Speeds on new Texas 130 South TR major $-issue

July 6, 2006
By Peter Samuel

Posted speed limits are a major financial issue in the terms of the toll concession for Texas State Highway 130 Segments 5 and 6 (TX130-S for South). The fine print of the concession agreement now available on the TxDOT website shows that posted speed limits are seen as a key to attracting large volumes of traffic from free-competitor I-35.

Exhibit 7 (Ex7) titled Compensation Terms provides that the concessionaire will pay TxDOT three radically different amounts of money depending on the legally enacted speed limits for the new tollroad (TR).

TX130-S TR route runs parallel with I-35 south of Austin toward San Antonio. It is 20 to 25km (15mi) to the east but serves much the same long distance traffic. If higher speed limits are posted on TX130-S then the improved travel times will attract more tollpayers.

Exhibit 7 provides for two approaches for the state to garner a share of higher speed toll revenues: (1) higher upfront concession fees or (2) a higher share of annual toll revenues.

$25m for 75mph, $92m for 80mph, $125m for 85mph

Most rural expressways in Texas were posted for speeds up to 70mph when the concession was negotiated but in the past month have been increased to 75mph (121km/hr). So without special treatment TX130 would now be posted 75mph. At that posted speed TxDOT only gets $25m upfront fee. Ex7.A.2 reads: "In the event TxDOT authorizes, within 180 days after the Service Commencement Date, a maximum daytime posted speed limit for passenger vehicles of 80 miles per hour on the Facility, other than in populated areas or other specific locations where design does not accommodate such speed, and TxDOT affirmatively elects in writing to waive increased revenue sharing under Part B respecting such posted speed limit, Developer shall pay to TxDOT an additional $67 million." There is more refinement on the timing.

Then in Ex7.A.3 the agreement reads that if TxDOT authorizes 85mph for passenger vehicles the concessionaire must pay an extra $100m in upfront fee.

80mph is now the legal posted maximum speed on a 695km (432mi) stretch of I-10 and on 143km (89mi) of I-20 in the west of Texas so there is precedent for 80mph, but there are no highways yet with 85mph posted. In a peculiarity of the law on speed limits in Texas higher speeds are not flat illegal but "prime facie" (considered on their face) to be unsafe speeds and an offense.

There is a formula for refunding the speed-concession fee add-on if the speed limit raises are revoked. (Ex7.A.5)

Different revenue sharing regimes

Exhibit 7 Attachment 1 (Ex1.7) provides schedules of revenue sharing for 70mph (Table 1), 80mph (Table 2), and 85mph (Table 3). Revenue sharing is an alternative for TxDOT to the different concession fees by speed. Under revenue sharing there are three "bands" of toll revenues due a different percentage for TxDOT. The bands specify revenues for each year that are the basis for the percentage, making a huge number of possible outcomes. Thus at regular posted speeds (70mph)

in Year 8 of operations if revenue were say $150m the first $82m would earn TxDOT 4.65% or $3.8m, the second band to $129m or $47m would earn 9.3% or $4m, and the third band of $21m would earn 50% or $14.5m for a total TxDOT take of the $150m of $22.3m. However at 80mph posted speeds the rates would be 9.05%, 18.1% and 50%, while at 85mph the band rates would be 11.05%, 22.1% and 50%. But the different percentage takes apply to different thresholds for each year. Thus taking the same example of $150m in year 8 at 85mph posted speed TxDOT is entitled to 11.05% of $89m or $9.8m in Band 1, 22.1% of the next $54m that's $11.9m, and 50% of $7m in band 3 or $3.5m for a total of $25.2m. That's only a little more than the $22.3m they'd get with 70mph speeds posted. Apparently the thinking is that at higher speeds the real comparison would be with a higher toll revenue number. So if say with $200m in year 8 at 85mph TxDOT would get $9.8m+$11.9m as before in Bands 1 and 2 then 50% of $57m or $28.5m for a total of $50.2m. (We've done some rounding.)

Cintra's Jose Maria Lopez de Fuentes

Jose Maria Lopez de Fuentes, head of Cintra in North America told us in an interview: "This will be a very safe road built to the most modern standards and we think it can operate safely at higher speeds. At higher speeds our studies show we get significantly more traffic, but the decision is up to Texas legislators. We have structured the concession so if we attract more traffic from higher speed, we share the revenues with the state - either in a larger upfront payment or in larger year by year revenue sharing."

COMMENT: There is a lot of inherent logic to this approach. If the 130 TR is to act as an toll express lanes alternative to free I-35 then speeds will play a major role in determining how much traffic the toll road attracts. However the road safety lobby are liable to go ballistic over this approach (they probably haven't discovered it yet). The safety lobby think there is some inherently 'safe' speed for different classes of roads and - we guess - will demagogue the issue of higher speeds being encouraged to earn more toll revenues and more money for TxDOT. We have to wonder whether TxDOT and the concessionaire have spokesmen capable of articulating the case for high speeds.

No public traffic and revenue studies

Most inter-urban roads like this attract relatively light traffic and this tollroad is designed to cater almost exclusively to inter-urban or longdistance trips.

Cintra's Lopez agrees: "We don't expect much local traffic (on the tollroad proper). Any local traffic will tend to use the (free) frontage roads. Most of our traffic will be longdistance traffic."

Most of the route of the concession is in presently undeveloped areas, though with construction of the TX130 South development can be expected off the interchanges, especially at the north end which is close to the developing fringe of the Austin area. We've heard skeptical comments about the viability of this TR, so we asked Lopez about the forecasts.

He declines to release any of their traffic and revenue projections - at least before the financial close which he says should be early 2007. But he insists the project has been proven financially viable. Banks and shareholders are convinced of its viability and fully committed he says: "We could go (to financial close) tomorrow if necessary."

But what are the traffic and revenue prospects? Given that most traffic is local and this pike won't get much local traffic the numbers are bound to be light.

The executive summary of the state's assessment of TX130 - the whole 89mi (143km) project segments 1 thru 6 - said on traffic: "Year 2020 forecasts of SH 130 traffic range from a high of 124,000 vpd within the northern, more urbanized portion of the corridor, to a low of 22,000 vpd in the southern, more rural area." Lopez told us the studies they have had commissioned suggest higher traffic than the state's older estimate. Higher than 22k apparently.

Say 25k to 30k? At 27k and assuming an average trip length of 30mi and an average toll of 20c/mi you have annual toll revenue in 2020 of $59m. They are spending about $1325m ($1300m project cost plus concession fee $25m), or 22 times gross revenue. That's below the ratios of 30 to 40 paid for the Chicago Skyway, Indiana TR and Pocahontas Parkway, and clearly there is no early profit to be had in any of these. The prices being paid are based on projections of much larger returns decades off. Whether they are discounting adequately for risk and to present value is a matter for argument. (Our gut feeling on TX130-S is they aren't discounting adequately and that traffic may well be very light, only 10k or so, for some years, but it would be nice to see some traffic and revenue studies and the assumptions they make.)

A real speed differential in favor of the TR would help a lot, but we wonder how much actual speeds are affected by posted speeds.

QUESTIONS:

Is there going to be the political will to enforce lower speeds on I-35 sufficiently to give the 130 TR the advantage intended by any legislation? And if such legislation were passed would it be sustained in the face of protests against a law designed to benefit the TR. Would it sustain a random run of newsworthy crashes on 130? Seems doubtful to us.

The road - some more from the concession documents

The 64km (40mi) road, with a project cost of $1.3b is planned Texan scale - the right of way is 202m (664ft) wide because it is part of a Texas Transportation Corridor with planning for eventual truck lanes, rail and utilities. Under the concession agreement Cintra-Zachry are building 2x2 lanes with two roadways of full depth pavement 12.2m (40ft) wide providing for two travel lanes shoulder lane and a 1.8m (6ft) inside offset. There is a central median of 45m (146ft) for future expansion inwards. The northern part, nearest Austin has frontage roads each side of 11m (36ft).

The 64km (40mi) long road has twelve interchange points.

The northern part is in open flat country on the fringe of Austin. The start of the road going south makes use of part of existing US183. The southern part has some rolling terrain but no major hills. It crosses no major rivers. The biggest structure will be the three level direct connector interchange with I-10 at the southern end of the project. There's another 3-level Y-interchnage with TX183 in the northern part.

Tolling entirely cashless

TX130 South will be Texas second cashless tollroad after the Westpark in Houston. It will use frontal as well as rear cameras to handle vehicles without transponders. Transponders will be the TxDOT issued eGo sticker tags. There will be 12 sets of ramp plazas and two mainline gantry setups. Contra-Zachary are talking to toll systems suppliers at present.

Tx Terminology

TxDOT and Cintra-Zachry (CZ) signed a Comprehensive Development Agreement (CDA) 2005-03-11 providing for collaboration in conceptual, preliminary and final planning along with some development, design, construction, financing, operation and maintenance. It contemplated further agreements or development of facilities like TX130S. Just under 5 months later on 2005-07-27 TxDOT and CZ agreed on a Facility Implementation Plan Preparation Agreement (FIPPA) for TX130S. 2006-06-29 the FIPPA for carrying out Facility Development Work (the work to be done under the concession) was agreed by TxDOT prior to closing. The Facility Concession Agreement (FCA or concession) together with agreements on right of way, intellectual property, the lease escrow and trust and security documents constitute a Facility Agreement. TxDOT calls the concessionaire the Developer.

Items of interest:

Items of interest in the text of the concession ducments include the following which we report in bullet fashion with reference in parentheses:

Term of concession: 50 years (2.2)

At end of concession: TxDOT may or may not continue tolls. (3.1.4)

90 days notice required of any proposed toll rate changes (3.2.3 and 3.3.1)

Toll revenues the exclusive property of the concessionaire (3.7.1)

TxDOT debts to be paid ahead of payments to affiliates or shareholders (3.7.2)

Refinancings at the option of concessionaire after commencement of service (4.4.2)

Customer records to be kept confidential (8.8.1-8)

State police ("Department of Public Safety" in Texas) to do policing, no private security services allowed to do policing (8.9.1.2)

TxDOT has right at all times to monitor, inspect, sample, measure, attend, observe or conduct tests and investigations and conduct any oversight to audit compliance (9.3.2)

Concessionaire provides TxDOT with information on contracts (10.1.1)

Key personnel must be approved by TxDOT as capable and have any changes approved (10.4.1-4)

Ethical standards to prohibit gifts and lobbying of TxDOT, the commission, the independent engineer and others (10.7.1.1)

Prevailing wages as defined in Texas statutes must be paid (10.11.1)

Compensation for revenue reductions due to competing free facility

Concessionaire has right to compensation to the extent that toll revenue is reduced through development of a competing facility (11.3.2) but TxDOT has unfettered rights to develop competing facilities (11.3.1)

"Developer acknowledges that TxDOT has a paramount public interest and duty to develop and operate whatever TxDOT Projects it deems to be in the best interests of the State, and that the compensation to which Developer is entitled on account of Competing Facilities is a fair and adequate remedy...." (11.3.3.1)

If TxDOT provides notice of developing a competing facility the concessionaire must respond within 120 days with a traffic and revenue study showing likely detriment to toll revenue and make a claim for compensation. (11.3.2.1-4)

Concessionaire is obliged to build extra capacity to maintain a specified level of service. (12.1.1, Exhibit 18)

Improvements initiated by the concessionaire are subject to review and comment b y TxDOT and approval by an Independent Engineer (12.1.2)

Improvements initiated by TxDOT and not required of the concessionaire may be built but at the expense of TxDOT (12.3.1-3)

Inability of the concessionaire to perform to contract may be handled by a "Relief Event" determination, but that is subject to procedures for approval. (13.1)

Default on contract is closely defined (17.1.1) and there are prescribed "cure periods," "warning notices" and other procedures. (17.1.2)

TxDOT's right to "step in" under circumstances of default are specified (17.3.4)

There are many pages specifying damages rights. (17.4)

There are procedures for mediation when TxDOT and concessionaire disagree (17.8.8)

Non-compliance points may be scored against the concessionaire (18.3.1)

In case of the concession being terminated "for convenience" of TxDOT TxDOT shall pay compensation for the remainder of the concession period. (19.1.3) There follow many pages of specifics.

Included among the Exhibits are some of the most important items.

Exhibit 3 is the actual Facility Lease agreement only 9 pages containing some important provisions many expressed in quaintly archaic stuff about "mechanics liens" "hypothecation," and "quiet enjoyment" -lawyers terms that bear no relationship to normal english.

Toll rate regulation annually by state per capita income

Exhibit 4 on toll regulation provides for a maximum toll rate to be adjusted each year and expressed as the maximum toll per mile pre-rated for each tenth of a mile. The adjustment is by the greater of the increase in the nominal state percapita income as measured in indices of gross state product and population published by the US Bureau of Economic Analysis. Toll rates are rounded to the nearest tenth of a cent. The base or starting maximum toll rates are:

Class A vehicles height < 7ft and <20ft long 12.5c/mile

Class B vehicles A plus trailer 25c/mile

Class C vehicles 7ft to 12ft high and length to 46ft without trailer 37.5c/mile

Class D large vehicles with trailer >12ft high or >46ft long 50c/mile

Class E vehicles wit h more than one trailer 62.5c

11c/mi for cars, 56c/mi tractor-trailers

The toll rates are similar to those on new TRs but expensive compared to older TRs. Indiana TR for example has tolls of only 2.7c/mile for cars (12.5c on TX130S) and charges 5-axle tractor-trailers 10c/mile (50c on TX130S). The WestPark TR in Houston however is slightly more expensive than TX130 with car tolls of 11c/mile and tractor trailer tolls of 56c/mile. San Joaquin Hills TR in southern California has car tolls ranging between 20c weekends with transponder and 32c/mile weekdays peakhours with cash, and tractor trailers pay 80c/mile with a transponder and $1.00/mile cash. (Tollrates calculated by full length toll charge/miles end to end, partial trips vary per mile.)

Concession fee of $25m or $92m (80mph), or $123m (85mph)

Exhibit 7 provides for a "concession payment" of $25m.

If however within 180 days TxDOT authorizes an 80mph (129km/hr) posted speed limit in rural sections the concessionaire will pay TxDOT an extra $67m. If TxDOT can get 85mph (137km/hr) approved the concessionaire will pay an additional $100m concession fee. There is also a formula for refunds if posted speed limits are rolled back by the legislature. (Ex7.5)

Revenue sharing

Revenue sharing - the concession provides for sharing of toll revenues laid out in seven pages of tables with three different share rates of 4.65% through 50% of toll revenues with thresholds rising year by year and the rates depending on the posted speed limits - though TxDOT has to choose between an upfront speed related fee and speed related revenue sharing.

Sharing any gains in refinancing - TxDOT gets 50% of any gain in refinancing by the concessionaire (Ex7.C.1)

If federal aid is used in the highway Bacon Davis union wage rates must be paid. State of Texas affirmative action quotas for minorities, women and others deemed disadvantaged must be met by the concessionaire.

TxDOT provides back office services for transponder toll collection including a call center, issue of transponders, violation processing, revenue handling, accounting, and clearinghouse operations with other toll agencies. (Ex14)

TxDOT will receive from the concessionaire a basic 15c fee per toll transaction for transponder toll services and the charge will increase each year with nominal state product per capita.

Video tolls (weirdly called "video trip tolls" - what is a video trip?) may not be charged a premium of more than $1.50 and this cap increases annually with the increase in state product per capita.

Little non-compete protection

Competing facilities are defined to exclude improvements provided for in the 2006-2008 state implementation plan, other 2006 plans and the Austin and San Antonio area 2030 mobility plans, frontage roads to TX130, and the whole of I-35 - seeming to gut non-compete clauses of any meaning. (Ex17p3)

Traffic flow monitoring and reporting requirements are specified. (EX18.2)

A speed measurement system will record average hourly speeds for each direction of traffic and the results will be reported monthly to TxDOT. Equipment must work to an accuracy of +-1%.

Speeds below 65mph (105km/hr) over three consecutive months for more than 5% of hourly speeds will be a first trigger calling for capacity enhancement. Within 90 days the concessionaire must submit to TxDOT proposals for capacity improvement.

Capacity enhancement needed if speeds drop

10% of hourly speeds below 60mph (97km/hr) - excluding incident hours - will be a second trigger. The second trigger will require implementation - design and construction of the improvements within a deadline. (Ex18.4,5) Only outs are if NEPA process blocks capacity enhancement or there are only five years left in the concession. (Ex18.6)

Insurance requirements - a lot of them - are specified (Ex19).

There is a whole elaborate non-compliance regime with trigger points, penalty points, monetary penalties, cure periods, and eventual voiding of the concession for failure to abide by concession terms laid out in Ex20.

There is a disputes board and rules for its selection and procedures for its operations. (Ex21)

Terms for terminating the concession are covered in Ex22.

Must affect whole TTC debate

In the second half of next year TxDOT will be opening a heap of great new tollroads in central Texas. TX130 segments 1 to 4 on the east side of Austin, a 79km (49mi) $1.6b stretch will be the first segment of Trans Texas Corridor to open. The success or failure of that together with discussion of the toll concession of what we call TX130-South (segments 5 and 6) from southeast Austin to I-10 will play into the debate on the whole future of the Trans Texas Corridor approach by Gov Perry for the rest of the state.

The open embrace of a financial approach to setting speeds on a tollroad may be judged either bold and innovative or foolhardy and crackpot. We think the former, but suspect many will denounce it as the latter. TOLLROADSnews 2006-07-06

CLARIFICATION: TxDOT spokesman Gabriela Garcia emails us: "SH 130 is not part of TTC-35. Right now, SH 130 lies within the narrowed study area for TTC-35 but a final route has not been selected. Any statement that indicates SH 130 is part of TTC-35 is incorrect."

TxDOT has to take this formal position since the NEPA process still in train for TTC35 requires maintaining the possibility for alternates to the incorporation of TX130 into the TTC35. However it seems to us as a practical matter there is no way they could justify a third expressway route north-south through central Texas and the Austin area. That would cost vast extra sums of money to build, consume land unnecessarily and poach traffic from a new tollroad already struggling to finance itself. Such an alternate TTC35 alongside TX130-S would also trigger the compensation requirements of the concession. So far as we are concerned - we are reporting realities not the legal niceties of bureaucrats - TX130 is destined to be incorporated into TTC35 over most of its length. TOLLROADSnews 2006-07-07 http://www.tollroadsnews.com/cgi-bin/a.cgi/wsAFIA1tEduFEIJ61nsxIA 85mph clause in concession contract Dashed segment is the concessioned portion TX130-S, part of the much longer envisioned TTC35 Construction of the traditional publicly funded portion of 130 is going hot and heavy Conventional toll plaza with mix of highway speed electronic toll collection and stop-to-pay cash payment in construction on the TRX130 North Ramp toll plaza - a hut on legs design which surely deserves an IBTTA award for Ugly & Ungainly Toll Structure of 2006 Northern end of TX130 at I-35 - pictures from TxDOT Pilings in the Colorado River east of Austin for TX130 TxDOT revenue shares under different speed regimes - Exhibit 7 p15 BODY ONLY

Posted speed limits are a major financial issue in the terms of the toll concession for Texas State Highway 130 Segments 5 and 6 (TX130-S for South). The fine print of the concession agreement now available on the TxDOT website shows that posted speed limits are seen as a key to attracting large volumes of traffic from free-competitor I-35.

Exhibit 7 (Ex7) titled Compensation Terms provides that the concessionaire will pay TxDOT three radically different amounts of money depending on the legally enacted speed limits for the new tollroad (TR).

TX130-S TR route runs parallel with I-35 south of Austin toward San Antonio. It is 20 to 25km (15mi) to the east but serves much the same long distance traffic. If higher speed limits are posted on TX130-S then the improved travel times will attract more tollpayers.

Exhibit 7 provides for two approaches for the state to garner a share of higher speed toll revenues: (1) higher upfront concession fees or (2) a higher share of annual toll revenues.

$25m for 75mph, $92m for 80mph, $125m for 85mph

Most rural expressways in Texas were posted for speeds up to 70mph when the concession was negotiated but in the past month have been increased to 75mph (121km/hr). So without special treatment TX130 would now be posted 75mph. At that posted speed TxDOT only gets $25m upfront fee. Ex7.A.2 reads: "In the event TxDOT authorizes, within 180 days after the Service Commencement Date, a maximum daytime posted speed limit for passenger vehicles of 80 miles per hour on the Facility, other than in populated areas or other specific locations where design does not accommodate such speed, and TxDOT affirmatively elects in writing to waive increased revenue sharing under Part B respecting such posted speed limit, Developer shall pay to TxDOT an additional $67 million." There is more refinement on the timing.

Then in Ex7.A.3 the agreement reads that if TxDOT authorizes 85mph for passenger vehicles the concessionaire must pay an extra $100m in upfront fee.

80mph is now the legal posted maximum speed on a 695km (432mi) stretch of I-10 and on 143km (89mi) of I-20 in the west of Texas so there is precedent for 80mph, but there are no highways yet with 85mph posted. In a peculiarity of the law on speed limits in Texas higher speeds are not flat illegal but "prime facie" (considered on their face) to be unsafe speeds and an offense.

There is a formula for refunding the speed-concession fee add-on if the speed limit raises are revoked. (Ex7.A.5)

Different revenue sharing regimes

Exhibit 7 Attachment 1 (Ex1.7) provides schedules of revenue sharing for 70mph (Table 1), 80mph (Table 2), and 85mph (Table 3). Revenue sharing is an alternative for TxDOT to the different concession fees by speed. Under revenue sharing there are three "bands" of toll revenues due a different percentage for TxDOT. The bands specify revenues for each year that are the basis for the percentage, making a huge number of possible outcomes. Thus at regular posted speeds (70mph)

in Year 8 of operations if revenue were say $150m the first $82m would earn TxDOT 4.65% or $3.8m, the second band to $129m or $47m would earn 9.3% or $4m, and the third band of $21m would earn 50% or $14.5m for a total TxDOT take of the $150m of $22.3m. However at 80mph posted speeds the rates would be 9.05%, 18.1% and 50%, while at 85mph the band rates would be 11.05%, 22.1% and 50%. But the different percentage takes apply to different thresholds for each year. Thus taking the same example of $150m in year 8 at 85mph posted speed TxDOT is entitled to 11.05% of $89m or $9.8m in Band 1, 22.1% of the next $54m that's $11.9m, and 50% of $7m in band 3 or $3.5m for a total of $25.2m. That's only a little more than the $22.3m they'd get with 70mph speeds posted. Apparently the thinking is that at higher speeds the real comparison would be with a higher toll revenue number. So if say with $200m in year 8 at 85mph TxDOT would get $9.8m+$11.9m as before in Bands 1 and 2 then 50% of $57m or $28.5m for a total of $50.2m. (We've done some rounding.)

Cintra's Jose Maria Lopez de Fuentes

Jose Maria Lopez de Fuentes, head of Cintra in North America told us in an interview: "This will be a very safe road built to the most modern standards and we think it can operate safely at higher speeds. At higher speeds our studies show we get significantly more traffic, but the decision is up to Texas legislators. We have structured the concession so if we attract more traffic from higher speed, we share the revenues with the state - either in a larger upfront payment or in larger year by year revenue sharing."

COMMENT: There is a lot of inherent logic to this approach. If the 130 TR is to act as an toll express lanes alternative to free I-35 then speeds will play a major role in determining how much traffic the toll road attracts. However the road safety lobby are liable to go ballistic over this approach (they probably haven't discovered it yet). The safety lobby think there is some inherently 'safe' speed for different classes of roads and - we guess - will demagogue the issue of higher speeds being encouraged to earn more toll revenues and more money for TxDOT. We have to wonder whether TxDOT and the concessionaire have spokesmen capable of articulating the case for high speeds.

No public traffic and revenue studies

Most inter-urban roads like this attract relatively light traffic and this tollroad is designed to cater almost exclusively to inter-urban or longdistance trips.

Cintra's Lopez agrees: "We don't expect much local traffic (on the tollroad proper). Any local traffic will tend to use the (free) frontage roads. Most of our traffic will be longdistance traffic."

Most of the route of the concession is in presently undeveloped areas, though with construction of the TX130 South development can be expected off the interchanges, especially at the north end which is close to the developing fringe of the Austin area. We've heard skeptical comments about the viability of this TR, so we asked Lopez about the forecasts.

He declines to release any of their traffic and revenue projections - at least before the financial close which he says should be early 2007. But he insists the project has been proven financially viable. Banks and shareholders are convinced of its viability and fully committed he says: "We could go (to financial close) tomorrow if necessary."

But what are the traffic and revenue prospects? Given that most traffic is local and this pike won't get much local traffic the numbers are bound to be light.

The executive summary of the state's assessment of TX130 - the whole 89mi (143km) project segments 1 thru 6 - said on traffic: "Year 2020 forecasts of SH 130 traffic range from a high of 124,000 vpd within the northern, more urbanized portion of the corridor, to a low of 22,000 vpd in the southern, more rural area." Lopez told us the studies they have had commissioned suggest higher traffic than the state's older estimate. Higher than 22k apparently.

Say 25k to 30k? At 27k and assuming an average trip length of 30mi and an average toll of 20c/mi you have annual toll revenue in 2020 of $59m. They are spending about $1325m ($1300m project cost plus concession fee $25m), or 22 times gross revenue. That's below the ratios of 30 to 40 paid for the Chicago Skyway, Indiana TR and Pocahontas Parkway, and clearly there is no early profit to be had in any of these. The prices being paid are based on projections of much larger returns decades off. Whether they are discounting adequately for risk and to present value is a matter for argument. (Our gut feeling on TX130-S is they aren't discounting adequately and that traffic may well be very light, only 10k or so, for some years, but it would be nice to see some traffic and revenue studies and the assumptions they make.)

A real speed differential in favor of the TR would help a lot, but we wonder how much actual speeds are affected by posted speeds.

QUESTIONS:

Is there going to be the political will to enforce lower speeds on I-35 sufficiently to give the 130 TR the advantage intended by any legislation? And if such legislation were passed would it be sustained in the face of protests against a law designed to benefit the TR. Would it sustain a random run of newsworthy crashes on 130? Seems doubtful to us.

The road - some more from the concession documents

The 64km (40mi) road, with a project cost of $1.3b is planned Texan scale - the right of way is 202m (664ft) wide because it is part of a Texas Transportation Corridor with planning for eventual truck lanes, rail and utilities. Under the concession agreement Cintra-Zachry are building 2x2 lanes with two roadways of full depth pavement 12.2m (40ft) wide providing for two travel lanes shoulder lane and a 1.8m (6ft) inside offset. There is a central median of 45m (146ft) for future expansion inwards. The northern part, nearest Austin has frontage roads each side of 11m (36ft).

The 64km (40mi) long road has twelve interchange points.

The northern part is in open flat country on the fringe of Austin. The start of the road going south makes use of part of existing US183. The southern part has some rolling terrain but no major hills. It crosses no major rivers. The biggest structure will be the three level direct connector interchange with I-10 at the southern end of the project. There's another 3-level Y-interchnage with TX183 in the northern part.

Tolling entirely cashless

TX130 South will be Texas second cashless tollroad after the Westpark in Houston. It will use frontal as well as rear cameras to handle vehicles without transponders. Transponders will be the TxDOT issued eGo sticker tags. There will be 12 sets of ramp plazas and two mainline gantry setups. Contra-Zachary are talking to toll systems suppliers at present.

Tx Terminology

TxDOT and Cintra-Zachry (CZ) signed a Comprehensive Development Agreement (CDA) 2005-03-11 providing for collaboration in conceptual, preliminary and final planning along with some development, design, construction, financing, operation and maintenance. It contemplated further agreements or development of facilities like TX130S. Just under 5 months later on 2005-07-27 TxDOT and CZ agreed on a Facility Implementation Plan Preparation Agreement (FIPPA) for TX130S. 2006-06-29 the FIPPA for carrying out Facility Development Work (the work to be done under the concession) was agreed by TxDOT prior to closing. The Facility Concession Agreement (FCA or concession) together with agreements on right of way, intellectual property, the lease escrow and trust and security documents constitute a Facility Agreement. TxDOT calls the concessionaire the Developer.

Items of interest:

Items of interest in the text of the concession ducments include the following which we report in bullet fashion with reference in parentheses:

Term of concession: 50 years (2.2)

At end of concession: TxDOT may or may not continue tolls. (3.1.4)

90 days notice required of any proposed toll rate changes (3.2.3 and 3.3.1)

Toll revenues the exclusive property of the concessionaire (3.7.1)

TxDOT debts to be paid ahead of payments to affiliates or shareholders (3.7.2)

Refinancings at the option of concessionaire after commencement of service (4.4.2)

Customer records to be kept confidential (8.8.1-8)

State police ("Department of Public Safety" in Texas) to do policing, no private security services allowed to do policing (8.9.1.2)

TxDOT has right at all times to monitor, inspect, sample, measure, attend, observe or conduct tests and investigations and conduct any oversight to audit compliance (9.3.2)

Concessionaire provides TxDOT with information on contracts (10.1.1)

Key personnel must be approved by TxDOT as capable and have any changes approved (10.4.1-4)

Ethical standards to prohibit gifts and lobbying of TxDOT, the commission, the independent engineer and others (10.7.1.1)

Prevailing wages as defined in Texas statutes must be paid (10.11.1)

Compensation for revenue reductions due to competing free facility

Concessionaire has right to compensation to the extent that toll revenue is reduced through development of a competing facility (11.3.2) but TxDOT has unfettered rights to develop competing facilities (11.3.1)

"Developer acknowledges that TxDOT has a paramount public interest and duty to develop and operate whatever TxDOT Projects it deems to be in the best interests of the State, and that the compensation to which Developer is entitled on account of Competing Facilities is a fair and adequate remedy...." (11.3.3.1)

If TxDOT provides notice of developing a competing facility the concessionaire must respond within 120 days with a traffic and revenue study showing likely detriment to toll revenue and make a claim for compensation. (11.3.2.1-4)

Concessionaire is obliged to build extra capacity to maintain a specified level of service. (12.1.1, Exhibit 18)

Improvements initiated by the concessionaire are subject to review and comment b y TxDOT and approval by an Independent Engineer (12.1.2)

Improvements initiated by TxDOT and not required of the concessionaire may be built but at the expense of TxDOT (12.3.1-3)

Inability of the concessionaire to perform to contract may be handled by a "Relief Event" determination, but that is subject to procedures for approval. (13.1)

Default on contract is closely defined (17.1.1) and there are prescribed "cure periods," "warning notices" and other procedures. (17.1.2)

TxDOT's right to "step in" under circumstances of default are specified (17.3.4)

There are many pages specifying damages rights. (17.4)

There are procedures for mediation when TxDOT and concessionaire disagree (17.8.8)

Non-compliance points may be scored against the concessionaire (18.3.1)

In case of the concession being terminated "for convenience" of TxDOT TxDOT shall pay compensation for the remainder of the concession period. (19.1.3) There follow many pages of specifics.

Included among the Exhibits are some of the most important items.

Exhibit 3 is the actual Facility Lease agreement only 9 pages containing some important provisions many expressed in quaintly archaic stuff about "mechanics liens" "hypothecation," and "quiet enjoyment" -lawyers terms that bear no relationship to normal english.

Toll rate regulation annually by state per capita income

Exhibit 4 on toll regulation provides for a maximum toll rate to be adjusted each year and expressed as the maximum toll per mile pre-rated for each tenth of a mile. The adjustment is by the greater of the increase in the nominal state percapita income as measured in indices of gross state product and population published by the US Bureau of Economic Analysis. Toll rates are rounded to the nearest tenth of a cent. The base or starting maximum toll rates are:

Class A vehicles height < 7ft and <20ft long 12.5c/mile

Class B vehicles A plus trailer 25c/mile

Class C vehicles 7ft to 12ft high and length to 46ft without trailer 37.5c/mile

Class D large vehicles with trailer >12ft high or >46ft long 50c/mile

Class E vehicles wit h more than one trailer 62.5c

11c/mi for cars, 56c/mi tractor-trailers

The toll rates are similar to those on new TRs but expensive compared to older TRs. Indiana TR for example has tolls of only 2.7c/mile for cars (12.5c on TX130S) and charges 5-axle tractor-trailers 10c/mile (50c on TX130S). The WestPark TR in Houston however is slightly more expensive than TX130 with car tolls of 11c/mile and tractor trailer tolls of 56c/mile. San Joaquin Hills TR in southern California has car tolls ranging between 20c weekends with transponder and 32c/mile weekdays peakhours with cash, and tractor trailers pay 80c/mile with a transponder and $1.00/mile cash. (Tollrates calculated by full length toll charge/miles end to end, partial trips vary per mile.)

Concession fee of $25m or $92m (80mph), or $123m (85mph)

Exhibit 7 provides for a "concession payment" of $25m.

If however within 180 days TxDOT authorizes an 80mph (129km/hr) posted speed limit in rural sections the concessionaire will pay TxDOT an extra $67m. If TxDOT can get 85mph (137km/hr) approved the concessionaire will pay an additional $100m concession fee. There is also a formula for refunds if posted speed limits are rolled back by the legislature. (Ex7.5)

Revenue sharing

Revenue sharing - the concession provides for sharing of toll revenues laid out in seven pages of tables with three different share rates of 4.65% through 50% of toll revenues with thresholds rising year by year and the rates depending on the posted speed limits - though TxDOT has to choose between an upfront speed related fee and speed related revenue sharing.

Sharing any gains in refinancing - TxDOT gets 50% of any gain in refinancing by the concessionaire (Ex7.C.1)

If federal aid is used in the highway Bacon Davis union wage rates must be paid. State of Texas affirmative action quotas for minorities, women and others deemed disadvantaged must be met by the concessionaire.

TxDOT provides back office services for transponder toll collection including a call center, issue of transponders, violation processing, revenue handling, accounting, and clearinghouse operations with other toll agencies. (Ex14)

TxDOT will receive from the concessionaire a basic 15c fee per toll transaction for transponder toll services and the charge will increase each year with nominal state product per capita.

Video tolls (weirdly called "video trip tolls" - what is a video trip?) may not be charged a premium of more than $1.50 and this cap increases annually with the increase in state product per capita.

Little non-compete protection

Competing facilities are defined to exclude improvements provided for in the 2006-2008 state implementation plan, other 2006 plans and the Austin and San Antonio area 2030 mobility plans, frontage roads to TX130, and the whole of I-35 - seeming to gut non-compete clauses of any meaning. (Ex17p3)

Traffic flow monitoring and reporting requirements are specified. (EX18.2)

A speed measurement system will record average hourly speeds for each direction of traffic and the results will be reported monthly to TxDOT. Equipment must work to an accuracy of +-1%.

Speeds below 65mph (105km/hr) over three consecutive months for more than 5% of hourly speeds will be a first trigger calling for capacity enhancement. Within 90 days the concessionaire must submit to TxDOT proposals for capacity improvement.

Capacity enhancement needed if speeds drop

10% of hourly speeds below 60mph (97km/hr) - excluding incident hours - will be a second trigger. The second trigger will require implementation - design and construction of the improvements within a deadline. (Ex18.4,5) Only outs are if NEPA process blocks capacity enhancement or there are only five years left in the concession. (Ex18.6)

Insurance requirements - a lot of them - are specified (Ex19).

There is a whole elaborate non-compliance regime with trigger points, penalty points, monetary penalties, cure periods, and eventual voiding of the concession for failure to abide by concession terms laid out in Ex20.

There is a disputes board and rules for its selection and procedures for its operations. (Ex21)

Terms for terminating the concession are covered in Ex22.

Must affect whole TTC debate

In the second half of next year TxDOT will be opening a heap of great new tollroads in central Texas. TX130 segments 1 to 4 on the east side of Austin, a 79km (49mi) $1.6b stretch will be the first segment of Trans Texas Corridor to open. The success or failure of that together with discussion of the toll concession of what we call TX130-South (segments 5 and 6) from southeast Austin to I-10 will play into the debate on the whole future of the Trans Texas Corridor approach by Gov Perry for the rest of the state.

The open embrace of a financial approach to setting speeds on a tollroad may be judged either bold and innovative or foolhardy and crackpot. We think the former, but suspect many will denounce it as the latter. TOLLROADSnews 2006-07-06

CLARIFICATION: TxDOT spokesman Gabriela Garcia emails us: "SH 130 is not part of TTC-35. Right now, SH 130 lies within the narrowed study area for TTC-35 but a final route has not been selected. Any statement that indicates SH 130 is part of TTC-35 is incorrect."

TxDOT has to take this formal position since the NEPA process still in train for TTC35 requires maintaining the possibility for alternates to the incorporation of TX130 into the TTC35. However it seems to us as a practical matter there is no way they could justify a third expressway route north-south through central Texas and the Austin area. That would cost vast extra sums of money to build, consume land unnecessarily and poach traffic from a new tollroad already struggling to finance itself. Such an alternate TTC35 alongside TX130-S would also trigger the compensation requirements of the concession. So far as we are concerned - we are reporting realities not the legal niceties of bureaucrats - TX130 is destined to be incorporated into TTC35 over most of its length. TOLLROADSnews 2006-07-07

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