This afternoon, Colorado House Bill 06-1116 (PDF) will be introduced to prohibit diversion of traffic onto toll roads from public roads.

This legislation was inspired by Unbossed's Roads Scholars series last August that focused on non-compete agreements and questionable public financing of private roadways.

I am testifying on behalf of the crack Unbossed investigative team to support HB 06-1116 and have included the text of my prepared remarks below the fold. Wish me luck!

Good afternoon, Mister Chairman and members of the committee.

I am testifying in support of House Bill 1116. I am the editor of Unbossed.com, a public policy weblog. Last August, two of Unbossed’s contributing writers discovered, through a public document search, the non-compete agreements that were designed to coerce the public to use the E-470 toll road instead of an existing tax-payer supported public road.

Their research resulted in a week-long investigative series that featured extensive commentary and highlighted serious questions about non-compete agreements, financing, and conflicts of interest in public-private road projects. The work by the Unbossed bloggers resulted in stories by Reuters, The Denver Post, and The Rocky Mountain News, dozens of cross-posts to other blogs. To gauge the level of concern this issue raised, the stories generated over 93,000 visits to our website.

The fact is: Non-compete agreements are a polite form of highway robbery. They destroy competition, and the point of privatization is supposed to be improving services and lowering costs through competition.

Non-compete agreements also penalize the public in three particularly egregious ways:

First, they are used fundamentally to impede traffic on tax-payer supported public roadways thereby reducing the cost-benefit of already scant public dollars for transportation. Additionally, by reducing traffic on local roadways, locally-owned small businesses that depend on foot traffic and ease of access to their location are negatively affected when potential customers are diverted several miles away to a private toll road.

Secondly, in the case of E-470, which is held up as the model for public-private toll road projects in Colorado, the non-compete agreements aim to deflect Colorado public tax funds into the pockets of out-of-state private bond investors.

On page 8 of the 2004 Annual Report, the E-470 Public Highway Authority boasts:

“Favorable word of mouth and increasingly difficult traffic
conditions on alternate routes helped pave the way
for sizeable increases in traffic.”

The Colorado Tolling Enterprise refers to the importance of non-compete covenants, significant congestion on free roads, and lack of availability of competing public roads on the CDOT website as ways to enhance the private road's credit profile and attract private financing. Apparently, CDOT has forgotten its own covenant to serve the public.

In this case, the E-470 non-compete agreement with Commerce City required that:

• the maximum speed limit on Tower Road be dropped to 40 m.p.h from 55 m.p.h
• three previously unnecessary traffic signals be installed
• no improvements be made to Tower Road unless they are appropriate and consistent with the regional interests of the parties. As we know, the regional interests of the parties were not and are not those of the citizens of Colorado.

Failure to comply would result in Commerce City not being reimbursed for its expenses and a penalty charged of 200% of any reimbursements that the city had previously received on the project.

The non-compete situation with the cities of Aurora, Brighton, Parker, and Thornton and Adams and Douglas Counties was even worse:

• a minimum aggregate contribution of $20 million to the E-470 toll road authority
• a match of $20 million from the Colorado Department of Transportation

Likewise, the cities and counties were prohibited for 15 years from building or improving any road that would compete with E-470 despite the tremendous population growth the area was experiencing and the clear public safety needs for improvements on the local roadways.

Repayment of the $20 million to the cities and counties was contingent upon the toll road authority receiving revenues in excess of its debt repayments plus any authorized expenditures. Keep in mind that no public-private toll road in the US has ever earned a profit. So far that has been the case in Colorado. The financial situation of E-470 and other roads is so grim they have been reduced to junk bond status. So, in effect, the public would never recover its $20 million investment in the private road under its terms.

Lastly, non-compete agreements violate the public trust. Cities and counties hamstrung by these contracts are forced to abdicate their responsibilities to the public in order to meet the private stockholders' expectations as they function not as elected officials but as board members of the toll road authority. It is difficult to imagine a clearer conflict of interest.

Steve Hogan, the executive director of the Northwest Parkway Public Highway Authority and the former director of the E-470 Toll Road Authority, the man who authored the non-compete agreements in the eastern suburbs, wrote in a 2005 Denver Post op-ed that perfectly sums up the situation:

"The public highway authorities that run toll roads should have their primary obligation to their customers and to bondholders, not officeholders, voters or taxpayers."

With $40 million of taxpayer funds devoted to E-470 alone, I find Mr.Hogan's statement repugnant and completely unacceptable. I am certain that the citizens of Colorado would agree with me.

You should be aware that E-470 has been failing to post timely board minutes and weekly transaction reports on its website for nearly a year. At some points these reports have been many months behind. This lack of public information makes it impossible to monitor their performance at a time when its performance deserves public scrutiny.

The need for accountability and transparency in public-private roadway projects in Colorado is clearly evident.

I urge you to pass House Bill 1116 as one simple measure to help restore the confidence of Colorado taxpayers in the stewardship of public funds and trust in effective public oversight.

The hearing will be webcast at 1:30pm MST from House Committee Room 0112.

• tollroad