Friday, December 17, 2004

Texas Transportation Commission votes unanimously to accept Spanish company's bid

Spanish contractor to begin Corridor

$7.2 billion in privately built toll roads planned from Red River to San Antonio

December 16, 2004

The Dallas Morning News,
Copyright 2004

AUSTIN – State leaders on Thursday unveiled what they hope will be the next era of Texas transportation with a proposal to funnel $7.2 billion in corporate money to help build a privately operated toll road from the Red River to San Antonio in nine years.

The Texas Transportation Commission, with Gov. Rick Perry in attendance, voted unanimously Thursday to accept a bid from Spanish company Cintra to build the first leg of Mr. Perry's ambitious Trans-Texas Corridor plan.

The proposal calls for Cintra and its partner, San Antonio-based Zachry Construction Corp., to build $6 billion worth of toll roads by 2013. Other segments to the Mexican border would be built later. Details must be negotiated by the end of February.

As part of the deal, the company also pledged to pay the state an additional $1.2 billion. In turn, the state agrees to allow the company to set and collect tolls on whatever it builds for the next 50 years.

"I have an idea a lot of people in the state of Texas don't realize how big this is yet," said Mr. Perry, who envisioned the plan more than three years ago. "I'm not sure I do."

Both sides still must hammer out more precise – and binding – details of what will be built and when. That process will involve an initial 60-day period, followed by up to 12 months of negotiations that will result in final goals, project financing and project schedules.

All ideas, costs and locations presented Thursday were preliminary.

Still, the proposal could offer some hope for Dallas-area motorists looking for an alternate, free-flowing path to an increasingly congested Interstate 35. Part of that path will include State Highway 130, a $1.5 billion project east of Austin that will connect with corridor segments and stretch from Georgetown to northeast of San Antonio.

The scale of the project is unprecedented in Texas, and also is at least two to three times as big as any current Cintra project, said Jose M. Lopez, the company's director for U.S. and Latin American operations.

Funding sources

The company expects to finance the road through several sources, including private investors such as pension funds, special taxing districts and about 20 percent to 30 percent of the company's own equity, Mr. Lopez said.

The concept calls for the state to own the land and lease it to Cintra. The state also will not guarantee the debt or financing sought by Cintra. Tax-exempt bonds like those used through government agencies also are not under consideration.

"When you have a project that has solid standing, you normally finance it in different ways" than tax-exempt bonds, Mr. Lopez said.

When completed, the 600-mile corridor generally will parallel Interstate 35 from the Red River to the Rio Grande. Many compared the proposal to President Dwight Eisenhower's push to build the interstate highway system in the 1950s. Only this time, the proposal calls for the entire Trans-Texas Corridor to be paid for with private funds.

"This is one of those days where actions speak louder than words," said state Rep. Mike Krusee, R-Round Rock, chairman of the House Transportation Committee. "You have made this the most historic day in transportation, not just for Texas but for the United States, since Eisenhower."

When first proposed, the corridor idea included provisions for freight and passenger rail lines, new utility corridors and truck lanes. Aside from a Central Texas rail relocation project and creation of some truck lanes east of Austin, the initial project outline presented Thursday made virtually no mention of rail, truck lane or utility projects until 2025 and beyond.

Even with massive amounts of private investment, Thursday's decision will have a big effect on the pocketbook of Texas motorists. The state encouraged bids that limit the amount of government involvement, but that lack of participation could raise project costs – and potentially tolls. Cintra now must strike a delicate balance between using state funds, charging tolls and using excess toll revenue to pay investors or extend the corridor into less-congested areas.

Although specifics have not been finalized, Cintra could set its tolls in the 10- to 20-cent-per-mile range.

"The general assumption we have made is for tolls to be in line with actual tolls in the state of Texas," Mr. Lopez said.

Principal Partners

Cintra is a publicly traded company based in Madrid, Spain. The company has years of transportation experience, including major investment and operating interests in the $1.8 billion Chicago Skyway, the $3.1 billion (Canadian) 407 ETR highway in Toronto, and several highway investments in Spain, Ireland, Chile and Portugal. Cintra is also the leader in the parking lot business in Spain, managing more than 200,000 parking slots. Cintra's parent company, Grupo Ferrovial, is also publicly traded.

Zachry Construction Corp. is a family-owned construction and industrial maintenance service company in San Antonio. Its projects are from coast to coast, with a concentration in the southern United States. During the last 80 years, Zachry has completed more than 5,500 projects, including power generation plants, chemical refineries, highways, bridges and dams. Locally, Zachry Corp. has been involved in the $261 million Dallas High Five interchange, $85 million Interstate 35E reconstruction and $113 million Central Expressway reconstruction.

SOURCE: Dallas Morning News research

Deals involving private toll roads in other states have included provisions to prevent widening of a nontoll highway nearby. The preliminary proposal does not include any noncompete clauses, Mr. Lopez said. Texas Department of Transportation officials added that they will continue with plans to widen the congested interstate to three lanes in each direction, but they probably would not have the money to do anything else.

"We fully expect that there will be a limit on our ability to compete with a road he [Cintra's Mr. Lopez] is going to be spending his money on," said Ric Williamson, chairman of the transportation commission. "They need to have an expectation that they can generate a profit."

Project's critics

The move toward building such a massive project has drawn its share of critics. The state Republican Party and the Texas Farm Bureau oppose the corridor.

Leaders of cities along I-35, including Dallas, Hillsboro and Laredo, have formed the River of Trade Corridor Coalition.

Although not opposed to the corridor concept in general, its members have questioned whether a new toll road would siphon vehicle and truck traffic that is the lifeblood of many communities along the interstate. State officials say the impact on communities will be reviewed.

Other critics worry that, because much of the road can be built with private funds, the state will not conduct as many public hearings before construction begins. They also say that such a major deal deserves more than just oversight than from a board with all of its members appointed or reappointed by Mr. Perry.

"There has not been a public dialogue," said David Stall, founder of Corridor Watch, based in Fayetteville, east of Austin. "There has not been any discourse on whether Texas is ready to have a massive, closed corridor across the state."

The federal environmental review process will allow for public input, Mr. Williamson said.
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