SH 99 Business Terms and Condition Negotiations
Background
SB 792 defines a process for determining the “value” of potential toll revenue (net of expenses) collected from vehicles using the proposed SH 99 (Grand Parkway) toll road. The legislation specifically requires MPO approval of the “terms and conditions for procurement and operation” of SH 99, which will guide development of the SH 99 Valuation Study. The valuation study will be conducted by mutual agreement of the Texas Department of Transportation (TxDOT) and Harris County, representing the other six counties traversed by the Grand Parkway. With H-GAC facilitating, TxDOT and Harris County are currently negotiating the SH 99 Business Terms and Conditions.
What is a “Valuation” Study and How Will It Be Used?
The purpose of a toll road “Valuation” analysis is to determine how much revenue will be generated from tolls and to what extent this revenue will exceed (or be less than) the costs to build, operate and maintain the toll road. From the information developed, the “Net Present Value” of the proposed project can be estimated. The “Net Present Value” is one way of determining what the cumulative toll revenues over a defined time period (often 30 to 50 years) net of project expenses would be worth in today’s dollars.
This information from the valuation study is also used to estimate the extent to which the project could be supported by bond financing. In the specific instance of SH 99, the valuation study will be used to estimate revenues that could be generated to support financing not only for construction of SH 99 but, should SH 99 have a positive net present value, for other transportation improvements in our region.
What are the “Terms and Conditions” Employed in a Valuation Study?
There are potentially many “terms and conditions” the Policy Council may consider, including:
- The analysis time period (usually 30 to 50 years)
- Economic and demographic and travel growth in the region and the SH 99 corridor;
- Construction sequencing and timing for major segments of the Grand Parkway;
- In addition to design, right of way, utility relocation, environmental mitigation, construction, operation and maintenance costs of the tollway, other ancillary costs for access to/from the Grand Parkway (including grade separations, direct connectors and interchanges)
- Magnitude and impact of freight transported over SH 99
- Impact of other transportation investments enhancing or diminishing potential toll revenue
- Toll rates and future growth in toll rates
- Financing costs.