Wednesday, June 22, 2005

"Privately funded?" Cintra-Zachry asks Uncle Sam for a Loan

Texas corridor developer now seeks public funding

Deal had been sealed largely on plan to use private money

Related Article: TTC Project Manager:"Cintra will not ask for local, state or federal contributions."

June 22, 2005

The Dallas Morning News
Copyright 2005

Cintra-Zachry, the consortium that won a $7.2 billion development deal from the state for the first part of the Trans-Texas Corridor largely because it said it would use private money on the massive project, is looking for public funds to help subsidize the corridor's first segments.

The partnership has filed a letter with the Federal Highway Administration stating its interest in applying for a $320 million low-interest loan. If approved, it would help pay for the estimated $1 billion, 42-mile State Highway 130 extension from south of Austin to Seguin that the company identified as a potential corridor project in its letter to federal officials.

For months, state officials have touted the Trans-Texas Corridor as a way to get 316 miles of needed toll roads and rail lines built from North Texas to San Antonio without the use of public funds. And when the state and Cintra-Zachry signed the deal March 11, Gov. Rick Perry's office issued a news release saying that the construction would be done "at no cost to taxpayers."

"I believe we always said state dollars" would not be used, said Texas Department of Transportation spokeswoman Gaby Garcia, drawing a distinction between federal and state money. "At the time Cintra-Zachry came on, we looked only at [whether there would be] the inclusion of state dollars. That's how we defined it."

In December, Cintra-Zachry officials outlined some of their financial and development plans for the corridor, which prominently included private funding for the public project.

José López, director of Madrid, Spain-based Cintra's U.S. and Latin American operations, said at the time that federal loans, known as Transportation Infrastructure Finance and Innovation Act loans, could be used. The loans are used to entice public and private investment in major transportation projects.

"This is part of our normal research in preparing for any eventuality to get needed roads built more quickly," Rossanna Salazar, a spokeswoman for Cintra-Zachry, said Wednesday.

Cintra teamed with San Antonio-based Zachry Construction Corp. and other firms to design and build the corridor project.

If Cintra-Zachry's federal loan request is eventually approved, it would mark only the second such loan given to a private entity for a large road project. An Australian firm received a $140 million loan for a toll road project near San Diego that broke ground in 2003.

Not surprised

Kathy Walt, spokeswoman for Mr. Perry, said he was not surprised that Cintra-Zachry would have to seek innovative forms of financing to help it build billions of dollars of new highways. The request is not a reversal of any of the consortium's previously stated goals about using private funds, she said.

"I disagree that the perception is any different here," Ms. Walt said. "A loan is a loan. It's not a grant, and it will be paid back with interest."

Still, the news that any government money could be used on the project dismayed some state leaders.

"This is the first we've heard of them essentially seeking tax money for the project," said Mike Sizemore, press secretary for Sen. Ken Armbrister, D-Victoria, who has publicly questioned the corridor project. "The whole thing is, it was touted as using private funds."

So does a low-interest federal loan use public money? It can be viewed both ways.

Opponents argue that the funds are coming from the U.S. Treasury, which could use the money for other purposes.

"I didn't think the federal budget has enough money to loan right now," Mr. Sizemore said.

Loan's terms

Federal officials who oversee the program also pointed out that the loan would be repaid with interest. But the terms on such loans usually are favorable to the borrower.

In general, the terms of such loans allow for repayment over 35 years. A recent loan for a Louisiana project featured the government's 4.45 percent interest rate. The loans typically don't require payments to begin until the project is substantially complete, an important point for a proposed toll road that would not generate revenue until it was opened to traffic.

Because it is part of a separate funding program, the loan would not affect the amount of federal highway money Texas regularly receives.

In debating whether public funds are going toward the corridor project, the state Transportation Department also makes a distinction on State Highway 130 itself. Technically, Ms. Garcia said, it is not considered part of the corridor because it received federal approval for construction before the Trans-Texas Corridor development deal was awarded.

In addition, Highway 130 also may not have room for roads, rail lines and utility lines all in one place, one of the key selling points the state has touted.

"If the corridor never moves forward, Highway 130 would be built on its own," Ms. Garcia said. "130 is a stand-alone project from the corridor."

But when the corridor deal was announced in December, the Highway 130 project was the first of six potential road projects listed in a presentation as links in the corridor. In addition, a Federal Highway Administration lists the proposed project name as "Trans Texas Corridor (SH 130 Segments 5 & 6)."

Federal officials could notify Cintra-Zachry within a few weeks whether it can file a formal loan request.

"We know this project is needed," Ms. Garcia said. "We've got to make it happen. The question is how to finance it" with either state funds or a private development deal.

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Related Article: TTC Project Manager:"Cintra will not ask for local, state or federal contributions."