Saturday, December 01, 2007

Ric Williamson: "Highway 121 represents the first concrete step toward a future where 'tolls, not taxes,' pay for major highways in the state."

NTTA pays $3.2 billion for right to collect tolls on Highway 121

Some fear high cost for right to collect tolls puts other projects at risk

December 1, 2007

The Dallas Morning News
Copright 2007

The often ugly fight over the State Highway 121 toll road ended with a flourish Friday as the North Texas Tollway Authority presented the state of Texas with a $3.2 billion check.

The huge – and to critics risky – payment makes the 26-mile road the second-richest toll project in America and will almost immediately fund scores of transportation projects, big and small, in North Texas.

"We're here to celebrate a $3 billion cash infusion that will be used to address the Dallas-Fort Worth region's transportation needs," said North Richland Hills Mayor Oscar Trevino, the chairman of the North Central Texas Council of Governments transportation council.

But not even the upfront payment – the biggest single cash infusion for North Texas road projects in the region's history – has erased some doubts over the wisdom of contracting with NTTA on the highway.

Those concerns stem from fears that the authority has paid too much for the right to collect tolls on the road over the next 50 years. None of the private firms that bid on the contract offered to pay nearly as much.

"The risks are the same as they were six months ago," said Michael Morris, transportation director for the North Central Texas Council of Governments. "The risk is that with its payment for 121, the NTTA won't have the money needed to finance the Trinity, the Southwest Parkway and the other projects it has committed to building."

Six months ago, Mr. Morris joined state transportation leaders in arguing vigorously against awarding the contract to NTTA, saying that doing so would invite risks of higher tolls and traffic jams that could have been avoided by letting a private company build the road.

A counter push led by North Texas legislators helped persuade the regional transportation council to endorse NTTA for the road anyway. Still, the critics from this year, including Mr. Morris, Transportation Department engineers in Dallas and members of the Texas Transportation Commission, have not changed their minds about the wisdom of letting NTTA build the road.

NTTA officials brushed aside such concerns on Friday, repeating again that the vast revenues expected from Highway 121 will leave plenty of money to pay its debt service, and with enough left over to finance new roads as well.

"With this check, the Highway 121 becomes not just part of our toll road system, but part of our financial system," NTTA Chairman Paul Wageman said at a ceremony in Carrollton celebrating the Highway 121 payment.

There has never been any question that the toll road will make an enormous amount of money for whoever operated it.

Its route through Collin, Denton and Dallas counties includes some of the fastest-growing communities in the nation. In addition, the road will carry the highest toll rates in the region, with frequent increases built into the schedule through 2058. By that year, the highway is expected to bring in $30.1 billion in toll receipts, nearly double what the longer Dallas North Tollway is expected to produce in that period.

On Friday, Mr. Wageman said the agency expects to make $1.3 billion profit in today's dollars on Highway 121. That money will enable the NTTA to finance the other roads Mr. Morris said the region is counting on.

Mr. Morris said the region badly needs the NTTA money, but he said the next three to five years will be "anguished" ones for him, as he worries whether NTTA will be able to keep its commitments.

"The upfront payment is fantastic. We're thrilled," he said. "But all we have is the NTTA's word that they will be able to finance these additional projects, and we're going to hold them to it."

Revenue projections are based on long-range forecasts that can seem like highly educated guesses, given that they attempt to describe reality in a time when today's newly licensed drivers will be ready for retirement.

The estimates are critical, however, because they determine how much bankers or other lenders are willing to commit to a project, said Maria Kang, who directs the infrastructure finance unit of DEPFA Bank, headquartered in Ireland. Typically, the more conservative the estimate is, the more confidence banks will have that the actual numbers will match or exceed the projected traffic numbers, she said.

NTTA's numbers carry a probability of 50 percent that they will be exceeded by actual traffic volumes in any given year, the agency said Friday. There's an equal chance that they will prove too optimistic.

Chief financial officer Susan Buse said that's well within industry standards, and pointed out that the short-term notes the agency borrowed to pay the $3.2 billion were issued top-of-the-market credit ratings.

Still, even if the risks are small, they could have been shouldered by the private sector, critics of NTTA's involvement have said repeatedly since last June.

"At some point NTTA will become leveraged out," Mr. Morris said Friday. "How soon is the question."

Mr. Trevino acknowledged the region gambled when it picked NTTA over Cintra in June. "If we're two, three years or five years out and the population in places like McKinney, Allen and Frisco aren't growing like they are now – then we'll know we made a mistake."

Given the seemingly endless migration to those suburbs, however, Mr. Trevino said that's highly unlikely.

In the meantime, Ric Williamson, chairman of the state transportation commission, said the arguing over which approach – private or public – to take on roads like Highway 121 can be saved for another day. In the meantime, he said, it's time to celebrate.

He said Highway 121 represents the first concrete step toward a future where tolls, not taxes, pay for major highways in the state.

"This is a great day for the state of Texas," he said.

© 2007 The Dallas Morning News Co

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