News Release
April 7, 2009
Contact: Alicia Pierce
(512) 463-0103
Senate approves Nichols' bill to reform private toll roads contracts

Austin — Today, the Texas Senate approved Sen. Robert Nichols' (R-Jacksonville) bill to reform the way private toll road contracts are issued.

"Last session the Legislature realized there was an urgent need to fix the way private toll road projects were built, and we imposed a two year moratorium on them to create a better system," said Nichols. "This bill reflects the efforts of stakeholders who worked together to create a process to build new roads and protect the taxpayer."

SB 17 emphasizes local control by giving local tolling authorities the option to develop the project before a private company can. SB 17 prevents private companies from selecting only the best and most profitable projects and leaving the rest for public entities.

"Private financing should be an option to build new roads, but only when public entities cannot meet that need," said Nichols. "State and local entities will build and operate a road in the public's interest, not the shareholder's."

The bill addresses concerns about private contracts, including setting a purchase price if the state ever needs to terminate the contract early and buy the project back from the private investor. Currently, private contracts call for the state to pay "fair market value" but do not specify how this value is determined. This could result in the state being on the hook for billions and a long legal battle. Nichols' bill requires private companies to include a competitively priced pay schedule in their initial proposal specifying what the state would have the option to pay if it ended the contract early.

"By establishing a mutually agreed on price today, we can save billions and keep the state out of court tomorrow," said Nichols.

The bill also reigns in non-compete clauses, which require the state to compensate the private company for lost toll revenue if a competing public or private road is built nearby. Under Nichols' bill, the state could expand any interstate or build any pre-planned project without penalty for the first thirty years. After 30 years, the non-compete clause would expire and the state would be free to build any additional roads without penalty.

"Any new road projects should help increase capacity and traffic flow, not create disincentives to building future projects," said Nichols.

Last session Nichols, a former Texas transportation commissioner, authored a two-year moratorium on private toll roads. During the last two years, he worked with fellow legislators, the Texas Department of Transportation, regional tolling authorities and other stakeholders to develop this legislation.

Sen. John Carona (R-Dallas), the chair of the Senate Committee on Transportation and Homeland Security is a joint author of SB 17. Other joint authors include: Sen. Jane Nelson (R-Flower Mound), Sen. Dan Patrick (R-Houston) and Sen. Florence Shapiro (R-Plano).