Texas finds itself in a challenging situation as the state transportation department moves to end a 52-year agreement for a toll lane project that was financed with private-activity bonds. The Texas Transportation Commission recently voted to terminate a comprehensive development agreement with Blueridge Transportation Group, LLC, for the project on State Highway 288. This decision will come at a cost of $1.7 billion to the Texas Department of Transportation (TxDOT).
Robert Poole, director of transportation policy at the Reason Foundation, expressed concerns over the potential long-term consequences of terminating such agreements in the state. He pointed out that Texas could face challenges if other deals are terminated early, affecting transportation infrastructure development moving forward. The termination of the agreement with Blueridge could deter companies from engaging in future partnerships with TxDOT, particularly when it comes to private financing and toll revenue projects.
The toll lane project on State Highway 288 was partially financed through various means, including private equity, federal loans, and bonds issued by the Texas Private Activity Bond Surface Transportation Corporation. The project’s funding structure included a significant amount of private equity along with a federal Transportation Infrastructure Finance and Innovation Act (TIFIA) loan. The bonds issued were initially rated at BBB-minus by Fitch Ratings and Baa3 by Moody’s Ratings but were later upgraded to BBB and Baa2 respectively.
Public-private partnerships (P3s) have played a crucial role in Texas’ transportation infrastructure development in recent years. Under former Governor Rick Perry, P3s saw significant growth and support, but the current Governor Greg Abbott has taken a different approach. The shift in perspective regarding P3s has led to challenges in ongoing projects and potential future collaborations between the public and private sectors in transportation development.
Legislative Impact
State Senator Robert Nichols, who chairs the legislative chamber’s Transportation Committee, has highlighted the importance of addressing concerns related to P3 agreements in Texas. Nichols emphasized the need for clarity in purchase price breakdowns in CDAs and warned of potential price escalations if agreements such as the State Highway 288 CDA are not terminated promptly. The legislative measures put in place aim to prevent any unforeseen complications in future P3 agreements and infrastructure projects.
As Texas navigates the challenges surrounding the termination of P3 agreements and the shifting perspectives on infrastructure development, the future of public-private partnerships in the state remains uncertain. The decision to end the agreement on State Highway 288 raises questions about the feasibility and sustainability of such projects in Texas. Moving forward, stakeholders will need to engage in open dialogue and strategic planning to ensure the continued growth and success of transportation infrastructure in the state.