Tuesday, June 19, 2007

"Eastland said that he regretted that he had not mentioned that Price Waterhouse Cooper had worked for Cintra on the Trans-Texas Corridor."

NTTA Takes $5 Billion Tollway From Cintra


by Richard Williamson
The Bond Buyer
Copyright 2007

DALLAS — In a dramatic reversal, the North Texas Regional Transportation Council yesterday handed a $5 billion toll project to the North Texas Tollway Authority less than four months after it originally selected private development team Cintra/JPMorgan.

The vote must be seconded by the Texas Transportation Commission, which had already approved Cintra’s bid in February — before the competition with the NTTA.

Despite the NTTA’s late-entry to the bidding, top officials said the authority could quickly catch up to Cintra’s plans for completion of the road by 2010.

“We’ve already commenced work to ensure on-time delivery,” said NTTA executive director Jerry Hiebert. “We’re certain NTTA will be on time for the financial close.”

The battle between the NTTA and Cintra was set up in March, just days after the 23-mile tollway in Denton and Collin counties north of Dallas was awarded to Cintra. Cintra emerged as the favored bidder after three years of developing its proposal.

By contrast, the NTTA developed its 800-page proposal in less than a month after state Sen. John Carona, R-Dallas, persuaded the RTC and Texas Department of Transportation to reopen the bidding to the toll authority, a division of the state.

While the NTTA proposal appeared to trump Cintra’s bid by about $100 million, analysis by TxDOT and the auditing firm of Price Waterhouse Coopers showed that Cintra’s proposal netted out as the better value due to a variety of factors.

In its presentation to the RTC board Thursday, NTTA board chairman Paul Wageman and Hiebert sweetened their original offer of $2.5 billion in an up-front payment and $833 million over the life of the project. At the board’s request, the NTTA would make the entire $3.3 billion payment for the project up-front, they said.

The authority, which operates 64 miles of toll roads in the Dallas-Fort Worth area, has complained of unfair treatment of its proposal and of conflicts of interest involving Price Waterhouse Coopers. After PWC issued its report favoring Cintra, it was revealed that the firm was working as auditor for Cintra, the Spanish developer whose full name is Cintra, Concessiones Infraestructuras de Transporte.

PWC and Cintra claimed that there was no conflict because the PWC auditors in Spain were a separate team from those who conducted the analysis for the RTC.

But Wageman disagreed, pointing to the fact that PWC also worked with Cintra and its partner Zachary Construction of San Antonio on development of the Trans-Texas Corridor, a proposed network of tollways in Central Texas whose final cost could reach $150 billion.

“How can Price Waterhouse Coopers possibly be unbiased and fair in evaluating its partner’s proposal against a competitor’s?” Wageman asked.

The NTTA originally passed up the SH 121 project when the 23-mile toll project was under discussion for financing in 2004, according to TxDOT. Cintra was one of the private developers that responded to financing proposals.

The NTTA has acknowledged comments from the three rating agencies that its credit rating will likely fall as it more than doubles its debt to build SH 121. But officials say they can stay within an A-range.

“We’re going to see a decrease in our credit rating,” Hiebert said. “But the inverse of that would be to just take our money and sit on it.”

Under a protocol agreement with TxDOT and Cintra last year, the NTTA was designated the toll collector and operator for the SH 121 project while Cintra was in charge of construction and financing.

Asked at Thursday’s RTC meeting why the authority earlier had ceded the project to Cintra, Wageman pointed to legislation favoring comprehensive development agreements with private developers in order to preserve bonding authority for government entities. That position was reversed last week with Gov. Rick Perry’s signing of SB 792, which gives toll authorities first shot at projects in their regions.

“We thought the better part of valor was to step back and accept a process that SB 792 has now extinguished,” Wageman said. “This has been an imperfect process.”

Mike Eastland, executive director of the RTC, said at yesterday’s meeting that PWC was the only viable contender to accomplish the analysis of the bidders in a short period time.

Eastland said that he regretted that he had not mentioned that PWC had worked for Cintra on the Trans-Texas Corridor. “We made a mistake,” he said. “We admit the mistake, but I do not think it is material.

© 2007 The Bond Buyer: www.bondbuyer.com

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