AUSTIN – Texas transportation officials received approval for $1.86 billion in tax-exempt private activity bonds (PABs) to improve mobility in the Dallas area by accelerating development of State Highway 121.
The PABs, allocated by the U.S. Department of Transportation, will be available for private investors who partner with TxDOT to build transportation systems quickly to reduce congestion – one of the department’s five goals along with enhancing safety, expanding economic activity, improving air quality and increasing the value of transportation assets.
Toll revenue will be used to retire the bonds, not state funds.
Private activity bonds allow investors to issue tax-exempt bonds for projects that improve public infrastructure. Until last year, PABs could not be used for highways.
In 2005, Governor Rick Perry asked Congress to make road projects eligible to use PABs.
Texas Congressman Sam Johnson was successful in opening the program to road and rail projects in 2005’s Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU), the legislation that guides how federal transportation dollars are spent.
“This is a very cost-effective way to build roads. As we evaluate all spending priorities, we should turn to private sector resources, expertise and efficiencies in constructing highways. Private Activity Bonds are a step in the right direction,”said Congressman Johnson, a member of the House Ways and Means Committee.
TxDOT was allowed to apply for the funding on behalf of prospective private investors under the proviso that the private companies become the ultimate borrowers and arrange to repay the PABs with toll revenues.“One of our key goals is to reduce congestion and to do that we have made the strategic decision to use all available financial tools,” said Ric Williamson, chairman of the Texas Transportation Commission. “We’re laying the funding foundation to permit the private sector to invest in our mobility projects to accomplish that goal.”
Texas is the first state to apply for the private activity bonds since they became eligible to fund highway projects.