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ARTBA Conference: Texas legislators threaten private financing for roads

US private finance pioneering state Texas is in danger of losing its power to use the funding mechanism because of politicians’ fears over public backlash.

The Texas Department of Transportation (TxDOT) was the first state in the USA to approve the use of private finance.

But now tens of billions of dollars worth of projects are at risk because the current state legislators have grown cautious of the mechanism.

The public perception of private finance in the USA has taken a beating in the last two or three years after foreign concessionaires made large profits from toll roads in Indiana and Chicago.

The outcry was sufficient to scare away state legislators across the USA from the approach.

In Texas, TxDOT lost its general authority to enter into PPP agreements in August last year. At present it can only do PPP deals in exceptional circumstances. But from August 2011 it will lose even this power.  

It wants this situation reversed.

“Current funding levels will not cover the needs of the state,” TxDOT assistant executive director for engineering operations John Barton told the Artba conference.

“There are projects worth tens of billions of dollars at risk. I expect to see extensive discussion on this in the 2011 legislative session.”

Barton said promoters of PPPs had learned the lessons of Chicago and Indiana.

“We have learned the hard way that communication with the public is the most important thing. We have learned, and we now have guiding principles in place,” he said.

Texas’ most recent PFI deals are its most pioneering.

On the I-635 concessionaire developer Cintra will use dynamic variable pricing to manage traffic over a 20km stretch. Traffic speeds must not fall below an average of 50mph or it will not get paid.

Cintra is also concessionaire on the North Tarrant Expressway, where as part of the deal it is being paid $2.5M (£1.6M) to develop a masterplan for further schemes in the area. It has 10 years to develop ideas, which it could then also bid for.

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