Regional mobility authority agrees to $160M price for eastern Hidalgo County tollway

Houston-based road developer Gerry Pate arrived in Hidalgo County in August 2007 with a pledge to turn the county’s vision for a highway loop into a reality.

County leaders had envisioned the loop as a way to ease traffic congestion and promote economic growth by developing a route where freight traffic leaving international ports could bypass the county’s main thoroughfares on the way to points north.

And Pate, who had developed similar projects elsewhere, was awarded a $46.5 million contract to develop plans for the western half of the loop while financing the project by leveraging a mixture of local revenues with state funding.

Much has changed since the summer of 2007, but the developer remains the same.

The Hidalgo County Regional Mobility Authority accepted a proposal last week from Pate’s consortium to construct the International Bridge Trade Corridor, a 17.7-mile tollway that connects international bridges in Pharr and Donna to Expressway 83 in eastern Hidalgo County.

Hidalgo County Roadbuilders, the group led by Pate, will also be given an option to submit a price to construct the tollway’s 14-mile companion piece in western Hidalgo County. Together, the two tollways will provide a seamless corridor connecting the county’s international ports and will offer drivers an avenue to bypass congested sections of Expressway 83.

The agreement reached last week is a culmination of the process that began three years ago when the mobility authority — an independent government agency tasked with developing the loop — selected Pate as its point man to bring the project to fruition.

Although the authority scaled down the project from a loop to a set of bridge connectors and nearly forced Pate’s ouster during a financial crunch last year, the developer’s model remains largely the same despite the smaller project.

Pate will finish the corridor’s design, purchase its right of way and construct the eastern tollway for a guaranteed maximum price of $159.6 million. In exchange for agreeing to cover any overages, Pate will receive a risk fee — his profit if the project stays under the guaranteed maximum price.

Pate said the model gives the mobility authority cost certainty as it seeks to finance the project by borrowing against future revenues from the county’s vehicle registration fee and tolls collected along the route — the first tollway in Hidalgo County.

“Our model gives them predictability because I’m guaranteeing the price,” Pate said. “They can finance against a fixed target.”

‘GOOD PRICE’

With the maximum price for the corridor settled, the mobility authority’s attorneys will negotiate the final project development agreement with Pate over the next 90 days.

Specific elements included in the contract — including Pate’s risk fee, right-of-way costs and construction estimates — aren’t public until those negotiations are complete.

Since Pate submitted the guaranteed maximum price in November, a review team hired by the mobility authority vetted his cost estimates for construction and right-of-way acquisition. To reach the $175 million figure the mobility authority’s financial adviser believes it can borrow, Pate and the review team reduced the scope of the project by $30 million.

Frontage roads and access ramps will be limited along the tollway, with only one lane in each direction plus passing lanes at certain intervals, Pate said, but it will be a fully functional, high-speed expressway that will prevent drivers from contending with any at-grade stops.

Pushing ahead with a scaled-down scope will also allow the mobility authority to take advantage of low construction costs and prevent the value of land from quickly escalating. The agency can expand in the purchased footprint once it begins collecting toll revenues.

Mobility authority chairman Dennis Burleson said the guaranteed maximum price allows for a usable tollway that his agency can finance.

“We think it’s a good price,” Burleson said. “This is a road we can pay for and give Hidalgo County the transportation assets that it needs.”

CLOSE TO CONSTRUCTION

Pate's selection also moves the mobility authority closer to construction on the eastern tollway.

Had the mobility authority opted to move forward without Pate, Burleson said, the project would have been delayed about six to nine more months as the agency put it out for bid using the conventional model.

If financing is secured, Pate said construction on the eastern tollway could begin early next year.

That can help restore credibility for the mobility authority, which has been criticized by the public and elected officials for planning expenditures that haven't yet resulted in construction.

Since its creation in November 2005, the agency has spent more than $20 million for advance planning, environmental clearance and schematics — expenditures that Burleson defends as providing a long-range plan for the full loop.

The lion's share has gone to Hidalgo County Roadbuilders and its subcontractors, which have been paid a total of $15.1 million to date.

Those costs nearly led to Pate's ouster last summer when some members of the mobility authority’s board complained the developer had been paid 90 percent of his $350,000-a-month management fee while completing only 25 percent of the work on the loop.

The board worked out an agreement with Pate that ended his monthly payments but still allowed him to submit the proposal to build the tollways connecting the international bridges.

Godfrey Garza, a management consultant for the authority who negotiated with Pate for the past eight months on the tollway's price ceiling, said this week's agreement was three years in the making.

“In the overall picture, we’re moving forward from just planning a project to building something,” Garza said. “It’s the next logical step for the RMA.”

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Jared Janes covers Hidalgo County government, Edinburg and general assignments for The Monitor. He can be reached at (956) 683-4424.