Senate Bill 792 of the 80th Texas Legislature charged this Committee, the Legislative Study Committee on Private Participation in Toll Projects, with the task of examining the following issues:
• What are the public policy implications of entering into Comprehensive Development Agreements (CDAs) with private parties to develop new toll project infrastructure ("greenfield" projects)?
• What are the public policy implications of selling an existing and operating toll project ("brownfield project") to a private entity?
The fundamental basis for the Committee's purpose - in fact for the entire public-private partnership (PPP) debate - is the recognition by a broad consensus of transportation policy officials that the current funding methods are inadequate to build the transportation network Texas will need to maintain its leading economic position in the 21st century.
Moreover, a number of the measures proposed to fill the highway funding gap will either be too small to address the problem in a meaningful way, or else will serve primarily as short term solutions whose long range viability remains open to question. This is especially true when less traditional considerations - such as meeting tightening environmental standards - become more pressing concerns.
This report is specifically concerned with the role that private capital and private sector investment in infrastructure should have in meeting public needs. It is also concerned with how PPPs can best play a role in achieving the public sector's goal of stable financial investment in its infrastructure assets.
We believe that advancing projects in the most well-planned, cost-effective manner is paramount, and projects should be funded (whether with public or private capital) if value can be created and realized.
In addition to capital, however, the private sector is in a position to bring to a project innovative designs and specialized project management expertise. As competition sharpens all parties involved in a particular line of endeavor, private sector involvement will have spill-over benefits going far beyond any financial resources provided.
While laying out the advantages the PPP model offers, this report will also address the critical factors necessary to protect the public interest when negotiating PPP transactions, as well as some of the practical steps that other jurisdictions have worked out in managing the overall private procurement process.
In addition, this report will address some of the fundamental policy choices facing public officials confronted with funding our Texas highways. For instance, to what degree should motorists of the few heavily traveled, profitable highways subsidize the remainder? Should one region of the state subsidize others? Should officials focus on a system finance approach versus a one-off approach? How should toll project revenues be allocated within a region - and even more fundamentally, what constitutes a region for highway financing purposes?
We note that one fundamental lesson to arise from our work is that no single solution exists for every highway or every part of the state. Instead, we emphasize that the state and local entities need to retain all the tools available for maximum flexibility in a changing world.
Finally, though this report will not specifically address the need for emergency evacuation, other forms of transportation investment (such as rail or airports) or the enhancement of regional or statewide trade and economic growth corridors - all of these factors must be weighed in the decision process as it relates to the need for and the timing of road projects.
Given that a widespread consensus exists - both among Texas policy makers and the voting public - opposing the idea of transferring an existing and operating project to a private entity, this report will focus on greenfield toll infrastructure.2
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2 Note, however, that for the purposes of this report, we include projects such as HOT lanes or other projects whereby new lanes are added to an existing highway under the general "greenfield" heading.