up to the Texas Transportation Commission (TTC) which will vote on the RTC recommendation June 28.
The Commission will be faced with a difficult decision. The U.S. Department of Transportation has questioned the propriety of allowing a competing proposal from NTTA to be considered after the procurement process had been closed and the project was awarded to Cintra/JP Morgan in a fair and open competition.
A letter from the Federal Highway Administration has warned that:

“If the project were awarded to NTTA, FHWA would be legally compelled to withdraw all federal funding from the SH 121 project.”

In addition, as Robert Poole has pointed out, a decision to re-open the procurement process would send a message to the private sector loud and clear that there is a high political risk dealing in Texas. Poole writes:

“And that might send private toll road companies and untold billions of private capital to other fast-growing states that know how to play by the rules of fair competition.”

The Texas Transportation Commission should take these arguments seriously to heart as it weighs the equities versus the political expediency of accepting or rejecting the advice of the regional planning body.
Elsewhere, impetus for private operation of toll roads continues to grow.
On June 20, Florida Gov. Charlie Crist announced that he had signed a bill that will allow private companies to build and operate toll roads. The measure passed 37-2 in the Senate and 68-49 in the House. The law will allow the state to enter into private concession agreements to operate existing toll roads (except for the Florida Turnpike) as well as build and operate new ones. Concessions will be limited to 50 years but could be extended to 75 years with legislative approval. The bill also permits automatic toll increases on existing and future roads to keep up with inflation.
Infrastructure is viewed by a growing number of pension funds as a source of a “steady, if unspectacular, stream of income,” reports the Wall Street Journal in an article titled, “Investing in the Fast Lane.” The article quotes one pension fund official as saying that infrastructure should deliver “fairly predictable, stable returns.” But, warned Mark Weisdorf who heads the infrastructure fund of J.P. Morgan Asset Management, there are political and regulatory risks.

“Governments can change their minds about how and whether to proceed on deals with the private sector.”

Weisdorf here makes an obvious allusion to the shadow cast on public-private partnerships by the North Texas RTC recommendation to nullify the Cintra award of the SH 121 project. Tomorrow will tell whether the Texas Transportation Commission sets things right; or not.
UPDATE, 6/29/07: Yesterday, the commission decided to affirm the reversal of the earlier decision to award the contract to the private partnership.