TxDOT Has A New Private Sector Partner For SH 130

Changing one private sector partner for another one hasn’t left any bumps in the road for motorists, the state of Texas or taxpayers.

Changing one private sector partner for another one hasn’t left any bumps in the road for motorists, the state of Texas or taxpayers. In the contractual agreement between the parties, all project risk got shifted to the private sector partner and as a result the agreement protected not only the state but also the public at large.

Over a year after filing for Chapter 11 bankruptcy protection for a subsidiary belonging to a private company that designed, constructed and operated segments of State Highway 130, it was announced recently that new owners have stepped in to operate and maintain the roadway.

The new partner will also bring $260 million in new financing to the Texas toll road and assume the existing contract between the Texas Department of Transportation (TxDOT) and the partnership. There are no problems and the state has a valuable new public asset.

The former owners took on about $1.4 billion in debt to acquire right of way, design the roadway and then construct it. The issue that created problems the private sector firm could not resolve was the ‘demand projections for road usage.

Simply put, the projections were wrong. Income generated by tolls did not meet the projected numbers and the financial model would not work. The private firm was forced to hand the project off to another company that was interested in stepping in to partner with the state of Texas.

Since opening to the public in 2012, toll rates on the 41-mile southern section of State Highway 130, from Austin to Seguin, have remained consistent.

The toll rates are set by the TxDOT and neither the state nor TxDOT were financially impacted by the restructuring.

This story originally published by Strategic Partnerships, Inc.