The result has been a troubling funding gap for transportation infrastructure. Next year, Texas voters will be asked to approve an amendment that will allow $1.2 billion to be taken from the state's "rainy-day fund," fueled by taxes on oil and natural-gas production, to help boost the transportation budget. Without it, the agency will have just $3.9 billion to spend in 2015, which will cover only the costs of maintenance.
Texas P3s are known as "comprehensive development agreements" (CDAs), which are individually approved by the Legislature and represent a binding agreement between the transportation agency and the private companies handling a particular project. For the state, CDAs allow for the leveraging of public funds using other funding sources that often—but not always—involve the use of toll roads or managed lanes.
That financial boost is bolstered by faster project delivery. Projects that would have taken as much as two decades to complete using the traditional segmented, pay-as-you-go method can be completed five to seven years with a P3 approach.
"We have been fortunate enough so far, with the health of the Texas economy, to stay ahead of the finance scenario," Zapalac says. "Funding is tight, and the more we can leverage and the more we can use concession-type projects where they make sense, the more we will."
The trick in formulating successful CDAs is limiting the state's risk while providing sufficient leeway to encourage the private sector to participate. Thus far, Texas seems to have found that balance, as the interest in its projects has been robust. One firm that has been very active in Texas P3s is Cintra US through its subsidiary Ferrovial Agroman US Corp.
"With the strong economic and population growth in Texas and the state's pro-business attitude, we felt it was a natural fit for our business," says Patrick Rhode, Cintra US vice president of corporate affairs. "One of the keys to continued growth is a viable, functioning transportation infrastructure system."
The genesis of CDAs emerged in 1991, when the Legislature green-lighted so-called exclusive development agreements. This allowed the then-Texas Turnpike Authority to enter into P3 contracts (although it did not do so). In 1997, that power was transferred to TxDOT, and, six years later, the Legislature broadened the agency's powers regarding these contracts.
The first P3 initiative in Texas was the state Highway 130 toll road, from south Austin to Seguin, near San Antonio. In 2007, the $1.3-billion project was awarded to SH 130 Concession Co., comprising Ferrovial and Zachry American Infrastructure. The toll road opened in 2012.
For many, the Highway 130 effort is a cautionary tale regarding the P3 strategy. Traffic on the corridor has fallen far short of projections. That prompted Moody's Investor Services to downgrade SH 130's concession rating in April to "highly speculative" and again last October to "high risk of default." Since project financing was arranged by the concessionaire, TxDOT is not on the financial hook—but a default would severely dent the state's effort to use P3s in the future.