Houston Strategies

HCTRA is wonderful! (according to HCTRA) while investigative reporters circle...

Labels: governance, government transparency, HCTRA, toll roads

posted by Max Concrete @ 5:29 PM 0 comments

2025 HCTRA financial statement: $399 million diverted out, second highest ever

Another excellent but sad guest post from Oscar Slotboom documenting the outrageous looting of HCTRA 😡 Let's hope the next County Judge can turn it around...

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The Harris County Toll Road Authority (HCTRA) fiscal year (FY) 2025 financial statement was posted on their site on April 21.

Harris County diverted $398.6 million of toll revenue out of HCTRA, which is the second highest annual diversion in HCTRA's history. It is a huge increase compared to 2024, which was $193.4 million.

This plot shows HCTRA toll revenue since 2004. 2025 toll revenue was $1.028 billion, a record for actual value. On an inflation-adjusted basis it is slightly below 2015, 2016, 2018 and 2019, with the all-time inflation-adjusted high $1.073 billion in 2019. Collection of tolls was substantially improved, going from an administrative loss of $44.7 million in 2024 to a gain of $5.93 million in 2025 (schedule 5 on page 57). HCTRA's total revenue was $1.125 billion, which includes $95.2 million in investment income. Total traffic count of 667.5 million is also a record, exceeding the previous record 648.3 million in 2024.

This plot shows diversion of toll revenue out of HCTRA, called "Transfers out" in the financial statements. Diversions have been substantially above historical values since Democrat control of Harris County Commissions Court in 2019.

This plot shows the percentage of toll revenue diverted out of HCTRA since 2004. 38.8% of toll revenue was diverted in 2025. The six-year average before Covid, from 2014 to 2019, was 16.8%. The six-year average after 2019 is 40.2%.

Where is the diverted toll revenue going?

Diverted toll revenue goes into the county Mobility Fund. (There was a one-time diversion of $300 million into a separate Infrastructure Fund in 2021.) The Harris County Annual Comprehensive Financial Report (page 290) shows the FY 2025 starting balance of the Mobility Fund was $376.1 million, expenditures were $249.7 million, and transfers in were $401.1 million (slightly above the toll diversion), leaving the fund with a FY 2025 ending balance of $547.0 million.

For the $249 million in expenditures, the comprehensive financial report shows $8.1 million to parks, $190.6 million to roads and bridges, and $51.0 million to "capital outlay", which is an expense which is also depreciated. Transparency and/or details of these large spending amounts has never been readily available, as Bill King (1, 2) and Wayne Dolcefino also discovered when they investigated how this money is spent. Dolcefino calls this fund the county commissioner slush fund (1, 2, 3, 4, 5, 6, 7). In April 2025, in response to legislative scrutiny, Harris County changed the allocation of funds to precincts to better match actual road mileage and needs in each precinct (page 79). The 2026 budget (page 80) recommends $180 million toll money for precincts, which is equal to the budgeted toll diversion (page 24). Actual amounts may differ.

The large balance in the mobility fund generates investment income, and the 2026 Harris County Budget (page 80) states that in 2026 a new accounting fund for "mobility fund interest" will be created. This fund will have the same restrictions as direct toll diversions, including the "related facilities" loophole which enables spending on non-road projects. Eligible uses are "the study, design, construction, maintenance, repair, or operation of roads, streets, highways, or other related facilities."

Harris County might be managing toll diversion amounts for political expediency. HCTRA finances were subject to scrutiny during the 2025 legislative session, so it was probably expedient to show a lower-than-usual diversion of $194.3 million in 2024. This year, with no scrutiny, Harris County diverted $399 million, 39% of record-setting toll revenue. If my suspicion is correct, 2026 will have a lower toll diversion.

It appears that Harris County is keeping the mobility balance very large, and padding it as much as possible, perhaps as insurance for any possible future legislative action to curtail diversions or redirect surplus toll revenue. In the 2025 legislative session, a bill sponsored by Senator Bettencourt to redirect surplus revenue out of HCTRA was passed in the Senate but did not get House support. (more details here)

The $283 million black hole in the financial statement

Separate from "Transfers out", the financial statement reports "Services and fees", which was a record $282.6 million, 27.5% of toll revenue. Page 11 of the financial statement says, "This is an increase of $72,126,093 from the prior year due to processing additional transactions tied to the onboarding of the Toll Services Agreement and additional resources needed for agency growth." This explanation is vague, and also doesn't explain why "services and fees" has been over $200 million for the last 3 years (page 55, excerpt below). As we'll see below, the "growth" is a growing budget, while HCTRA's project delivery remains dreadfully slow.

Where is this "services and fees" money going? The HCTRA financial statement provides no details. The Harris County comprehensive financial statement provides no details. The Harris County Purchasing Department procurement portal has a list of all active and pending contracts, but does not report contract value. I compiled a list of all active and pending contracts which include "toll" or "HCTRA" in the contract name, and others which are likely for HCTRA, which results in 106 items (spreadsheet). Most items appear to be low value (tens to hundreds of thousands per year), such as software licenses. Since this list is probably not comprehensive and it lacks contract values, it is impossible to make any conclusions.

56% Budget increase between 2024 and 2026

The Harris County 2026 budget document (page 42, excerpted below) shows the HCTRA budget has increased from $275.3 million in 2024 (actual) to $429.6 million (adopted) in 2026, a 56% increase. The actual 2026 amount will differ from adopted, and could be lower.

Category "Administration and support" shows the largest increase, from $39.5 million actual in 2024 to $87.6 million budgeted for 2026, a 122% increase, but is partially explained by a shift of $19 million into this category from another program. (page 49)

All these budget increases are happening with only one significant construction project in progress - the ship channel bridge, which is years behind schedule, and four connectors at the bridge and SH 225. Project delivery has been dismal for the last 8 years. Long-planned projects, such as the Hardy downtown extension, toll plaza modernization and connectors at Hardy/Beltway 8, are delayed year after year. This certainly looks like an expanding bureaucracy with a substantial decrease in project delivery productivity.

How much does it cost to collect tolls?

To an economist, the cost of collecting tolls is a "transaction cost". In an efficient economy, transaction costs should be minimized, and we want the cost of toll collection to be as low as possible. Lower transaction cost = higher productivity = higher incomes. Traditional road funding from the gasoline tax is very efficient. Google AI agent states, "The gasoline tax is highly efficient to collect, with administrative costs generally estimated to be less than 1% of the revenue generated."

The cost of collecting tolls is not reported in the HCTRA financial statement. Viewed from the budget perspective, it is likely covered within the $303 million in the 2025 budgeted amounts for administration and support ($54.5 million), customer service ($103.6 million) and tolling solutions ($145.5 million).

In contrast, the 2025 financial statement for the Fort Bend County Toll Road Authority explicitly states the cost of collecting tolls is $11.4 million of $68.5 million in toll revenue, an alarmingly high 16.7%.

What is HCTRA's cost to collect tolls? Is HCTRA becoming more or less efficient? There's no way to answer these questions from the financial statement.

Bond Activity

One item of good news is that there was not a major issuance of new debt in FY 2025.

The financial statement (page 32) reports on activity occuring after the fiscal year. Previously I reported on serious financial mismanagement by Harris County and HCTRA (see section "Commercial paper shenanigans"). In 2020 Harris County diverted $554.1 million out of HCTRA, 99% of toll revenue for that year and the largest ever annual diversion. Soon afterwards HCTRA had insufficient funds for operations and needed to issue the K and K-2 series of commercial paper debt, which carried a 10% interest rate for the first period which cost $25.89 million. The K and K-2 debt was defeased by issuance of $227.44 million in long-term (30 year) debt maturing in 2055.

Instead of defeasing the debt with surplus toll revenue, Harris County diverts $399 million of toll revenue out of the agency and adds $227 in long-term debt to HCTRA.

More transparency, please

As I've stated in previous posts, HCTRA and Harris County need to provide more transparency about the huge costs reported in its financial statement.

• Harris County needs to provide a detailed accounting of spending of toll revenue diverted into the Harris County Mobility Fund.
• HCTRA needs to provide an itemized list of spending in the costly "Services and fees" category.
• The financial statement needs to report on the total cost of toll collection, like the Fort Bend County Toll Road Authority financial statement.

Part 2

HCTRA has saturated local media with advertising. In part 2 I will investigate the cost of the marketing campaign.

Labels: governance, government transparency, HCTRA, toll roads

posted by Max Concrete @ 1:40 PM 1 comments

The Original Three Sections of the Sam Houston Tollway Pay for Themselves Every 3 Years

This week we have another excellent analytical guest post from Oscar Slotboom:

In the recent legislative session Representative Shaheen, representing the North Dallas suburbs, introduced a bill to end perpetual tolling. The bill required that a tollway becomes a freeway after all construction costs are paid, with the facility transferred to either TxDOT or the county for free operation.

The bill didn't make it out of committee, but it did remind me that I and hundreds of thousands of toll payers are victims of the most flagrant instance of perpetual tolling in Texas: the original three sections of the Sam Houston Tollway.

Construction cost with interest: around $978 million

The approval of the Harris Country Tollway Authority (HCTRA) by voters in 1983 with $900 million bond funding authorized the construction of the original three sections of the Sam Houston Tollway and the Hardy Toll Road. Section 1 from US 59 (Southwest Freeway) to I-10 (Katy Freeway) opened in June 1988, section 2 from I-10 to US 290 opened in June 1989 and section 3 from US 290 to I-45 (North Freeway) opened in July 1990. One lane in each direction was added in the early 2000s.

Original cost, 1980s, millions*	$420
Interest, estimated 5% for 30 years	$400
Widening, early 2000s**	81.1
Interest, estimated 5% for 30 years	77.2
Estimated Total Cost	$978 million

*Press report    **HCTRA document

Three-year revenue: $1.04 billion

Looking at the three most recent HCTRA financial statements for 12-month periods (there was a transitional 7-month fiscal year in 2022), these three sections of the Sam Houston Tollway generated $1.038 billion in revenue.

2021 (millions)	$351.45
2023	$342.39
2024	$344.25
Total Revuene	$1.038 billion

HCTRA data for the original three sections is available back to 2001. Since 2001, these three sections have generated $5.95 billion in revenue, which is $7.97 billion in today's dollars.

Of course, there are operation and maintenance expenses. If this expense is $10 million per year, it is only 3% of annual revenue. Other improvement costs were also incurred, such as connection ramps to the SH 249 Tomball Parkway and Westpark Tollway, ramp modifications, toll plaza modifications and miscellanous work like lighting. This HCTRA document shows they are all small costs over the last 25 years, adding up to less than one year of current toll revenue.

A previous blog post reported on the huge diversions of toll revenue to the Harris County budget, which has amounted to $1.486 billion in the last 5 annual reports, averaging $297 million per year.

With tolls in place 35 to 37 years, high toll rates and heavy traffic, the typical toll payer on the original three sections of the Sam Houston Tollway is surely thinking that the toll road paid for its construction cost long ago. Yes, this is correct. Now the tolls are being used to finance diversions of toll revenue to Harris County.

Should tolling at high rates continue perpetually?

If you are a toll payer, the answer is almost surely no. If you are a government official distributing "surplus" toll money or an entity receiving the money from toll payers, you surely want tolling to continue.

Of course, work-from-home employees can avoid tolls. These workers are usually higher-paid professionals. Lower paid service workers don't have the option to work from home, such as those working in warehousing, education, health care, construction, industrial and Bush airport operations. These lower-paid folks are paying the price for perpetual tolling on the original three sections of the Sam Houston Tollway.

Labels: governance, government transparency, toll roads

posted by Max Concrete @ 1:01 PM 9 comments

Texas Just Launched a Four-Pronged Attack on the Housing Crisis

This legislative session has culminated in a landmark victory for property rights and housing affordability in Texas. Thanks to the tireless work of advocacy groups like Texans for Reasonable Solutions, which championed this entire suite of bills, Governor Abbott has now signed four powerful pieces of legislation that represent the most significant pro-housing reform the state has seen in decades. This isn't a single, timid step; it's a coordinated, multi-front assault on the regulatory red tape that has driven up housing costs and limited options for Texas families.

For years, we've watched major Texas metros grapple with an affordability crisis born not of scarcity of land or lack of demand, but of an ever-growing thicket of municipal ordinances. These four new laws—HB 24, SB 840, SB 2477, and the capstone bill, SB 15—take direct aim at the root of the problem: artificial constraints on supply. Let's break down each of these strategic wins.

1. HB 24: Ending the "Tyrant's Veto"

One of the most pernicious, anti-growth mechanisms in Texas zoning has been the "protest-by-a-small-minority" rule, rightly dubbed the "tyrant's veto." Under the old law, if owners of just 20% of the land area near a proposed zoning change objected, it triggered a supermajority vote (three-fourths) of the city council for approval. This gave a handful of NIMBY ("Not In My Back Yard") neighbors disproportionate power to block new housing projects that a simple majority of elected officials, and likely the community at large, supported.

Championed by Rep. Dustin Burrows and Sen. Bryan Hughes, HB 24 fundamentally restores fairness to the process. The bill targets the most common use of the veto by raising the protest threshold for adjacent property owners to 60% and, crucially, removes the supermajority requirement for those protests.

The result: A small group of opponents can no longer single-handedly kill beneficial projects. This strengthens property rights for landowners who wish to develop housing and empowers city councils to make decisions for the good of the entire city, not just a vocal few.

2. SB 840: Turning Underused Commercial Strips into Homes

Drive through any major Texas city, and you'll see them: aging, half-empty strip malls, vast parking lots, and underutilized commercial corridors. This is what I call "greyfield" land—already developed and served by infrastructure, yet failing to meet its economic potential. SB 840, led by Sen. Bryan Hughes and Rep. Cole Hefner, provides a powerful tool for recycling this land into something far more valuable: housing.

The bill allows residential and mixed-use housing to be built by-right on land zoned for commercial or retail use in Texas's largest cities. This means developers can bypass the lengthy, expensive, and uncertain rezoning process to build multifamily or mixed-use projects. The law builds on the stunning success of similar reforms in Florida, which saw over 15,000 housing units approved in its first year.

The impact is threefold: It unlocks a massive supply of land for infill development, which reduces sprawl and conserves precious farmland. It puts downward pressure on rents by increasing the housing supply where it's needed most. And it revitalizes unproductive commercial areas, turning them into vibrant, walkable neighborhoods.

3. SB 2477: Unlocking Empty Offices for Housing

The post-pandemic world has left Texas cities with millions of square feet of vacant office space. Houston and Dallas have some of the highest office vacancy rates in the nation. This is not a cyclical dip; it's a structural shift. SB 2477, from Sen. Paul Bettencourt and Rep. Jared Patterson, offers a common-sense solution: let people live there.

Much like SB 840, this law legalizes the conversion of vacant office buildings into residential housing by-right. It streamlines the process by waiving costly and often unnecessary requirements like traffic impact analyses and new parking minimums that were designed for a commercial-use building, not a residential one. With polls showing 71% of Texans support this idea, it's a clear policy winner.

This is the definition of sustainable growth—recycling existing structures to meet a critical need without using an inch of open space.

4. SB 15: The Starter Home Revolution

The final and perhaps most crucial piece of the puzzle is SB 15. With an overwhelming 90% of Texans viewing housing costs as a problem, the need for more attainable options is undeniable. For decades, many cities have used large-lot zoning requirements as a tool to mandate low-density, high-cost housing, effectively outlawing the construction of more affordable "starter" homes.

SB 15 takes direct aim at this exclusionary practice. In Texas's largest cities (150K+ population in counties of 300K+), the law now limits a city's ability to impose a minimum lot size greater than 1,400 square feet in new subdivisions. It also reigns in excessive setback, height, and bulk rules for these smaller lots, giving builders the flexibility to provide a wider range of housing products.

We don't have to guess at the results. Houston’s pioneering 1998 reform provides a real-world case study, resulting in a boom in townhomes that in 2021 averaged just $310,000 compared to $545,000 for traditional single-family homes. Analysis shows the potential is enormous: Dallas could add over 120,000 starter homes and Fort Worth could add 26,000 on available land under the new rules. This is the kind of sustainable, market-driven solution that encourages infill development, conserves farmland, and boosts tax revenue per acre.

A New Era for Texas Housing

Individually, each of these bills is a significant victory. Together, they represent a paradigm shift. The Texas Legislature and Governor Abbott have sent a clear message: the state will no longer allow arcane local regulations to stand in the way of housing production. By neutralizing the NIMBY veto, unlocking underutilized properties for residential use, and allowing the market to build the smaller, more affordable homes that Texans clearly want, this legislative session has laid the foundation for a more prosperous and affordable future for our state.

Labels: affordability, development, governance, home affordability, land-use regulation, zoning

posted by Tory Gattis @ 4:18 PM 7 comments

HCTRA Update: Legislative session is a bust for reform, but no action is better than bad action

Labels: governance, government transparency, toll roads, transit

posted by Max Concrete @ 8:49 PM 0 comments

Whitmire = Bob Lanier, Vision Zero doesn't work, people prefer sprawl over walkability, and more

  Clearing more from the smaller items backlog this week:

• This Texas Observer piece on Houston's northside is so scattershot and random and socialist/left-wing biased it's hard to know where to start. Houston is bad because... it has gentrification, inequality, racial tensions, and suburbanization/sprawl like every other city in America?? Because it has the most affordable housing among the nation's major metros, but not affordable enough for the very poorest populations??

At the end, he calls for communities to control their own fate vs. developers, but isn't that what every other over-zoned and over-regulated city in the country has done resulting in a massive national housing affordability crisis?? The fact is that we called it right when we said Houston had the right formula for housing supply and affordability, and the rest of country is finally catching up to that. This incoherent, woke, down-with-capitalism/free-markets rant adds nothing helpful to the conversation. 

• Why so many Americans prefer sprawl to walkable neighborhoods in the Washington Post piece (no paywall archive link).

• While walkable neighborhoods like Clarendon offer convenience, they can be expensive and lack living space compared to suburban "sprawl."
• Despite the benefits of walkable neighborhoods, surveys show that many Americans prefer the spaciousness of suburban sprawl, especially older, less-educated, and Republican-leaning individuals.

• Portland City Auditor: Vision Zero Doesn’t Work by Randal O'Toole (The Antiplanner).

• I got quoted! 'In many ways Whitmire is, in the words of longtime Houston blogger Tory Gattis, “the second incarnation of Bob Lanier: focused on running a good city, not caught up in the urbanist dogma"...Apparently, Bayou City voters aren’t chomping at the bit to see their city become the next Portland.” From "These Mayors Understand How to Run a City" in the City Journal.

Labels: affordability, governance, home affordability, inequality, perspectives, sprawl, vision zero, walkability

posted by Tory Gattis @ 4:41 PM 6 comments

The advantages of no-zoning in Houston, The Economist on Dallas, Chicago's fiscal warning

 Clearing more from the smaller items backlog this week:

• No-Zoning Flexibility (and Complications): The Houston Landing recently explored Houston's lack of traditional zoning (with a leftist bias, of course). While acknowledging it adds some complexity (requiring deed restrictions, etc.), experts cited in the piece note the significant flexibility it provides, contributing to our ability to adapt and grow more dynamically than zoned cities. It reinforces that our system, while different, has tangible benefits.

• Houston's No-Zone Recipe Keeps Housing Affordable: Hat tip to Barry Klein for sending The Daily Economy piece that summarizes Houston's success. Judge Glock highlights how our unique approach allows the market to respond quickly to demand, preventing the kind of artificial scarcity and price spirals seen elsewhere. The key elements? No zoning, minimum lot size reform, and a responsive development community. It's a recipe other cities could learn from.

• Chicago's Fiscal Woes - A Cautionary Tale: This NYT Opinion piece details the severe fiscal challenges facing Chicago and Illinois, largely driven by pension debt. It's a stark reminder of the importance of fiscal discipline and realistic accounting for long-term liabilities – lessons Houston and Texas have generally taken to heart, contributing to our healthier financial position compared to many older northern cities.

• The Economist: Dallas: Utopia for the Trump-curious CEO - The Texan city embodies the allure of small government. The description definitely sounds similar to Houston:

"The city boasts an enviable standard of living. Scorching summers are a small price to pay when a typical house costs a fifth less than in Austin and half as much as in San Francisco. “You don’t need to know some secret handshake to get your kid into a private school,” gushes a banker. Co-workers raise eyebrows when you do not go to your child’s 2 o’clock school play, marvels another.

Best of all, enthuses a venture capitalist, Dallas is “unabashedly American” in its embrace of meritocracy and free enterprise. “If you are successful, any prejudice melts away,” agrees a CEO. The result is a virtuous circle. Business begets growth, growth brings people, people draw restaurants, culture and buzz"

Labels: governance, home affordability, land-use regulation, zoning

posted by Tory Gattis @ 4:59 PM 3 comments

HCTRA Part 2: spiraling debt and outrageous costs

Another excellent followup investigative guest post by Houston Freeways author Oscar Slotboom. Be warned: this will make you nauseous if you like good government.

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In my previous post, "HCTRA: from model agency to delay, divert and do nearly nothing", I documented how HCTRA has hugely increased diversions of toll revenue and drastically curtailed construction. To summarize

• HCTRA had $935 million in revenue in 2023, and $410 million in profit.
• $369.3 million was diverted out of HCTRA in 2023. Diversions have averaged $345 million per year in the years 2020-2023. Harris County diverted $1.292 billion of toll funds out of HCTRA in the last 4 years, which is around $830 million above historical levels.
• For the period 2020 to 2023, diversions were 46.3% of toll revenue and 45.3% of total revenue. It appears this trend will continue for 2024 and 2025 based on budget documents (page 81), although the percentage may be in the mid-thirties since there were one-time transfers in the 2020-2023 period.
• HCTRA awarded approximately $1.648 billion in construction contracts in the six years prior to 2019, but only two projects for around $297 million in the six years after 2019. Long-planned projects like the Hardy downtown connector, toll barrier removal and the SH 225/Sam Houston interchange have been delayed for years.

The Loophole

Are these large diversions legal? Apparently yes, using a loophole in Section 284.0031 of the Texas Transportation Code which states "The commissioners court of a county or a local government corporation ... may authorize the use or pledge of surplus revenue to pay or finance the costs of a project for the study, design, construction, maintenance, repair, or operation of roads, streets, highways, or other related facilities." It appears the phrase "other related facilities" is used to justify diversions to anything remotely related to a road, and the term "maintenance" may allow toll revenue to go into maintenance budgets for marginally related facilities. Of course, money that would normally fund precincts, non-HCTRA engineering or general administration can be shifted to other "focused objectives" (starting on page 52), nearly all of which have nothing to do with infrastructure.

HCTRA's financial statement for fiscal year 2024 (ended September 30) will be available in April. The Harris County 2024 budget indicates at least $300.5 million in transfers. For the current fiscal year, the Harris County budget (excerpt below) indicates at least $305 million in transfers, but we won't know the official audited amount until April 2026.

$950 million in new debt in 2024, and another $2.15 billion on the way

With toll revenue being diverted out of the agency, there's no money to pay for planned projects. The result: a huge increase in debt is in progress.

The 2023 HCTRA financial statement shows $1.999 billion in debt principal and $111.9 million in commercial paper principal outstanding for a total of $2.1 billion. In the near future, we can expect debt to rise to around $5.2 billion, a 148% increase.

HCTRA issued $950 million debt in June 2024, the first of what is expected to be multiple debt issues.

This May 2024 credit opinion document from Moody's Ratings has more information about the HCTRA debt issuance program. Some key points are excerpted below.

"HCTRA expects to fund the remaining $3.5 billion of its five-year capital plan with existing capital funds, commercial paper and proceeds from past and future toll road revenue bonds. HCTRA projects that $3.1 billion of the remaining $3.5 billion will be funded by new debt issuance. We anticipate issuance between $800 million and $1 billion of annual debt issuance over the next few years."

HCTRA has expressed an intent to issue $3.1 billion in new debt. $950 million this year is only the start. This means that HCTRA's debt principal will skyrocket to around $5.2 billion within a few years.

If the huge toll revenue diversions were not occurring, HCTRA would have around $215 million per year available to dedicate to the capital program, which would greatly lower the debt needed to complete the investment program.

"Some of the other major projects planned are removal all tolling barriers, the largest project with expected construction costs of $1.6 billion. There is also a related $238 million project for toll system enhancements."

Say what?!?! $1.838 billion for removing toll barriers and toll system enhancements? Yes, it's true, if you look at this HCTRA document (page 5) you'll see "Barrier Free HCTRA" listed at $1.61 billion, which is more than the way-over-budget ship channel bridge ($1.45 billion).

Good grief, this is outrageous! At least half the toll road system is already barrier-free, and only sections built before 2000 have barriers. Since this work will mainly apply to the original three sections of the Sam Houston Tollway (Southwest Freeway to North Freeway) which have paid for themselves many times over, this certainly smells like paying tolls to pay for the collection of tolls.

HCTRA needs to provide a detailed listing of the costs in this program. Is this project a trojan horse to disguise bloated administrative costs? Who knows, but a detailed listing of estimated costs of all elements in the project would shed some light on this appalling cost. (Attention Houston Chronicle!)

"HCTRA in September 2023 updated the toll rate policy to again increase rates at the greater of CPI and 2.0%"

"... we expect that HCTRA will have sufficient revenue growth through transaction growth, resumed annual toll rate increases, and fee revenue to maintain strong credit metrics in line with Aa2 rated peers."

"Factors that could lead to a downgrade: Failure to adhere to new toll escalation policy without reductions in the capital plan"

Moody's expects that toll rate increases will be needed to maintain HCTRA's credit rating, and HCTRA appears to have a policy in place to start increasing tolls.

"HCTRA faces risk from organization structure given the increase in transfers to the county for non-toll road projects. The toll road operates as a division of Harris County. Its operating board is comprised of members of the county commissioners court, all five of whom are elected officials."

"The elected county commissioners court directly oversee the authority, reducing the level of independence of rate setting versus peers."

Yup, we know the transfers are siphoning off a large percentage of revenue. Actually, I'm surprised Moody's isn't more concerned about it, but there is some discussion on page 4.

It appears that HCTRA is governed solely by Commissioners Court, with no independent oversight. Of course, the political minority (Republican Jack Ramsey) has no influence in the matter, and the majority does what it wants, and it could be a case of one or two individuals steering these decisions. In sharp contrast, the North Texas Turnpike Authority has 9 directors, with 8 appointed by four different counties and one by the governor. This prevents one or two people from having too much power.

Overall, Moody's says HCTRA can most likely withstand the massive debt increase, mainly due to the strong financial position inherited when Democrats took control of Commissioners Court in 2019, and with expected toll increases.

We don't get much for $3.5 billion

So what do we get for $3.5 billion in capital spending, including $3.1 billion in new debt? Not nearly as much as I would think or hope. For example, this spreadsheet shows total construction payments of $1.45 billion from 2001 to 2022, including construction of the Westpark Tollway, Tomball Tollway, Sam Houston Northeast, Sam Houston tollway widenings, Fort Bend Parkway and extensive miscellaneous work. Now it costs $3.5 billion for a smaller number of long-planned projects that have been delayed for years and years. Sure, there's been inflation, but the new capital projects program seems like poor bang for the buck.

Using cost numbers here and here and an estimate, I come up with Ship Channel Bridge $726 million for remaining work, Hardy Downtown connector $226 million for remaining work, Hardy-Sam Houston connectors $310 million, Sam Houston-SH 225 connectors phases 1 and 2 estimated $350 million and the Lynchburg ferry $15 million. That adds up to $1.627 billion. This is just about the same as the barrier-free program at $1.61 billion. The total is $3.24 billion.

Commercial Paper Shenanigans?

Looking at HCTRA's 2023 financial report page 33, there is a discussion of the issuance of commercial paper, which is short-term financing as opposed to long-term bonds. Issue K authorized $200 million in May 2022, and issue K-2 authorized $150 million in May 2023.

HCTRA diverted $799 million out of HCTRA in 2020 and 2021. Then HCTRA issued $350 million in commercial paper in 2022 and 2023. It looks like so much money was diverted that HCTRA was short of money, so it had to tap credit markets to pay bills. In other words, the bank account was empty.

For both credit issues, HCTRA paid a 10% interest rate for 270 days, amounting to $25.89 million. Why did HCTRA need to pay 10% interest? Is this sound financial management - running the bank account dry and then taking out $350 million in loans with 10% interest for a period of time? The interest on the commercial paper after the 270 days is not stated, but the payment schedule shown on page 34, using estimated dates and the Excel XIRR function, suggests a rate of 5.88%.

The 2023 financial statement says remaining principal was $111.93 million, but the Harris County 2025 budget (page 90) shows huge adopted amounts for payments in 2024 and 2025 on Series K and K-2, including $320.3 million budgeted for 2025 (see budget excerpt below). Looking at the commercial paper reports, I can't make any sense of the numbers. Perhaps we'll get some clarity in the next HCTRA financial statement.

Wayne Dolcefino investigates HCTRA

HCTRA services contracts are another world which I haven't even attempted to dissect. Services and fees were $213.4 million in 2023.

Investigative reporter Wayne Dolcefino has investigated HCTRA's service contracts and recently posted a video with results of his investigation. Dolcefino reports that certain contracts have been transferred to firms with politically well-connected ownership, and the cost to HCTRA has gone up substantially after the work was transferred.

 

Tolls go on Forever, no matter how much HCTRA customers pay

The Chronicle recently reported that tolls will continue forever, regardless of how much customers have paid on particular sections, even on sections which have paid for themselves many times over, such as the original three sections of the Sam Houston tollway, completed in 1988 to 1990.

The 2023 HCTRA financial statement states, "When all of the debt service has been paid or provided for in a trust fund, the Toll Roads will become a part of the State of Texas Highway System." What will HCTRA do to continue charging tolls forever? Continue to divert toll revenue, and issue more bonds to ensure the agency is perpetually in debt.

HCTRA's Game, post 2019

So now we get a clearer picture of HCTRA's modus operandi since Democrats took control of Harris County Commissioners Court in 2019.

1. Divert a high percentage of toll revenue out of the agency for use elsewhere, 46% in recent years and probably in the mid thirties percent going forward. (2020-2023 included large one-time transfers.)
2. This money gets distributed to the commissioners, the county engineering department (not HCTRA engineering) and general administration. Once in the budgets of those departments, it appears to be used at their discretion for anything they can justify as "related uses" to roads.
3. With toll revenue being siphoned off, planned and committed projects are delayed for years, and the price escalates.
4. With available money running short due to diversions, issue billions in bonds to pay for the cost of planned projects and also higher-interest short-term commercial paper to pay bills.
5. According to the Moody's report, toll rate increases are expected in the future, imposing a higher cost burden on businesses and individuals in Harris County and extending tolling farther in the future (2054 for now, but future bonds will extend it).

Sad but true, HCTRA has degenerated into a Chicago-style, debt-driven machine rife with inefficient project delivery, high costs, cronyism and increasing debt. Customers of the toll road system will pay for this, making the Houston area a more expensive place to travel and conduct business.

Can this be fixed?

Since HCTRA operates at the direction of Commissioners Court, and Commissioners Court has created this situation, the only potential remedy is state-level legislation, which has been done before in 2021 with SB 1727.

Some possible legislative remedies could include

• Eliminating the loophole in the transportation code, and require all toll surplus funds to be used directly on the toll road system or to pay off debt.
  
• Limiting the amount of toll revenue which can be diverted out of HCTRA, for example to 15% of toll revenue annually.
• A state takeover of HCTRA to stop all diversions and implement policies for efficient and timely project delivery, and customer-friendly policies to reduce and eventually eliminate tolls.

Dear Santa: all I want for Christmas 2025 is for TxDOT to take over the Harris County Toll Road System!

Labels: governance, government transparency, toll roads

posted by Max Concrete @ 4:50 PM 4 comments

HCTRA: from model agency to delay, divert and do nearly nothing

This week we have one of Oscar Slotboom's best guest posts to date, although sadly with bad news about the state of HCTRA, which used to be one of the crown jewels of Harris County. If you know anybody in the Texas Legislature (including your rep), please pass it along. Thank you.

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Once upon a time, the Harris County Toll Road Authority was a model agency that regularly delivered projects quickly and efficiently at a low cost. This efficient and financially conservative approach put HCTRA in a very strong financial position.

Democrats took majority control of Harris County commissioners court in 2019. Since then, HCTRA has degenerated into an agency which gets very little done and takes forever to move forward with any project, in spite of collecting huge revenues from the public.

Reduction in new contracts since Democrat control

HCTRA has awarded only two new major construction contracts since 2019, with a nearly five-year hiatus between awards, and only one project which was planned and prepared after 2019. (reference 1, 2)

The list below shows contract awards in the six years before Democrat control and six years after, keeping in mind that the 2019 project on the Tomball Tollway was already poised to proceed.

Contract(s) Awarded	Project
August 2024	Sam Houston Tollway at SH 225, 5 connection ramps, $205 million
December 2019	Tomball Tollway (SH 249) at Grand Parkway, 4 connection ramps, $92 million
2017	Sam Houston Tollway widening, I-45(S) to SH 225: $199 million
2017	Sam Houston Tollway Ship channel bridge : $934 million (original contract amount)
2016-2017	Hardy Toll Road downtown connector, Lorraine and Collingsworth: $47 million
2015-2016	Sam Houston Tollway widening, SH 288 to I-45(S): $185 million
2014-2015	Hardy Toll Road widening, FM 1960 to Grand Parkway: $84 million
2013-2016	Tomball Tollway main lanes, Spring Cypress to county line: $200 million

Ship Channel Bridge

The project contract was awarded in April and June 2017. It has been delayed for years and sustained a major cost increase, around $487 million. This 2023 HCTRA document lists the current cost at $1.449 billion, up from the original reported cost of $962 million.

The 2018 failure of a bridge designed by the same engineering firm, Figg Bridge Group, prompted an independent design review. Based on the design review findings, HCTRA made major changes to the design, including replacing structural concrete bridge sections with steel structures.

Figg also designed TxDOT's new Corpus Christi harbor bridge, which is longer and taller than the ship channel bridge. TxDOT paused construction for an independent design review which resulted in findings and recommended adjustments, but a major redesign was not required and the concrete structural design was retained.

Of course this problem occurred before 2019 and was inherited by the post-2019 management. But was the costly major redesign really necessary? HCTRA can justify it based on the independent consultant report, but a major redesign was not needed for the longer and taller Corpus bridge.

Delayed Projects

Toll plaza modernization

HCTRA has plans to replace the outdated toll plazas along the original three sections of the Sam Houston Tollway, from the Southwest Freeway to the North Freeway. This project was listed as costing $494 million in this 2022 document, but the current cost of this project is unclear.

This project is surely a sore point to customers on these three sections of the tollway. This segment consistently generates over $300 million per year in revenue ($336 million in 2023) and has paid for itself many times over since all sections were completed in 1990, but HCTRA wants to spend hundreds of millions to continue to collect tolls. It certainly smells like paying tolls to pay for the collection of tolls.

An eye-opening investigative report on Click2Houston.com in February 2024 was not able to get answers from HCTRA about this project, stating "that the total price tag remains uncertain as HCTRA was unable to provide us with numbers". The report concludes that this relatively simple project would require "a total of nearly 8 years to reconfigure and reopen the publicly funded toll lanes along the Beltway" at the plazas. The video states "The now four-year delay in reengineering of the tolls is attributed to the pace Harris County government operates these days."

Hardy Toll Road Downtown Connector

Preliminary work on this project has been ongoing for a very long time, starting with work to relocate a railroad track in June 2003. Contracts for completed projects at Collingsworth and Lorraine were awarded in 2016 and 2017, and the project appeared ready to proceed to construction in 2018.

When Democrats took control of Commissioners Court in 2019, it became clear that the majority did not want to this project to proceed, in particular Judge Lina Hidalgo, and the project was suspended in May 2020. But there were longstanding agreements between HCTRA, the City of Houston and TxDOT to build the project, and TxDOT funded the $36.5 million replacement of the Elysian Viaduct, which connects to the project.

So HCTRA went into the delay mode. It hired a consultant to conduct a reevaluation process, community meetings and "visioning" in 2022. This visioning process resulted in recommendations to make the entire length an elevated structure or a cut-and-cover tunnel (1 2 3), with a 0.83-mile-long tunnel from north of Lorraine to south of Collingsworth. No cost estimates were provided, but the vision design would drastically increase the cost, probably by hundreds of millions of dollars.

Parks on a deck ("cap" in TxDOT parlance) above a freeway are trendy these days, but this is the most absurd proposal for a cap park I've ever seen. The purpose of cap parks is to connect neighborhoods which were severed by past freeway construction, or create park space where land is not available. Neither condition exists along the downtown connector. The connector is alongside a long established and heavily trafficked multi-track railroad corridor. The deck park will be alongside or near the railroad, not connecting any neighborhoods. It would, however, provide good views of warehouses, scrap yards and freight terminals on the east of the the railroad. Google aerial view shows there is plenty of vacant land in the area, and it's difficult to justify a massive expenditure for a strip of park land around 80 feet wide.

So is this super-expensive redesign a poison pill intended to indefinitely delay construction by increasing the cost? Maybe. Since the majority on Commissioners Court appears to be against improvement and expansion of the toll road system, it could also be a way to burn up money which otherwise could be going to highway and street improvements.

Interchange at the Sam Houston Tollway and SH 225

This project is the low hanging fruit among the planned projects, since it has negligible negative impact and would directly benefit motorists connecting to and from the Sam Houston Tollway and SH 225. This project has been delayed for years, but HCTRA was obligated to proceed because it is part of a 2018 agreement between HCTRA and TxDOT. The $205.4 million contract for five connectors was awarded in August, and this is the first HCTRA contract for a major project planned and prepared after 2019.

Interchange at the Hardy Toll Road and Beltway 8

The project has been delayed for years and the HCTRA site now says "Construction is expected to begin in 2026."

HCTRA's Guiding Principles since 2019: Delay and Divert

HCTRA revenue has fully recovered from the impact of Covid, with revenue at a record $935 million in fiscal year 2023, including $896 million in toll revenue. (However, inflation-adjusted revenue was higher in 2015, 2016, 2018 and 2019, see chart).

Every planned project is being delayed year after year, and of course costs have escalated rapidly during this period, with the highway cost index up 65% since October 2021. Delay may be the intent of the majority on Harris County Commissioners court, since they appear to be against making improvements to the toll road system.

Instead, Harris County Commissioners Court has drastically increased diversions of surplus revenue out of HCTRA, which is called "transfers out" in financial reports. Diversions include a longstanding amount for general mobilty, and additional transfers are mainly or entirely to flood control budgets, but of course budgeting is like a shell game, where money that normally could have gone to flood control can be redirected to other purposes. In the four years from 2020 to 2023, Harris County diverted $1.29 billion out of HCTRA ($1.45 billion in 2024 dollars), which is about $824 million above the long-established transfer rate. HCTRA toll revenue has become a slush fund for Harris County Commisioners Court.

Have Legislators in Austin Noticed?

The Texas Legislature authorized HCTRA with legislation in 1983 (SB 970). HCTRA in 2024 collects massive revenue from the public, diverts toll revenues to general government and gets very little done in terms of construction. Is this what the Texas legislature intended? I don't think so.

Toll roads have become a hot political issue around the state in recent years due to sky-high tolls, excessively punitive penalties and general arrogance of toll road agencies. In May the Dallas Morning News did a comprehensive report of the discontent called Toll Trap (overview, part 1), and an accompanying DMN editorial stated the following in a commentary called "Texas made the wrong decision on toll roads".

The state of Texas has abdicated its responsibility to provide necessary transportation infrastructure in exchange for a vast web of toll roads controlled by a patchwork of powerful, self-interested organizations that often act to the detriment of residents.

That’s our conclusion after reading a yearlong investigation conducted by our newsroom into how Texas built more toll roads than nearly all other states combined over the last two decades, and the alarming consequences for the public.

A subsequent report hinted at the possibility of toll road reform in the 2025 session: "As lawmakers have grappled with how to ease toll expenses on motorists, some say the time is ripe for them to reform Texas’ complex tollway system"

My Preference

The state Legislature gives, and it can also take away. My preference is for the State of Texas to disband HCTRA due to its mismanagement and ineptitude, and take control of toll road system, including assuming its debt. Under state control via TxDOT, diversions of toll revenue to Harris County would stop. Then the system should be managed to be customer-friendly by reducing and eliminating tolls. TxDOT should cancel plans to spend hundreds of millions of dollars to modernize toll collection on older parts of the system which have long paid for themselves. Instead, tolls on the original sections of the Sam Houston Tollway, from the Southwest Freeway to North Freeway, should be entirely eliminated. Surplus toll revenue should go to local projects, including projects currently being planned by HCTRA.

This may be wishful thinking. But it appears that Harris County is attempting to repair its soiled reputation in Austin, possibly to preempt any legislative action. At the November meeting of the Texas Transportation Commission, Harris County Commissioners Tom Ramsey and Leslie Briones spoke to the commission in support of a new era of partnership between TxDOT and HCTRA. HCTRA Executive Director Robert Trevino, whose salary was recently increased to $485,000, was also in attendance. (video, "open comment period" starting at 34:15)

All the the long-planned projects remain on HCTRA's to-do list, and this October 2024 document has schedules for contracts. HCTRA also launched two studies, the Westpark Tollway Capacity Optimization Study and the Harris County Truck Route Study & Freight Corridors Plan. Will HCTRA actually be able to get these jobs done, or just continue its policies of study and delay?

Let's hope something happens to improve HCTRA's performance - either legislative action or mandates from Commissioners Court to get things done. Ideally, we can bring back the pre-2019 HCTRA that got the jobs done quickly and efficiently.

Labels: governance, mobility strategies, toll roads

posted by Max Concrete @ 10:10 AM 4 comments