Wednesday, September 17, 2008

Cintra on NTTA: "They mortgaged every room in the house."

Credit crunch puts SH 161 toll road in jeopardy


The Dallas Morning News
Copyright 2008

Radically shifting fortunes on Wall Street have left the North Texas Tollway Authority scrambling to keep a key promise it made last year when it won the right to pay $3.2 billion for the State Highway 121 toll road.

On Wednesday, NTTA made clear that its ability to keep that promise has been compromised by the nation's financial uncertainties.

NTTA chairman Paul Wageman again delayed a decision on whether to build the highly anticipated State Highway 161 toll road. Just months ago, the toll contract was seen as a lucrative sure bet and had been the subject of months of acrimonious negotiations between NTTA and state transportation officials.

"Needless to say, the financial markets are in high stress," Mr. Wageman told a packed room of more than 150 contractors, consultants and engineers eager to hear which direction the agency is moving. Another delay is "the prudent thing to do," he said.

The pause gives NTTA another month to seek hundreds of millions of dollars in loans on the terms it needs, which include deferred payments until after construction is complete.

That the agency would be struggling to borrow money for SH 161 is surprising on a number of fronts, not least because that road, like the larger SH 121 deal, is one of the few toll projects NTTA has promised to deliver that is expected to be profitable.

Some critics, including the executives at the Spanish firm NTTA beat out last year for the SH 121 project, allege the authority is simply overextended. To the firm, NTTA's delays on SH 161 foreshadow problems it will have with finding money to pay for many of the projects it has promised to build.

"They mortgaged every room in the house," said Jose Lopez, North American president for Cintra. "They don't have the leverage left to borrow the money they need for the long list of projects they have promised. Sure, there may be value there in 10 or 20 years, but does Dallas-Fort Worth want to wait that long for those roadways?"

Temporary crunch

NTTA says it's not overextended. Instead, the NTTA is facing a temporary credit crunch that will ease once the credit market rights itself, officials there said.

But NTTA president Jorge Figueredo has said that the agency's ability to keep promises made a year ago will probably depend on how soon the credit markets stabilize.

"We have been looking at all the projects on our list, and looking at when will these projects be ready to go, when will we actually need the money to get started?" he said. "But if the markets continue to go sour and TxDOT and RTC and ourselves don't have ability to leverage each other, then what we thought was possible a year ago will likely not be possible."

What NTTA promised is that in addition to paying for SH 121, the agency would borrow another $7 billion to pay for six additional toll roads that would open by 2015.

But almost immediately after winning the SH 121 contract, the credit markets began to act unexpectedly. And as some companies stopped dealing in municipal bonds, others began trimming back the kinds of loans they offer.

NTTA has scrambled to not only find money for new projects, but also to retire short-term debt it took out for SH 121.

Relief for 360

Wednesday's delay won't immediately slow the completion of SH 161, which is under construction, news that will probably reassure Grand Prairie commuters anxious for an alternative to jammed State Highway 360.

But NTTA is looking hard at other projects, including the big Southwest Parkway Corridor toll project in Fort Worth. Delays to that project will cost $10 million a month. But on Wednesday, NTTA opted to study again the finances for that project, given that costs have gone up as available tax dollars for the project have gone down.

Michael Morris, transportation director for the North Central Texas Council of Governments, said NTTA's delays are worrisome, especially because other sources of road funds – including the state – are also under increasing strain.

"This is very important," Mr. Morris said, noting that NTTA's original plan included paying billions for SH 121, while still having enough available for additional projects. "If you go back to last summer, when the vote for 121 was held, I think the regional transportation council said, 'We know there are some risks out there, but we want to vote for our partner. And NTTA is our partner.' "

Now it's time for NTTA to figure out a way to reward that faith, said Mr. Morris, who was among the fiercest advocates for letting Cintra build SH 121.

He has since supported NTTA in its negotiations with the state and says the region has no choice but to work together.

That's what NTTA vice chairman Victor Vandergriff had in mind Wednesday. Looking at the billions of dollars the agency will need to borrow to make good on its promises, he suggested it may need help from the state or regional partners.

"That's a lot of money, and while we can expect profits to flow, they aren't going to be seen for maybe 40 or 50 years," Mr. Vandergriff said Wednesday. "I urge us as we are proceeding forward to talk with our regional partners and with TxDOT, to think through how we do these projects."

© 2008 Dallas Morning

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