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Amendments 7 and 12 May Have Important Local Impacts
This editorial utilizes the facts about Amendment 7 and 12 to draw an opinion regarding their potential impact on the Grand Parkway Segment C development in Fort Bend.
This editorial synthesizes numerous interpretations and expressed opinions and is simply offered here for your information and critical review. You are also urged to visit the following sites for further explanation and analysis of pros and cons.
League of Women Voters, Houston Analysis
Texas Legislative Council Analysis
AMENDMENT NO. 12 (S.J.R. No. 64)
Providing for the issuance of up to $5 billion in general obligation bonds by the Texas Transportation Commission to finance highway improvement projects.
Amendment No. 12 is important because it could provide a source of funding for the Grand Parkway project that is not currently available.
Proponents argue that the proposed amendment would help fill the void left by a reduction in available options for funding highway projects that we need to meet the mobility and economic development needs of the growing population of the state.
Opponents argue that our transportation needs could be met by indexing our gas taxes to the inflation rate, vehicle registration fees and other sources rather than incurring state debt that drives up the cost of projects, ties up money in debt service that should be allocated to other state needs, and transfers costs to future taxpayers.
In 2001 voters eliminated the state’s “pay as you go” financing and allowed the transportation dept to borrow money, and in 2003 the Texas Transportation Commission was authorized to issue bonds backed by the highway fund. Bonds authorized by Amendment 12 would be backed by the general fund under the full faith and credit of the state. This would allow a lower rate of interest, but would also result in a much broader scope of “proprietary” financing vehicles that could be created by investment bankers. Once approved by the attorney general, registered by the comptroller, and delivered to the purchasers, the bonds would become incontestable and general obligations of the state under the Texas Constitution.
Recent passage of SB792 imposed a two-year moratorium on privately funded toll roads which has temporarily, and to a limited extent, restricted TxDOT’s access to these up-front private funds. Many projects around the state, including the Grand Parkway, were permitted to be exceptions to the moratorium. These selected projects can go forward to the extent that local authorities create financing mechanisms. The combination of resistance to foreign investment, declining gas tax revenue, and the diversion of part of the gas tax revenue to needs other than transportation is driving the singular focus on toll revenue as the answer.
For the construction of toll roads, the state has been relying on two types of contracts: those that allow private entities to build the roads and those that allow state or local tolling authorities to build them. Contracts with state or local tolling authorities allow bonds backed by expected toll revenue. Businesses that enter into an agreement with the state make up-front payments in exchange for expected toll revenue.
Given the sparse population and lack of congestion along the corridor proposed for Grand Parkway Segment C, future expected toll revenue would be insufficient to justify an up-front private investment and insufficient backing for public investment without significantly higher tolls than are customary or practical. The $5B proposed bonds in Amendment 12 could serve as a bridge financing measure to circumvent the two year moratorium on projects. There is no restriction on what the $5B could be spent on, so it clearly could be spent on planning and engineering.
There is currently a significant and growing opposition movement by residents along the proposed Grand Parkway Segment C corridor in part because the current proposed design is significantly different than that which they had originally supported and the process was less than transparent, the current proposal would result in numerous negative impacts on residential and business properties, the Environmental Impact Study did not address many of the cumulative impacts of other road improvements and induced development as a result of the project, and the data currently does not support the need or the economics of the project. In addition, opposition is growing for other Segments of the Grand Parkway which could impact Segment C that stretches from Fort Bend from SH59 to SH288 in Brazoria.
Therefore, it would not be prudent to fast-track this project with new sources of funding that could trump the due diligence on Segment C and obligate taxpayers and toll road users with debt over several decades.
AMENDMENT NO. 7 (H.J.R. No. 30)
Allowing a governmental entity to sell property acquired through eminent domain back to the previous owner at the price the entity paid to acquire the property.
Amendment No. 7 is important because it could facilitate increased land speculation around the alignment of the Grand Parkway, likely to induce the growth that could be used to justify the Grand Parkway project.
Since only property owners whose land was taken for cancelled, absent or unnecessary uses are eligible for restitution under this proposition, proponents of the amendment expect it to safeguard against excessive and reckless use of eminent domain by discouraging the acquisition of land for which there are no immediate plans. But the proposed amendment only applies to land that has been condemned under eminent domain (not to voluntary sales negotiated with the highway departments). Oddly there is no expressed time limit, so one would assume that the 10 year limitation would not apply and that a shorter period might apply (The amendment is lacking in implementing legislation and regulations to address the holding period issue.)
Opponents argue that this provision is unfair to land owners who choose to negotiate a sale through eminent domain proceedings. They further argue that a private land owner should not be permitted to invest the proceeds of the original sale of his property to the public entity and then repurchase at the original price because it would be using public money for personal gain.
Now consider that the land owner who is using public money for personal gain is a developer. In this scenario, the developer speculates on the land, sells it to a public entity such as a highway department or tollroad authority, the public entity holds the land for the developer through bond financing (thereby avoiding the tax payments because the land would be held in the title of the state), and then if all/part of the land is not needed for the project, the developer has the option to buy back the land at the original price at a time when the adjacent land values have skyrocketed. In effect, the developer has parked his land at public expense until the land is ready for development and capitalization. This indirect benefit could become a further incentive for development that is at worst out of control and at best lacks the vision and planning the region's citizens called for in the Envision Houston Region public participation process.
http://www.gulfcoastinstitute.org/jay/Citizen_Vision_Final.pdf
http://www.gulfcoastinstitute.org/jay/Citizen_Vision_Final.pdf
Currently, Section 52(a), Article III, Texas Constitution, prohibits the legislature from authorizing a county, city, or other political subdivision of the state from lending its credit or granting public money or anything of value to or in aid of an individual, association, or corporation. Under present law, if a project is canceled after 10 years, then the land must be offered for sale at fair market value, rather than the purchase price. This assures that the appreciated value of the property over time would be fairly taxed in the public interest (i.e. the developer does not get to speculate and park the land).
Because land speculation has been the driving force for the Grand Parkway (not mobility), this provision could be invoked widely and applied unevenly to developers vs. homeowners and state parks/preserves.
Consider this combined scenario:
If approved, Amendment 7 could enable developers to speculate on land purchases along and adjacent to the proposed Grand Parkway corridor, with the state or local tolling authority's promise to buy that land from the developers with Amendment 12 approved bonds backed by the state general fund. This would allow the tolling authority to protect the Right of Way for the Grand Parkway project and to conduct the necessary planning and engineering. This investment would only be prudent however if the developers promise to repurchase at a later date (easy to agree to that deal when guaranteed the original purchase price!) and develop the adjacent land so that projected toll revenue could be tied to projected population increases. Striking that kind of deal could render the Grand Parkway an economical project, which it is clearly not today, but at the irreparable cost to the land and the life of its inhabitants.
It is of concern that Amendment 7 and Amendment 12 could become the vehicles that further enable the interdependency and deal-making that currently seems to drive our land use planning and infrastructure development, rendering private citizens powerless against the inertia of a system that no longer serves the public interest.
