HCTRA Update: Legislative session is a bust for reform, but no action is better than bad action
This week we have another excellent guest post from Oscar Slotboom.
In December I reported on HCTRA's massive diversions of toll revenue, financial mismanagement and dismal project delivery (part 1, part 2). Bill King has reported (1, 2) on HCTRA's lack of financial controls and poor transparency. Investigative reporter Wayne Dolcefino has exposed HCTRA's slush fund and financial improprieties. The Dallas Morning News did an extensive report called "Toll Trap", documenting how toll road agencies statewide work against the public interest.
So as the Texas legislature convened in January I was hopeful there would be legislation to reform HCTRA and perhaps toll roads statewide.
The result: nothing relating to HCTRA passed. In fact, I don't see a single meaningful bill statewide relating to highways, toll roads, high speed rail or public transit which passed. (search by subject) (Some non-meaningful bills like naming sections of highways passed.) The legislature was not in a mood to do anything relating to transportation.
However, getting nothing done is better than something that does more harm than good, which seemed likely in May for HCTRA. After bill SB2722 was approved by the Senate and seemed poised for a House vote, perhaps Harris County Commissioners Court will take the initiative to improve HCTRA management, project delivery and financial transparency. If not, we can hopefully get legislation in 2027 with meaningful reform and cleanup of HCTRA.
SB 2722: Initially disastrous, amended to be tolerable, then dies
Just before the bill filing deadline, Senator Bettencourt introduced SB2722 targeting HCTRA. When I read the text I was horrified.
- It mandated that 100% of toll "surplus revenue" is distributed to Harris County and the City of Houston (CoH).
- The City of Houston would receive 30% of surplus toll revenue, ostensibly for providing emergency services on toll main lanes in Houston.
- There was no limit on the annual diversion of toll revenue, and the diversion continued in perpetuity.
- The bill's only redeeming quality was that it strictly required Harris County to use toll diversions for road improvements and imposed an audit to verify compliance. There was minimal restriction on use of the funds by CoH.
Let's consider these bill features one at time.
On point 1, "surplus revenue" is somewhat ambiguous but would likely be very large. HCTRA reported income of $410 million in 2023 and $407 million in 2024. Harris County and CoH would be incentivized to maximize surplus revenue to maximize legally-mandated diversions into their budgets. How to do you maximize surplus revenue? First, you build as little as possible. Second, you issue bonds when you do build a project, instead of using available toll revenue. Third, you keep tolls artifically high. This is exactly what HCTRA is already doing, resulting in dismal project delivery, more debt and high toll costs to the public.
A legally mandated diversion of surplus toll revenue sets a very bad precendent. SB2722 basically says that surplus toll revenue should be diverted to local governments, potentially to spend as they please, which undermines already underfunded transportation resources.
On point 2, the huge payoff to CoH is totally unjustified. 30% of HCTRA profit in the last two years is around $120 million per year. Harris County took the initiative and risk to launch HCTRA in the 1980s. HCTRA continuously invested to expand the system and grow revenue. CoH did nothing. HCTRA says they spend $43 million per year to handle 98% of incidents on the entire system (not just the sections in CoH). This is entirely consistent with my observations, since I see HCTRA assistance and constables on the toll roads all the time, and I virtually never see Houston police or fire/ambulance. Yet CoH made the highly implausible claim that they spend $19 million per year handling incidents on the toll road main lanes in Houston. Even if $19 million was valid, the likely payout to CoH would have been vastly larger, with few strings attached.
On point 3, the original version of the bill passed out of committee had no limits, not on diversions of toll revenue, and not on duration of diversions. HCTRA bond payments are slated to drop in the future (although this may change as HCTRA issues more debt), and revenue will probably increase. It is plausible that around 60% of revenue would be "surplus" revenue in the future. (Net income was 45.7% or toll revenue in 2023 and 46.5% of toll revenue in 2024.) Of course, governments expand to spend revenue and it could become difficult or impossible to stop the diversions in the future.
On point 4, there was a strict requirement that 95% of the share of surplus funds going to Harris County (which would get 70% of the surplus amount) must be spent on roads using a new formula for distribution. But of course money is fungible. More toll money going to Harris County means money normally slated for roads could be used elsewhere. Restrictions on the use of funds by CoH were minimal, simply sending the money to the police and fire departments.
SB2722 passed out of committee on a 6-3 vote on April 16.
Amendments, House Substitute, then it Dies
On April 29 SB2722 reached the Senate floor for a vote. It was amended to place an $80 million annual limit on toll revenue diversions to CoH and ended diversions to CoH in 2030, passing on a 21-8 vote. But there was no limit on diversions to Harris County.
The House Transportation Committee considered the bill on May 13 and submitted a committee substitute, which limited payments to CoH to $25 million per year and retained the expiration in 2030. There was still no limit on the toll revenue which could be diverted to Harris County. This version was far better than the original version, but provided no requirements for Harris County to build toll system projects and no protection for toll payers.
The House substitute was never placed on the calendar for a House vote. On Thursday May 29, the Houston Chronicle officially declared SB2722 dead. Yay!
Statewide
While HCTRA mismanagement is the main problem in Houston, overzealous criminal prosecution of individuals with unpaid tolls is the main problem North Texas and was the focus of extensive reporting by the Dallas Morning News. (overview, Houston case study)
"Each year, thousands of drivers are hauled into court for unpaid fees. Some have their car registrations yanked and others are sent to jail even when they have proof the fees they were charged are incorrect. These practices make Texas one of the country’s harshest and most unforgiving states for unpaid toll fines, the investigation revealed."
"Texas is one of only a handful of states that criminalize toll drivers for unpaid fees and where courts regularly issue arrest warrants over the debts."
All bills relating to toll roads, including toll billing reform, died in committee. A highly controversial bill related to the use of public transit sales tax in North Texas also died.
The reality for this session of the Texas Legislature is that there was no appetite to do anything relating to toll roads.
Labels: governance, government transparency, toll roads, transit
posted by Max Concrete @ 8:49 PM
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