Open Corridor Policy
Wed March 14, 2007 11:37 am

Back on March 7, I posted an item about the Senate's passage of a two-year moratorium on the Trans-Texas Corridor (See "Closing the Corridor.") That item generated two responses from proponents of the Corridor, which I recommend to readers. A third response arrived today, reacting to the five questions I asked in the original posting. Since my original item is a week old, I'm going to publish the response here in the main portion of the blog. The author clearly knows the subject--probably a lobbyist for the project. The questions in italics were mine in the original piece, the responses are from today's correspondent, and my comments follow each response.

1. Can the state meet its transportation needs by self-funding?

RESPONDER: If the Senators really feel that self-funding is the best route, and if it can be validated by multiple studies in addition to those done by the TTI, then let's see them place their next election on the line by voting for the requisite gas tax/registration fee increases.

MY COMMENT: The respondent apparently does not believe the TTI study, which was generated by the Governor's Business Council and offered several self-funding options, from a large raise in the gasoline tax to a small increase combined with indexing the tax to inflation and issuing bonds. The study also debunked Tx-DOT's estimations of the state's needs. I'll go with the Aggies on this one. As for whether senators would vote to raise taxes, the corridor is so unpopular with rank and file Texans that I think any competent campaigner could defend a vote for it by saying that it will keep Texas highways out of foreign hands.

2. Can the public have confidence that a public-private partnership will operate in a way that assures that transportation policy will be conducted in the light of day?

RESPONDER: If the policy is properly established, then the answer is certainly yes. The need for visibility [must] be balanced against the benefit of private investment, and the fact that investors won't dump money into CDAs if they know their strategies and tactics will be shared openly with competing investors.

MY COMMENT: No one forces a private company to enter into a partnership with government. If one chooses to do so, that should not abrogate the public's need to know. Instead, Tx-DOT is siding with the private entities to keep the agreements secret. The problem is, a key part of the agreement may obligate the state to pay the toll operator if new state roads take traffic away from toll roads. This is precisely the kind of thing that the public and its elected representatives must know before they can give a comprehensive development agreement their blessings.

3. When tolling is necessary, should the goal be to maximize revenue or to provide convenient transportation to the public at a reasonable cost and for a limited time?

RESPONDER: Tolls should ideally be a project-specific revenue stream, but there are cases where a network is useless if negative-revenue segments close because subsidies from other segments dry up. Just take a look at the Florida Turnpike Enterprise, particulary SW FL, for some great examples.

4. Should public pension funds be used to help underwrite the Corridor?

RESPONDER: That's a question that should be left up to those contributing to the pension. In what level of risk-return are they willing to invest? Proper independent oversight negates concerns about inappropriate use of the pension funding.

MY COMMENT: In the phrase "proper independent oversight," I don't believe in any three of those words, much less the combination. Why should we trust pension funds after all of the shenanigans we have read about? Bill Ceverha, who is nothing but a political operative, is on the board of the Employees Retirement System. Ceverha, you'll recall, was famously given a large check, the value of which he famously reported as "check." Do I trust him to do "proper independent oversight?" I do not. ERS and TRS will be heavily lobbied to invest. Do I trust the lobbyists? I do not.

Sorry, Responder, but I'm going to rant about this for awhile. When Houston's municipal pension fund was found to have a $1.5B shortfall in 2004, here's what offthekuff had to say about it, before I even knew bloggers existed:

The projected shortfall in the city employees' pension fund is now $1.5 billion, and there's a mad scramble to come up with ideas to fix the damn thing. Nobody's committing to anything other than ruling out a property tax hike, which, let's face it, would be political suicide.

There are three things in this story I want to comment on. First:

An actuarial report prepared for the Houston Municipal Employees Pension System in 2001, when the biggest changes were made, said the city could afford the changes. But by late last year, the forecast had changed drastically. And a constitutional amendment, ratified by state voters in September, keeps cities from rolling back pension benefits they've already given to workers.

This may be a semantic quibble, but the "forecast" didn't change in the sense that the conditions which affected the long-term numbers suddenly became very different. I'm quite certain that a true and accurate forecast in 2001 would have been about the same as the one that came out late last year. What really changed was the identity of the person or persons doing the forecast, from someone with a cranial-anal inversion to someone who knew how to work a calculator.

As for that Constitutional amendment that was ratified in September, the reason you don't remember anything about it is because that was the same election that featured the tort "reform" amendment Proposition 12. Though I strongly suspect that a seemingly innocuous amendment like the one that now shackles Mayor White would have gotten overlooked in just about any election, I do wonder if pushing it back to November might have given the competent forecasters enough time to figure out and warn about this mess we're facing. Oh, well.


One more thing: Towers Perrin, the firm that prepared the 2001 actuarial report, has declined to comment on the major revision it made to its forecast last year. I'm just curious here, but since I haven't seen any mention of it yet, I'll ask: Do these guys have any liability for their role in this debacle? What is the likelihood that the city will try to shake a few dollars loose from them as part of an overall solution, and what is the likelihood that they'd be successful? If nothing else, at the very least they ought to refund the fees we paid them for their lousy advice.

And, if my memory is correct, TRS was once used to invest in a project of a governor's favorite developer.

Now, tell me again about "proper independent oversight."

5. How can we ensure the continued growth and quality of the free road system? If we are going to forego the billions of dollars in concession payments from private companies that the state would receive under the current plan for the Corridor, what alternative source of funds is available to help build and maintain free roads?

RESPONDER: That's a great question for the 25 Senators willing to kill the CDA [Comprehensive Development Agreement] program. It's also a very important question for drivers. Are they willing to pay for a system that actually works, or are we okay with congestion resulting from a lack of expanded capacity? Do we have the will to acknowledge and actually address the structural flaws in the current approach to collecting and appropriating funding? Congestion is simply another form of a Soviet-era bread line resulting from political control over a system that would be more efficient in free-market form.

MY COMMENT: I don't need to point out that Accenture just got fired, do I? Public-private partnerships aren't guaranteed to work. I'd like to believe in this particular tooth fairy, because we need the roads, toll and free, but before we accept Tx-DOT's insistence that the CDA model is the only way we can have an adequate transportation system, I think we should determine whether self-funding is feasible.

Thanks to the unknown correspondent: RW? MK? DS? RS? All friends of RP. It's great to have good comments like this.

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