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TxDOT sees tollway profits just around the bend
By Ben Wear
American-Statesman Staff
Sunday, Dec. 16, 2012
News flash: Our local toll roads could all be profitable by 2014.
If only it were that simple.
I got a call the other day from Terri Hall, an anti-toll road activist from the San Antonio area. She had just met with Texas Department of Transportation officials, and they had shared with her the startling news that their system of four tollways in and around Austin would reach profitability by the end of the 2013-14 fiscal year. Hall was skeptical.
I was surprised. In July 2011 when I last checked in on the financial status of the Texas 130, Texas 45 North and Loop 1 tollways — which are combined fiscally as the Central Texas Turnpike System — TxDOT’s own projections showed them losing $20 million to $40 million annually as a group until 2030. After that, most years would be profitable, the projections showed, and by 2042 the three roads would make a $520 million cumulative profit.
Now, a bit over a year later, TxDOT’s numbers have changed. The agency’s latest figures show the roads (there are now four, because the lightly travelled Texas 45 Southeast tollway has officially joined the fold) losing about $3 million this fiscal year, but making about $5 million in profit in fiscal 2014. After that, it’s hit and miss for a few years until the system reaches long-term profitability by the 2018-19 fiscal year.
From 2013 to 2042, the total profit is now shown as $1.53 billion. That net figure doesn’t account for $204 million in tax subsidies since 2007.
The numbers matter for a couple of reasons.
When the toll road system is in the red — meaning revenues are less than debt payments on bonds sold to finance the roads, plus operating and maintenance costs — the difference is made up by gas tax dollars. Which means less money for other highways around the state. And if and when the roads started generating a profit, that money would be available for other transportation projects in Central Texas because state law requires that toll road surpluses be used in the area where they are generated.
So, what changed in the past 17 months or so?
Adding Texas 45 Southeast to the ledger in September helped, but only a little. That road between Interstate 35 near Buda and Texas 130 at Mustang Ridge, which was built with tax money and has no debt, brought in only about $4.2 million in the 2012 fiscal year.
TxDOT this fall also refinanced much of the $2.2 billion in debt it incurred in 2002 to build the roads, decreasing its annual debt service on the system by amounts that vary from $5 million to $20 million over the years.
But two other significant changes take place Jan. 1, and the projections reflect that. The Texas Transportation Commission decided to increase tolls on the northern 49 miles of Texas 130 by 25 percent, and on Texas 45 North and Loop 1 by 50 percent, rate hikes that are both larger and two years earlier than reflected in earlier projections. Beyond that, the commission also decided that the rates will be increased annually from now on using a formula tied to the consumer price index.
At the same time, the agency will stop allowing drivers to pay with cash at toll booths on those three roads (Texas 45 Southeast is “all-electronic” already). Going cashless will not only save money (an estimated $5 million a year, the agency said last week), but could also increase toll revenue. About 8 percent of the system’s users were still paying with cash as of August, while about 20 percent were using the “pay-by-mail” option. The rest have electronic toll tags on their windshields and pay that way.
Cash users have been paying tolls at a rate 10 percent higher than toll tag folks, while the pay-by-mail rate is 33 percent higher than the toll tag rate. So, in theory, if all of those cash payers kept using the road and now were billed in the mail, revenue would go up. Similarly, if usage of the road remains unchanged, the higher toll rates will produce significantly more revenue.
Plus, the southern 41 miles of Texas 130 opened in October, making it a high-speed alternative to I-35 all the way to Seguin. Usage of that new section is slight so far. But that is likely to change over time and, although the revenue from that new section goes to a private company rather than TxDOT, many of those drivers will end up using the TxDOT section of Texas 130 as well.
In the short run, of course, the significantly higher toll rates might drive some people away. Or maybe not. People are getting used to tollways around here and they might be price-proof to some degree. TxDOT said last week it expects traffic on the roads to return to this year’s level in two years.
Usage of Texas 130, Texas 45 North and Loop 1, taken as a group, has increased by 37 percent since 2009. With Circuit of the Americas drawing people to the tollways, and more development in the Texas 130 corridor in the years to come, the numbers will surely increase.
And even the higher toll rates will still be much lower than what tens of thousands of people in Cedar Park and Leander are paying each day on the 183-A tollway, a road built and run by the Central Texas Regional Mobility Authority. That road has been profitable almost from the point it opened in 2007.
TxDOT’s projections show system revenue going up from almost $97 million in fiscal 2012 to about $114 million this fiscal year, about an 18 percent jump.
So, higher revenue, lower costs and, if the projections are right, a tollway system kind of profitable by 2014, and truly in the black by the end of this decade.
It’s not easy to root for a toll road’s balance sheet, so it’s understandable if some of you hold the confetti. But a profitable tollway is better than the alternative.