Reason's newest Surface Transportation Newsletter by Bob Poole talks about Harris County's dangerous raid on HCTRA's toll road money, and this is so important I'm reposting it in full here (highlights mine):
Toll Agency Politicized in Houston
"Back in September, the governing body in Harris County, Texas—the Commissioners Court—voted 3-2 to take over the respected Harris County Toll Road Authority (HCTRA). They created a government corporation that will divert toll revenues to things like flood control and help to pay for deepening the Houston Ship Channel. This political move undercuts the widely followed principle of most U.S. tolling: users-pay/users-benefit. Harris County will receive a $300 million lump sum from HCTRA, followed by $90 million a year indefinitely.
Another part of the deal calls for refinancing HCTRA’s $2.7 billion worth of toll revenue bonds to take advantage of today’s historically low-interest rates, with estimated savings of $60 million per year. That’s a move HCTRA could have made on its own, in the interest of delivering better value to its toll-paying customers. And its well-managed counterpart in the Dallas/Ft. Worth metro area—the North Texas Tollway Authority—the same month announced its own debt refinancing, but without any revenue diversions.
The Houston change was decidedly political, with the three Democratic commissioners voting in favor while the two Republicans voting against it. One of the Republicans, Steve Radack, was quoted in the Houston Chronicle saying, “This is a money grab. They are going to use it to pay for things that are normally paid for via property taxes.” Also opposing the takeover was David Hagy, executive director of the American Council of Engineering Companies, who supported the sensible refinancing but not the county’s money grab. And the Transportation Advocacy Group urged the Commissioners to at least use the diverted funds for transportation purposes.
I wonder how the rating agencies will view this politicization. HCTRA’s current bond indenture, as well as state law, limits the use of surplus revenues to non-toll roads, streets, and highways, according to a Q&A provided by the Harris County budget office. If that’s true, there might be grounds for bondholder litigation.
Moreover, while short-term thinking would say this is only a small amount of revenue diversion, the real danger is that it sets a precedent and provides no safeguards against future raids on HCTRA’s toll revenues. Transportation professionals know what has happened to the Pennsylvania Turnpike when that state’s legislature imposed Act 44 mandating that the Turnpike divert $450 million per year to the state DOT for transit subsidies. The Turnpike has had to significantly increase its bonded indebtedness, and enact large annual toll rate increases to meet the new debt service. That same fate could await HCTRA’s toll payers the next time Harris County faces budget shortfalls."
This piece first appeared on Houston Strategies Blogspot.
Tory Gattis is a Founding Senior Fellow with the Urban Reform Institute and co-authored the original study with noted urbanist Joel Kotkin and others, creating a city philosophy around upward social mobility for all citizens as an alternative to the popular smart growth, new urbanism, and creative class movements. He is also an editor of the Houston Strategies blog.
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