Saturday, August 30, 2008

"Oh what a tangled web we weave..."

Public office holders think tax dollars are for profit


Letters to the Editor
The Oak Hill Gazette
Copyright 2008

Not representing me

Dear Editor,

It has been my observation throughout all the meetings of the past few years, that there are those who consistently present themselves as the arbiters of Oak Hill. They do not represent me (or anyone I know), or my thoughts on development in our neighborhood area. Let them chest beat and rail condescendingly, as I'm sure they will. Invalidating the community activist resident's voices is par for the course.

Enlisting lawyer/ex-Mayor/Senator and ex-Precinct Judges into the ranks of existing toll-developer players on commissions, tells us the stakes for self-enriching are high and they are upping the ante. Never mind the waste for profit--that's what public office holders think tax dollars are for it seems.

We simply want 290 expanded by two lanes with a simple single elevation, or recess, or roundabout at the "Y" to accommodate traffic, with some modest, local amenities, and to leave the beautiful Hill Country we all love clean and open so we can see, smell, hear and enjoy it. These convoluted plans we've been force-fed have too many masters... "Oh what a tangled web we weave.."

Toni Logan
Oak Hill Resident

Portions © 2008 Oak Hill

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Friday, August 29, 2008

"Betting in favor of polluting the Edwards Aquifer and paving the Hill Country.”

U.S. 281 tollway is seen as a road to $2.1 billion


Patrick Driscoll
San Antonio Express-News
Copyright 2008

At 17 cents a mile, and rising steadily each year, the tolls for driving on U.S. 281 will add up fast.

Motorists could pay $2.1 billion over 37 years to use the 8-mile stretch of tolled express lanes expected to open by 2012, according to a recent traffic and revenue report needed to sell bonds for the project.

That averages almost $57 million a year, an eighth of the $472 million needed upfront to design, buy land and rebuild U.S. 281 into a tollway with nontoll frontage roads.

Bottom line, according to Moody's Investors Service, the project is a sound investment for bond buyers, Alamo Regional Mobility Authority Director Terry Brechtel said.

“It's conservative,” she said. “So we feel good about it.”

The money would trickle in at first, with toll lanes fetching just $8 million the first year, says the report by consultant URS. But as waves of people and jobs migrate north of Loop 1604 and traffic increasingly chokes area roads, drivers will warm to the idea of paying to double their speeds, analysts predict.

Toll traffic could swell five times over by 2048, when about $1.3 billion in bonds, loans and interest would be paid off. Also, the 17-cent-per-mile fee should rise to about 48 cents by then, while trucks would be paying almost triple the rate.

By the time today's teens get around to eyeing retirement four decades from now, the U.S. 281 tollway might be on track to rake in $120 million a year.

Startup and debt costs aren't the only outlays needed.

Expenses to collect tolls and pay staff would eat 18 percent, or $427 million, of revenues, a recent HNTB Corp. engineering report says. Maintenance would add another $170 million.

The biggest risks to money flows would be a major slowdown in population growth, which feeds traffic congestion, or political backlash that reigns in annual toll-rate increases, the URS report says.

If San Antonio's population and job growth falls 14 percent below forecasts — which, to be safe, URS set lower than 1990s trends — the toll road could lose more than a fourth of earnings. A recession stopping growth along the corridor for five years could slice revenues more than a tenth.

Robust growth and perpetually escalating toll rates are much of what activists fear.

A pending federal lawsuit challenges a state environmental study for not seriously considering how the toll road would spur growth over recharge areas of the Edwards Aquifer or financially harm residents.

Yet, the URS report confirms that healthy traffic and revenues rely on such growth, said Bill Bunch of Save Our Springs Alliance, which is representing two area groups.

“If you are projecting decades of substantial traffic growth along U.S. 281 and then taking on debt based on those projections, then you are basically betting in favor of polluting the aquifer and paving the Hill Country,” he said.

Another looming concern involves record-high gas prices, which the URS report doesn't specifically address.

Most experts agree that global oil production is peaking now or will in a few decades, and that the age of cheap energy is over. But how adjustments play out with alternatives, including public transit and fuel-efficient cars, is less certain.

After seeing the URS report, Brechtel requested a close look at gas-price impacts.

“I said, ‘Thank you very much, I want a specific gas-price analysis,'” she said.

With high gas prices pushing Americans to drive less this year, most U.S. toll roads lost 2 percent to 10 percent of traffic, Fitch Ratings said in a report last week. Texas losses are under 5 percent.

The trouble could last one or two years, Fitch said. If pressures continue, and policymakers start funneling more money to transit and more people begin shunning suburbs to live in urban cores, toll roads will face even bigger problems.

“The question is whether the current trend will continue for a longer period,” the report states.

Portions © 2008 KENS 5 and the San Antonio

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


"Report comes amid a backdrop of legislative distrust about the department's financial projections."

TxDOT 's $1 Billion Error


Janet Elliott
Houston Chronicle
Copyright 2008

AUSTIN — Poor internal communication and complicated procedures caused a $1.1 billion blunder that forced Texas transportation officials to pull back on construction projects earlier this year, according to an audit released Thursday.

Texas Department of Transportation officials actually discovered the accounting error six months earlier, the report said.

The accounting error occurred when bond proceeds were counted twice when the department developed the fiscal year 2008 contract award schedule. As a result, $4.2 billion in planned projects was reduced to $3.1 billion.

This resulted in a reduction of $71.5 million worth of construction and maintenance in the San Antonio region and a $161 million deduction in the Houston area.

Auditors faulted department officials for failing to immediately communicate the error to the Texas Transportation Commission, lawmakers and the public.

“Although the department asserts it briefed all commission members individually, no briefing documents, specific dates or calendars were provided to auditors to verify these briefings,” the report said.

Auditors recommended that TxDOT develop a formal process for reviewing money available for projects, keep commission members informed in open meetings, post updates on the agency's Web site and alert legislators when funding in their areas change.

The department said it was already making changes suggested in the report.

“I am committed to increasing the department's transparency, and the recommendations identified in this audit put us another step closer to realizing that goal,” said Amadeo Saenz, TxDOT executive director, in a statement on the agency's Web site.

The report comes amid a backdrop of legislative distrust about the department's financial projections as TxDOT turns to privately financed toll roads to meet future transportation needs.

The department has projected a $3.6 billion shortfall by 2015 and said that increased maintenance needs will leave little for new construction.

Lt. Gov. David Dewhurst, who along with House Speaker Tom Craddick asked for the audit, said in a written statement that the report confirms his arguments that the agency needs to be more transparent and make wiser use of its resources.

“The people of Texas deserve a world-class transportation system,” Dewhurst said. “I'm hopeful this report, along with recommendations made by the Sunset Commission, will provide the Legislature with a good roadmap for making immediate and long-term improvements to our transportation system.”

A legislator who has been critical of TxDOT welcomed the details contained in the audit.

“However, I must admit I am dismayed to learn that there were persons in the department who became aware of this error as early as September 2007, and yet it was not brought to the Legislature's attention until early this year,” said Rep. Ruth Jones McClendon, D-San Antonio, in a written comment.

McClendon sits on the Sunset Advisory Commission, which is conducting a periodic review of the department's operations. A staff report recommended replacing the five-member commission with a single commissioner.

Other proposed changes include increasing legislative oversight through a new House-Senate committee; making TxDOT's transportation planning and project development more open and easily understood; enhancing chances for public involvement; and improving TxDOT's contract management.

© 2008 Houston

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Texas Transportation Commission was complicit in keeping $1.1 billion accounting error from the Legislature and taxpayers

Audit knocks TxDOT for $1.1 billion error

State auditor says poor internal communication caused huge accounting glitch, and that TxDOT failed to make mistake public for several months.

August 29, 2008

By Ben Wear
Austin American-Statesman
Copyright 2008

The Texas Department of Transportation made a $1.1 billion accounting mistake last year through a mixture of "ineffective internal communication, a complex reporting structure and misunderstanding" of its data, according to a report by the state auditor's office released Thursday.

The agency kept the error out of public view for four months by failing to immediately report it to legislators, affected state and local officials and its governing commission, at least in a public forum, the audit found.

TxDOT staff said it gave private briefings to the five members of the Texas Transportation Commission after realizing in October that it had in effect double counted $1.1 billion that was expected to be available for highway work, the report says, but kept no record of the meetings as proof they occurred or to document what was said.

And in several monthly commission meetings that followed, despite considerable talk about tight agency finances and public moves to cut back on future road projects, neither the staff nor the commission members mentioned the accounting problem.

"Although the effects of the error were discussed, the specific error and the causes were not discussed," says the report, which the auditor's office initiated after a Feb. 19 request from Lt. Gov. David Dewhurst and House Speaker Tom Craddick. The existence of the error surfaced publicly for the first time at a Feb. 5 state Senate committee hearing.

"The Department (TxDOT) should ... brief the full Texas Transportation Commission on developments that occur and have a significant statewide impact, so that members of the commission can be involved in the process of making corrections," the 64-page report says.

Asked why the agency waited until February to announce the error, TxDOT spokesman Chris Lippincott said in an e-mail Thursday that the agency had told officials with metropolitan planning organizations around the state in November that TxDOT "had incorrectly projected how much money would be available" for road contracts in 2008.

"Did we call a press conference? No," Lippincott said. "When we had an explanation of what happened, we brought it to the Legislature ... in early February."

As for the broader criticisms in the audit about how the agency tracks its available money, TxDOT executive director Amadeo Saenz said in a statement that changes are "already well underway for several of the recommendations. I am committed to increasing the department's transparency, and the recommendations identified in this audit put us another step closer to realizing that goal."

TxDOT officials have said that the problem was that one TxDOT office was keeping track of money, while another was charged with allocating funds for future projects. Saenz has now brought those two functions under one person, TxDOT Chief Financial Officer James Bass.

Saenz did not become TxDOT's boss until late September, taking over for the retiring Michael Behrens. But as engineering director under Behrens, Saenz was among a handful of officials on his core team.

Until sometime in September, TxDOT had thought it had $4.2 billion available to spend on highway expansion and maintenance projects during the 2007-08 budget year, which began Sept. 1. But, according to the audit report, that total included $580.5 million to be borrowed from future gas tax funds and $487.8 million from the Texas Mobility Fund that were already a part of a $3.1 billion forecast of cash on hand made that July.

Those two amounts of money, thus, were counted twice. TxDOT, in fact, had $3.1 billion to spend this year, and much of that was already committed to road maintenance.

After the error was found — Bass has said in public meetings that he immediately realized there was a problem when he saw the $4.2 billion figure — agency officials at a late September meeting of the commission said there would be no money available for building new highways or adding lanes to existing highways in the coming year.

The squeeze, officials said at the time, was the result of lagging federal transportation grants, inflation of construction costs and diversions of gas tax revenue to other state needs.

The agency figured out the cause in October, according to a timetable of events included in the audit. In November, the agency announced cuts of 50 percent or more in money for engineering and right-of-way purchases for new highways, trims that emphasized the seriousness of the situation and heightened interest among legislators and local transportation officials.

Unaware of the error, some lawmakers accused TxDOT of crying wolf about its finances to pressure the Legislature to back off of limits on private toll road contracts instituted in the 2007 session. That led to the Senate hearing in February where news of the error emerged.; 445-3698

© 2008 Austin

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


"A public hearing was held today in Austin and several more are scheduled in the upcoming months."

TxDOT taking comments

Aug 29, 2008

by Christa Lollis
Copyright 2008

EAST TEXAS - East Texans have gone to town hall meetings and public hearings and even protested against the Trans Texas Corridor.

Well now, TXDOT is offering another way for people to voice their opinions. A public hearing was held today in Austin and several more are scheduled in the upcoming months.

TxDOT says it's another tool for East Texans to make suggestions, bring up concerns and to voice opinions about the way TXDOT is structured. You can even email your issues to TxDOT if there aren't meetings near you.

If you would like to send an email to TXDOT you can send it to

You can also go to TXDOT's web site for more information at

© 2008

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Thursday, August 28, 2008

Pineywoods Sub-Regional Planning Commission will request a supplemental DEIS on the effects of building 'TTC-69' along U.S. Highway 59

TTC plans for U.S. Hwy. 59 may not come to fruition

Related Link: Texas 391 Commission Alliance

August 28, 2008

Nacodoches Daily Sentinel
Copyright 2008

The Pineywoods Sub-Regional Planning Commission met Thursday to hear a presentation by the commission's president, Hank Gilbert, who said the plans to move the Trans-Texas Corridor to the current U.S. Hwy. 59 location may not come to fruition.

The Texas Department of Transportation initially planned to build a new highway system, which would have been as large as 1,200-feet wide, that would run through rural areas of East Texas, including Nacogdoches County. However, TxDOT scrapped those plans in June and announced a new proposal to build the TTC along the existing route of U.S. Hwy 59.

But Gilbert, of the anti-corridor activist group TexasTURF, said TxDOT has not provided new documentation detailing the potential effects of building the TTC on the new site, and he also said the current proposal could still allow TxDOT to build the TTC in the original proposed location.

"If TxDOT gets the approval on the (draft environmental impact statement) as is, they can come back and build the highway wherever they want to," he said. "They can come back and say, 'The Federal Highway Administration said we're good to go, but we don't want to use U.S. Hwy. 59 anymore.' And there's nothing we can do about it."

For this reason, Gilbert and the PWSRPC is requesting a supplemental draft environmental impact statement that takes into account the effects of building the TTC along U.S. Hwy. 59. The commission has already requested meetings with Amadeo Saenz, executive director of TxDOT, and Richard Greene, regional administrator for the Environmental Protection Agency. Gilbert said there has been no response from either organization.

Gilbert argued that, by law, TxDOT must prepare a new DEIS from scratch, now that plans have changed. Doug Booher, the TxDOT environmental manager, refuted his claim, saying the final environmental impact statement, which will be released for public review at the end of 2008 or early next year, will include the necessary revisions to avoid starting over.

Because the PWSRPC did not have enough voting members in attendance to form a quorum, Gilbert did not receive approval to send new letters to the EPA and TxDOT requesting a meeting. The PWSRPC will meet again at 4p.m. Thursday, Sept. 11, at the county courthouse.

Before the next meeting, Gilbert asked group members to research facts about how the TTC's new location on U.S. Hwy 59 would affect the county.

"What's the loss going to be to the school districts affected, the water districts affected?" he said. "How many acres will be lost in Nacogdoches County? What's the economic impact of the loss of those acres, in hard dollars? What will be the impact on endangered plants and endangered animals in the area?"

Gilbert said he will incorporate this new data into an updated draft of the letter to the EPA and TxDOT.

"This isn't your mom and dad's interstate," Gilbert said. "This is nobody's interstate."

© 2008 Nachdoches Daily

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


North Texas Tollway Authority claims "ownership" of State highway 121

State Highway 121 to open Sunday

August 28, 2008

The Dallas Morning News
Copyright 2008

A new era begins for State Highway 121 on Sunday as a nine-mile section of the toll road opens to motorists and the road is turned over to new ownership.

The North Texas Tollway Authority becomes the new owner of the state road, tentatively renamed 121 Tollway. A permanent name will be selected later this year.

The changeover occurs as the toll road opens between Old Denton Road in Denton County and just east of Hillcrest Road in Collin County.

The new segment, along with the existing seven-mile segment, creates a 16-mile corridor stretching from Coppell to Plano.

“That trip now takes 35 to 40 minutes on the existing lanes and service roads with traffic lights,” NTTA spokeswoman Sherita Coffelt said. “With the new lanes open, that time should be cut in half.”

But the quicker commute comes with a price, which some critics say is too steep.

New rates will go into effect for the opening segment, and increases will occur beginning Monday for the existing segment between Old Denton Road and Denton Tap Road. The adjusted rates will increase from one to four cents for cars and passenger trucks with toll tags and from two to 12 cents for those without tags.

Rates vary depending on which exit ramps are used.

The one-way 16-mile trip will cost $2.11 for toll tag users and $3.06 for those who don’t use them, officials said.

“I will use it sometimes,” said Kyle Steinhauser, who commutes from his home in Frisco to his job near Dallas-Fort Worth International Airport. “I am excited about the enhanced mobility, but that is hampered by the high tolls coupled with high gas prices.

“Unfortunately, that is a disincentive to use it,” he said.

The toll rates were set by the NTTA board of directors as part of the project agreement between the state and the tollway authority, officials said.

That agreement was reached last year, after years of debate and acrimony. The tollway authority was chosen over a competing private firm to build the rest of the road and operate it for the next 50 years in exchange for a payment of $3.2 billion to the state.

NTTA made the payment last fall. The money will be used to pay for other transportation projects in North Central Texas.

“We look forward to turning over the road and providing better mobility for the region,” said Kelli Petras, a spokeswoman for the Texas Department of Transportation. “State Highway 121 has been sort of the poster-child for public-private partnerships.”

The transportation department has been expanding State Highway 121 since 2003. The first segment opened in 2006.

The second segment, built at a cost of $210 million, has been under construction since 2004.

The original plans were to build the road as a free highway. But state officials then decided to convert it to a toll road so that money earmarked for the project could be used for other transportation projects.

Local officials were originally upset with the plan but have come to accept that toll roads are a part of the future.

“It’s an imminent thing,” said John Dillard, mayor of The Colony, which is bordered on the south by the new segment opening Sunday. “This will make it much easier to get around here, and I’m excited and looking forward to it opening.”

Construction of the third segment from near Hillcrest Road to Hardin Boulevard on the Allen/McKinney line is already under way. That segment will cost $125 million and is expected to open in 2010.

Segment four, involving an interchange at U.S. Highway 75, is expected to begin this fall and open to traffic in 2011. Design of the final segment — an interchange with the Dallas North Tollway — is still in design and planning but is expected to open in 2012.

NTTA officials will convene a committee of representatives from Dallas, Denton and Collin counties — all touched by the 121 Tollway — to help choose a permanent name, Ms. Coffelt said.

The western end of the toll road will connect with State Highway 121, which will remain a free highway through Tarrant County. A portion of the highway on the Denton/Tarrant county line is currently being improved and expanded by the state.

The 121 Tollway has an all-electronic collection system. Drivers with an NTTA TollTag, a TxDOT TxTag or a Harris County Toll Road Authority EZ Tag will have tolls deducted from their accounts.

Those without tags will be considered ZipCash customers and will have their license plates photographed. Bills will arrive by mail.

© 2008 The Dallas Morning

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Macquarie shares fall 60% since May 2007

UBS Cuts Its Macquarie Rating

Maquarie stock drops


The Wall Street Journal
Copyright 2008

SYDNEY -- Macquarie Group Ltd. shares fell 9.6%, touching a 3½-year low, after broker UBS AG cut its rating on the stock and warned the Australian investment bank's profit may be hit by asset write-downs.

UBS analysts cut their rating on Australia's biggest investment bank by revenue to "neutral" from "buy," slashing their price target to 48 Australian dollars (US$41.05) a share from A$60.


"With the global credit crunch and bear market entering its second year, and with little end in sight, we believe this is placing ongoing pressure on Macquarie's businesses and outlook," said UBS analysts Jonathan Mott, Chris Williams and Shu-Ling Liauw in a report.

In the heaviest volume in 12 months, Macquarie hit an intraday low of A$41.31, a level not seen since November 2004, amid fears other brokers would follow UBS's lead.

"There are still eight brokers with 'buy' recommendations on the there is a high risk of more cuts to recommendations and earnings estimates," said a senior institutional trader.

Macquarie's Response

A spokesman for Macquarie declined to comment on the UBS report or drop in the bank's share price. Macquarie shares ended down 9.6% at A$41.61 in a flat Sydney market. In a response to a query from the Australian Securities Exchange, Macquarie said it isn't aware of any explanation for the sharp fall in its shares.

Macquarie has avoided the big write-downs that have plagued many of its global investment-banking peers. But its shares have fallen 60% from their May 2007 peak of A$98.64 amid worries about the sustainability of its specialist infrastructure-funds business amid the credit crunch.

Macquarie combs the globe for assets exposed to limited competition, such as airports, toll roads and utilities, and sells them in initial public offerings of shares or bundles them into managed funds, taking capital gains as well as advisory and management fees along the way.

The business has been aided in recent years by access to cheap debt and rising asset prices.

'Knee-Jerk Reaction'

"Judging by the knee-jerk reaction [to the UBS report], people are voting with their feet," said Justin Gallagher, head of institutional sales at ABN Amro. "I think people are just concerned about the high gearing and intricate financial structure of Macquarie and all its satellites."

The UBS analysts said Macquarie may require impairments on some investments in associated companies or asset-valuation write-downs, and that its capital flexibility isn't as great as generally perceived.

--David Rogers and Lyndal McFarland contributed to this article.

Write to Rebecca Thurlow at

© 2008 Wall Street

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


U.S. Commuters will pay the toll for Transurban CEO's golden parachute

Loose lips, loose change


Michael Evans doesn't settle for cheap fakes, copies or imitations.

THAT'S the problem with a mini-me following you around: when the mini-me has a major problem, the major-me has a mega problem.

And for Macquarie Group, it was all fine while everyone was focused on the implosion of Babcock& Brown .

But now UBS analyst, Jonathan Mott - there's a name you're going to be hearing a lot about in the next few weeks - has raised a few questions about how much loose change Macquarie has in its pockets.

An interesting question, even if it does come from Macquarie's chief rival locally, UBS.

Still, Macquarie's Nicholas Moore couldn't find a single reason to explain the 10 per cent slump in the bank's share price as investors trampled over him on the way to the exit yesterday, slicing 10 per cent off its share price to wipe out almost all its bull market share-price gains.

The sell-off drew the attention of US investors perplexed at how Macquarie hasn't been targeted in the same way as Babcock. After all, those short-selling hedge funds have a bit of spare time on their hands now, having polished off Allco, ABC Learning Centres, Centro and Babcock.

Thanks a million

Motoring tolls are used for many things. Painting the Sydney Harbour Bridge. Fixing potholes.

But motorists on the M2 in north-western Sydney can take heart that last year, numerous chunks of their $4.40 toll were collected by former boss Kim Edwards.

Edwards pocketed $16.7 million last year before he left in April, just a few months before the company announced it would be forced to cut its future distributions. Wonder if he's got his own Etag.

The, um, CEO transition costs, as Transurban called them, featured a $9 million cash bonus of which $5 million was a "strategic milestone incentive plan" and $3 million was a "business generation plan". He also got a $2.5 million fixed remuneration payout and $2 million for leave entitlemU.sents.

Edwards's tidy $17 million payout was more than the Transurban-owned Pocahontas highway outside Washington DC earned last year at US$13.8 million. We're sure it's a coincidence Transurban has sold down its stake now the Edwards toll burden has been lifted.

Still, with new chief tollgate Chris Lynch pocketing a $2 million sign on and a $1 million cash bonus in year one, it's unclear if the company has acquisition plans for its new boss to collect the toll.

© 2008 Sydney Morning

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Wednesday, August 27, 2008

"How on earth did anyone ever think toll roads were sexy?"

Roads to hell paved with debt

August 28, 2008

Ian Verrender
Sydney Morning Herald (Australia)
Copyright 2008

There will come a time in the not-too-distant future when ordinary people will look back on this era, shake their heads in wonder and ask: how on earth did anyone ever think toll roads were sexy?

From the tulip bubble in Holland in the 1630s through to the dotcom boom of the late 1990s, otherwise rational minds have discarded logic and joined the frenzied mob in whatever investment fad promises fabulous wealth.

Without fail, they always end in tears. And so it is with the infrastructure boom.

Yesterday, Macquarie Group found itself under concerted attack from hedge funds as its shares fell 10 per cent to $41.61.

That's wiped out all the gains from the bull market and left senior executives floundering in a sea of confusion about how to stop the rout.

In part, the renewed attack on the Silver Donut is in part the fault of Babcock & Brown, the deeply-flawed and heavily-indebted infrastructure group.

When B&B's bankers effectively seized control in a bloodless coup last week - sidelining Phil Green and Jim Babcock while they figure out how to retrieve their $50 billion in loans - the attention inevitably swung towards the last bastion of financial engineering.

Macquarie is not a Babcock & Brown. It has a huge global banking operation that will ensure its survival. But its growth strategy of the past decade has been built on buying infrastructure, loading it up with debt, selling it off to investors in tax-effective listed trusts and then "managing" the assets - with fees extracted every step of the way.

Even dividends and distributions were paid with debt rather than earnings.

With the business model now dead, Macquarie's future growth has evaporated. And every group that imitated the Macquarie model, such as the listed property trusts, is now in trouble.

Macquarie's early response was to start buying units in its deeply-discounted satellites, spending as much as $500 million alone on Macquarie Infrastructure Group.

Lately, the plan has morphed into a strategy to delist the satellites from the sharemarket and resell them into unlisted funds. But events appear to be overtaking the plan.

There are now serious doubts about whether it has the cash reserves to privatise the assets. A stockbroking analyst from UBS concluded yesterday Macquarie Group had between just $150 million and $500 million in excess capital - well below the $3 billion claimed by Macquarie.

That started the hounds barking and was enough to concentrate the minds of hedge funds.

Another to run into a roadblock yesterday was Transurban, which started life as the successful developer and owner of Melbourne's CityLink toll road.

It is a fairly simple model that goes something like this: cars drive on a road; they pay a toll.

The operator pays the government a concession for the right to build and operate the road for anywhere between 25 and 100 years. That invariably requires large borrowings that ensure losses in the early days. But as time goes on and the loan is paid down, the company becomes increasingly profitable.

Transurban did well out of CityLink. But as toll road mania swept the land, and then the globe, Transurban's boss Kim Edwards scouted around for expansion opportunities. First he took Sydney - with a takeover of Hills Motorways M2 and a half share in the Macquarie-controlled Westlink M7. Then he bought a major slice of the M1, M4 and M5 from Macquarie. And then it was off to show the Americans a thing or two.

Each deal meant more debt to buy assets in an inflated market. And to keep the punters happy, Edwards pumped up the dividends with - a little more debt.

Transurban's newly-appointed Chris Lynch, the former BHP executive, has inherited this mess and taken swift action. He's raised extra equity and, luckily, has a strong backer in the Canada Pension Plan. He's also slashed the dividend which left investors with a bitter taste.

Lynch, a no-nonsense former AFL player from Broken Hill, says he wants to transform Transurban back into a "fair dinkum" company. He's going to have to.

So are numerous others who bloated themselves on cheap debt and now are stuck with overpriced assets no one wants.

© 2008 Sydney Morning

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Perry: 'Let them eat rice cake'

Trans-Texas Corridor should never be built


Taylor Daily Press
Copyright 2008

I am enthralled at the number of letters that were generated by Philip Jankowski’s (column) in which he supported the Trans-Texas Corridor, all in opposition to the plan to build this highway.

In a previous (column), the author’s name I can’t remember, it was disclosed that it would take an estimated 50 years to build and at a cost of $200 billion. Now, as things go there are always time delays and cost overruns. My intuition tells me that it might require 60 to 70 years to complete and at a cost of some $300 billion, especially since the price of oil has increased so much and oil is used in the production of road asphalt.

If it takes 70 years to complete the TTC, then most of us will be dead and buried by then. I say they should never even begin this monstrosity of a highway.

What we do not hear very much about this giant highway, which will make its way through Texas and the Eastern United States, running from Mexico all the way to Eastern Canada, is that it is a splendiferous contrivance of the North American Free Trade Agreement. It is somehow supposed to improve international trade between Mexico, the United States and Canada.

I feel there are better ways to promote trade in our Northern Hemisphere.

The Trans-Texas Corridor is Gov. Rick Perry’s pet product, however there are some vital facts being withheld. In a court of law this is classified as “lying through omission.”

If this giant highway is ever completed it will have something in common with the Great Wall of China; it will be visible from the moon. And it’s going to “take the cake” ... rice cake.

Frank L. Chovanec


© 2008 The Taylor Daily

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Zachry and ACS TTC-69 plans raise questions in Wharton

County Commissioners question plans for I-69


Wharton Journal-Spectator
Copyright 2008

A presentation on the Texas portion of the proposed Interstate 69 plan raised more questions with the Wharton County Commissioners Court than it answered Monday morning.

Zachry American Infrastructure Senior Project Manager Gary Kuhn reiterated the Texas Department of Transportation decision to use existing highway footprint, including U.S. 59, for development. But he warned the company is looking at ways to generate revenues to fund local upgrades along the route.

"As part of our competing for site selection, we are looking to seek and share resources," Kuhn said, adding it would help generate more prosperity which leads to more disposable income, encourages small companies to grow into big companies that would in turn create more smaller companies and lower unemployment rates.

The commissioners questioned two comments made by Kuhn. The first was quoting a CNBC report Texas had the number one business climate in the U.S. having the "best transportation system in the country." Kuhn said that was determined by the fact that more goods are shipped in and out of the state than any other.

Precinct 2 Commissioner Chris King questioned that statement, saying that during the Trans-Texas Corridor meetings, TxDOT officials said the state's highway system was deteriorating.

King also questioned Zachary's partner in the development project, the Spanish firm ACS Infrastructure, asking if it was a branch of Cintra, the Spanish Company initially awarded the TTC project based on developing toll roads and the wide-based, multiple transport systems that included rail, pipelines, transmission lines and multiple lanes of traffic. Kuhn said there was no connection between the two companies and that Cintra had partnered with another firm and lost out on the development contract.

Kuhn pointed out that along U.S. 77, local government entities were looking at approving toll roads to generate the revenue but said that leasing right of way for pipelines and similar kinds of projects could also be included. He added the upgrade to an interstate would also attract businesses to the Rio Grande Valley and other communities along the route.

"The valley is the most populous area of the country not served by an interstate," he said. "And it is difficult to compete in today's markets without an interstate, without out that red, white and blue shield along the roadway."

The big funding alternative centers on another project being worked on by Zachary and its Spanish Partner ACS Infrastructure - one to create a universal elevated freight shuttle. The shuttles would be designed to haul specifically designed containers, but could be adapted to accommodate trailers.

The shuttle lines would connect Brownsville, Corpus Christi, Freeport, Galveston, Houston, Dallas-Fort Worth, San Antonio and Laredo. Those lines would be built in the highway right of way with the companies leasing the "air space" from TxDOT.

That prompted Precinct 3 Commissioner Philip Miller to question why the county would have to raise money for the road work if the right of way was generating revenues. He said a lot of the rural counties the highway would pass through don't have the available resources to contribute to such a project.

Kuhn said that while Zachry is partnered with ACS, the majority of the money invested would come from the U.S.

He added that several retirement funds for teachers and other union groups had expressed interest in making such an investment because it is so stable.

In describing the appeal of the freight shuttle system, Kuhn said the freight industry looks for the least expensive way to transport goods. He said railroad companies are not interested in the kind of short trips made between, for example, Houston and Dallas and really aren't interested in anything being shipped less than 750 miles.

By offering the container option, Kuhn said it would get trucks off the road, creating space for more personal vehicle traffic and reduce the maintenance needs. He said company research predicted there would be no need to increase the capacity of I-69 for at least the next 40 years.

That wasn't the only cost savings he pointed out. Based on current fuel prices, Kuhn said, the cost of shipping a trailer by shuttle would be around 8 cents per mile compared to 85 cents per mile for a tractor-trailer.

In addition, he said that while the system would be plugged into the state's electric grid, designers were expecting to use solar power to generate all the necessary electricity for normal operations.

And he said the system, along with transfer stations, are modular in design and could essentially be assembled quickly, "like Legos" and be in place and handling freight as soon as 2015.

When announcing the awarding of the bid to ZAI/ACS in June, TxDOT Yoakum District Spokesperson Bryan Ellis said because no construction is involved, the proposal does not violate Senate Bill 792, which placed a moratorium on the construction of I-69.

As part of the framework of SB 792, local toll roads proposed by Zachry could only be operated with the approval of local government entities, according to a TxDOT news release announcing the contract. However the bill does include, with certain exemptions, a provision permitting the private participant to operate the toll project or collect revenue from the toll project. That prohibition does not apply to any part of the project located on U.S. 77, U.S. 281 or U.S. 59 south of Refugio County.

The proposal, with maps, is available on the Internet at

© 2008 Wharton

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Leveraging Road Kill: Infrastructure funds push toll road privatization despite high fuel prices, declining traffic numbers

Running Out of Money, Cities Are Debating the Privatization of Public Infrastructure

August 26, 2008
The New York Times
Copyright 2008

Cleaning up road kill and maintaining runways may not sound like cutting-edge investments. But banks and funds with big money seem to think so.

Reeling from more exotic investments that imploded during the credit crisis, Kohlberg Kravis Roberts, the Carlyle Group, Goldman Sachs, Morgan Stanley and Credit Suisse are among the investors who have amassed an estimated $250 billion war chest — much of it raised in the last two years — to finance a tidal wave of infrastructure projects in the United States and overseas.

Their strategy is gaining steam in the United States as federal, state and local governments previously wary of private funds struggle under mounting deficits that have curbed their ability to improve crumbling roads, bridges and even airports with taxpayer money.

With politicians like Gov. Arnold Schwarzenegger of California warning of a national infrastructure crisis, public resistance to private financing may start to ease.

“Budget gaps are starting to increase the viability of public-private partnerships,” said Norman Y. Mineta, a former secretary of transportation who was recently hired by Credit Suisse as a senior adviser to such deals.

This fall, Midway Airport of Chicago could become the first to pass into the hands of private investors. Just outside the nation’s capital, a $1.9 billion public-private partnership will finance new high-occupancy toll lanes around Washington. This week, Florida gave the green light to six groups that included JPMorgan, Lehman Brothers and the Carlyle Group to bid for a 50- to 75 -year lease on Alligator Alley, a toll road known for sightings of sleeping alligators that stretches 78 miles down I-75 in South Florida.

Until recently, the use of private funds to build and manage large-scale American infrastructure assets was slow to take root. States and towns could raise taxes and user fees or turn to the municipal bond market.

Americans have also been wary of foreign investors, who were among the first to this market, taking over their prized roads and bridges. When Macquarie of Australia and Cintra of Spain, two foreign funds with large portfolios of international investments, snapped up leases to the Chicago Skyway and the Indiana Toll Road, “people said ‘hold it, we don’t want our infrastructure owned by foreigners,’ ” Mr. Mineta said.

And then there is the odd romance between Americans and their roads: they do not want anyone other than the government owning them. The specter of investors reaping huge fees by financing assets like the Pennsylvania Turnpike also touches a raw nerve among taxpayers, who already feel they are paying top dollar for the government to maintain roads and bridges.

And with good reason: Private investors recoup their money by maximizing revenue — either making the infrastructure better to allow for more cars, for example, or by raising tolls. (Concession agreements dictate everything from toll increases to the amount of time dead animals can remain on the road before being cleared.)

Politicians have often supported the civic outcry: in the spring of 2007, James L. Oberstar of Minnesota, chairman of the House Committees on Transportation and Infrastructure, warned that his panel would “work to undo” any public-private partnership deals that failed to protect the public interest.

And labor unions have been quick to point out that investment funds stand to reap handsome fees from the crisis in infrastructure. “Our concern is that some sources of financing see this as a quick opportunity to make money,” Stephen Abrecht, director of the Capital Stewardship Program at the Service Employees International Union, said.

But in a world in which governments view infrastructure as a way to manage growth and raise productivity through the efficient movement of goods and people, an eroding economy has forced politicians to take another look.

“There’s a huge opportunity that the U.S. public sector is in danger of losing,” says Markus J. Pressdee, head of infrastructure investment banking at Credit Suisse. “It thinks there is a boatload of capital and when it is politically convenient it will be able to take advantage of it. But the capital is going into infrastructure assets available today around the world, and not waiting for projects the U.S., the public sector, may sponsor in the future.”

Traditionally, the federal government played a major role in developing the nation’s transportation backbone: Thomas Jefferson built canals and roads in the 1800s, Theodore Roosevelt expanded power generation in the early 1900s. In the 1950s Dwight Eisenhower oversaw the building of the interstate highway system.

But since the early 1990s, the United States has had no comprehensive transportation development, and responsibilities were pushed off to states, municipalities and metropolitan planning organizations. “Look at the physical neglect — crumbling bridges, the issue of energy security, environmental concerns,” said Robert Puentes of the Brookings Institution. “It’s more relevant than ever and we have no vision.”

The American Society of Civil Engineers estimates that the United States needs to invest at least $1.6 trillion over the next five years to maintain and expand its infrastructure. Last year, the Federal Highway Administration deemed 72,000 bridges, or more than 12 percent of the country’s total, “structurally deficient.” But the funds to fix them are shrinking: by the end of this year, the Highway Trust Fund will have a several billion dollar deficit.

“We are facing an infrastructure crisis in this country that threatens our status as an economic superpower, and threatens the health and safety of the people we serve,” New York Mayor Michael R. Bloomberg told Congress this year. In January he joined forces with Mr. Schwarzenegger and Gov. Edward G. Rendell of Pennsylvania to start a nonprofit group to raise awareness about the problem.

Some American pension funds see an investment opportunity. “Our infrastructure is crumbling, from bridges in Minnesota to our airports and freeways,” said Christopher Ailman, the head of the California State Teachers’ Retirement System. His board recently authorized up to about $800 million to invest in infrastructure projects. Nearby, the California Public Employees’ Retirement System, with coffers totaling $234 billion, has earmarked $7 billion for infrastructure investments through 2010. The Washington State Investment Board has allocated 5 percent of its fund to such investments.

Some foreign pension funds that jumped into the game early have already reaped rewards: The $52 billion Ontario Municipal Employee Retirement System saw a 12.4 percent return last year on a $5 billion infrastructure investment pool, above the benchmark 9.9 percent though down from 14 percent in 2006.

“People are creating a new asset class,” said Anne Valentine Andrews, head of portfolio strategy at Morgan Stanley Infrastructure. “You can see and understand the businesses involved — for example, ships come into the port, unload containers, reload containers and leave,” she said. “There’s no black box.”

The prospect of steady returns has drawn high-flying investors like Kohlberg Kravis and Morgan Stanley to the table. “Ten to 20 years from now infrastructure could be larger than real estate,” said Mark Weisdorf, head of infrastructure investments at JPMorgan. In 2006 and 2007, more than $500 billion worth of commercial real estate deals were done.

The pace of recent work is encouraging, says Robert Poole, director of transportation studies at the Reason Foundation, pointing to projects like the high-occupancy toll, or HOT, lanes outside Washington. “The fact that the private sector raised $1.4 billion for the Beltway project shows that even projects like HOT lanes that are considered high risk can be developed and financed privately and that has huge implications for other large metro areas,” he said .

Yet if the flow of money is fast, the return on these investments can be a waiting game. Washington’s HOT lanes project took six years to build after Fluor Enterprises, one of the two private companies financing part of the project, made an unsolicited bid in 2002. The privatization of Chicago’s Midway Airport was part of a pilot program adopted by the Federal Aviation Administration in 1996 to allow five domestic airports to be privatized. Twelve years later only one airport has met that goal — Stewart International Airport in Newburgh, N.Y. — and it was sold back to the Port Authority of New York and New Jersey.

For many politicians, privatization also remains a painful process. Mitch Daniels, the governor of Indiana, faced a severe backlash when he collected $3.8 billion for a 75- year lease of the Indiana Toll Road. A popular bumper sticker in Indiana reads “Keep the toll road, lease Mitch.”

Joe Dear, executive director of the Washington State Investment Board, still wonders how quickly governments will move. “Will all public agencies think it’s worth the extra return private capital will demand?” he asked. “That’s unclear.”

© 2008 The New York

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Tuesday, August 26, 2008

Jennie Taraborelli yields fishy 'catch of the day'

Inside The Woodlands

The latest word from The Woodlands and South Montgomery County

Dropping a dime: John Q. Public tips off the media

Audgust 26, 2008

by Kimberly Stauffer
Houston Chronicle
Copyright 2008

The news business is rife with whistle-blowers, tipsters and anonymous Internet avatars ready to unveil business secrets, bad conduct and the occasional scandal. Unfortunately, not every well-written item from lil Lois Lanes that purports truth pans out.

Recently we received a series of e-mails detailing how Jennie Taraborelli, a partner in Pate Transportation Partners, a major road construction contractor, was playing hostess and taking more than a few highly placed elected officials on a free Alaskan fishing trip, a five day vacation reportedly worth $5,000.

But when asked about his cold water catch, Montgomery County Precinct 3 Commissioner Ed Chance was left out to sea. One of the named officials supposedly enjoying the hospitality of our icy northern neighbor, Chance said he had never heard of the fishing trip.

"I'm not familiar with it," he said.

Calls to Taraborelli's office yielded news the partner is traveling this week in unknown parts.

As to whether elected officials should take companies up on sponsored trips, Chance said, "I don't see anything particularly wrong with it, expect it might have a bad appearance. It shouldn't impact anyone one way or another."

What do you think of elected officials taking it easy on a company's dime? Would you ever tip off a news agency?

© 2008 Houston

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Monday, August 25, 2008

Lobbyists at 'intelligent design' conservative think tank 'Discovery Institute' push private toll roads with 'Cascadia Prospectus'

"A Coalition Of Change Agents At The State Level" Will Boost P3s

August 25, 2008

Ken Orski
Cascadia Prospectus
Copyright 2008

Funding infrastructure with private capital, a practice widely used abroad, has had its tentative beginnings here at home, but its domestic long-term future is still clouded. We interviewed a diverse group of individuals of varying political persuasion, on public-private partnerships in U.S. surface transportation. They included state legislators, congressional staffers, senior U.S. DOT officials, state and local transportation officials, members of the two congressionally-chartered transportation commissions, executives of trade and professional associations, and analysts on Wall Street, in think tanks, academia and private consulting firms.

Support for Public-Private Partnerships is Growing

Total reliance on public resources and the fuel tax to fund future investments in transportation infrastructure is no longer a realistic option. Such, in essence, is the considered judgment of a great majority of participants in our survey.

State officials tell us they are embracing private sector financing and tolling not because of any ideological commitment to "privatization" or a philosophic attachment to market-driven solutions but out of sheer fiscal necessity. Increasingly, state departments of transportation are obliged to commit a major part of their tax-supported transportation budgets to preserving, modernizing and replacing existing infrastructure, leaving little money for new construction.

"We are struggling to have enough money to hold together what we have, let alone be able to think about the level of investment that would be needed to provide new infrastructure," Allen Biehler, Secretary of PennDOT told state legislators recently.

Influential political leaders on Capitol Hill, in state capitals and in the Bush Administration have taken note of the growing need for private investment in infrastructure. House Speaker Nancy Pelosi (D-CA) (below, left) stated approvingly in an address to the American Public Transportation Association that "Private investment is playing an increasingly larger role in public infrastructure. Innovative public-private partnerships are appearing around the country, bringing much-needed capital to the table."

Texas Governor Rick Perry (above, right), in a keynote speech at the annual meeting of the Texas Transportation Forum, observed "I am convinced that private dollars, administered through public-private partnerships, are a significant part of the answer to our transportation infrastructure challenge."

As another high-ranking state official told us, "since Congress is not likely to come up with adequate resources to help us meet our future infrastructure needs, we have no option but to move on our own and find new ways of funding our capital needs." The official in question reflected a widespread sense among state officials and lawmakers we have talked to that there is little prospect for a substantial increase in federal aid. This judgment was also shared by Sen. Chuck Hagel (R-NE) at a recent congressional hearing. "The Federal Government," he said, "does not and will not have the resources to meet our future national infrastructure needs."

USDOT and a range of blue-chip advocacy groups have been contributing to the dialogue on infrastructure and PPP. So are many states. In Colorado, Iowa, Massachusetts, Michigan, Minnesota, Oregon, South Carolina, and Texas, governors and local authorities have convened special commissions to identify new revenue sources for infrastructure investments. In other states, such as Arizona, Nevada, North Carolina, Oklahoma, Washington and Wyoming, special legislative committees are studying "revenue enhancements" to supplement existing transportation funds.

"A Coalition Of Change Agents"

"A coalition of change agents at state level will bring about a fundamental reorientation in the way we approach transportation funding," one senior state financial official told us, adding that tolling and private investment will play an increasingly prominent role.

By our count, a total of 22 states are contemplating the use of tolls to support road capacity expansion. Some of them, such as Florida, Pennsylvania and Texas may resort to long-term concession-based PPPs, while others will choose the more traditional approach of using tax-exempt debt, design-build contracts, and operation through state departments of transportation or regional public toll authorities.

Municipal Bond Market Has Limited Potential

However, survey participants pointed out that many state and local governments will be precluded from using the municipal bond market as a financing mechanism because they have reached their statutory debt ceiling or because voters have refused to approve further bond issues. Moreover, pension funds, a potentially major source of investment capital for infrastructure, do not participate in the municipal bond market because they do not benefit from the munis' tax-exempt status.

Is Private Capital Really Necessary?

Not all of our survey participants were convinced that future infrastructure investments will require private capital. Some of those we consulted suggested that the nation's future transportation needs could be met by raising the federal fuel tax or through new federal financing initiatives. The former option, they said, has never been taken off the table and will most likely figure in the transportation reauthorization proposal shepherded by Rep. Jim Oberstar (D-MN). The latter option includes the National Infrastructure Bank (S. 1926 and HR 3401) championed by Sens. Christopher Dodd (D-CT) and Hagel, and the "Build America Bonds" program (S. 2021) proposed by Sens. John Thune (R-SD) and Ron Wyden (D-OR, below at left). Both initiatives would create a de facto national capital budget that could be used to fund "qualified public works projects of regional or national significance."

The NIB proposal has gained political traction by receiving the support of presidential candidate Barack Obama and House Majority Leader Pelosi.

But many survey participants pointed out that the extra revenue generated by a gas tax increase - even assuming that such a tax increase would pass muster with the tax-writing congressional committees and obtain a filibuster-proof majority support in the Senate - would be largely consumed by demands for preservation and reconstruction of the existing highway network and by escalating construction costs, leaving little capital for new construction.

Besides, the federal program contributes only about 40 percent of the capital cost of transportation infrastructure. The remaining 60 percent comes from state and local budgets, and there is no guarantee that local jurisdictions would be able to meet their part of the bargain.

As for the new federal financing initiatives, their revenue - $60 billion over 10 years in the case of the National Infrastructure Bank and $50 billion in the case of the Build America Bonds program - would hardly suffice to make up for decades of underinvestment.

These bills could only fund a small fraction of the infrastructure deficit - a deficit that the American Society of Civil Engineers estimates at $1.6 trillion. "A federal-centric approach does not offer an adequate long- term solution to closing the huge infrastructure funding gap," summed up one respected think tank analyst.

Overall Verdict For PPPs Is Positive

Overall, our survey participants thought that tolling, private equity capital and long-term concession-based public-private partnerships will play a significant role in the nation's efforts to expand infrastructure capacity. The circumstances which they believe are driving states to partner with the private sector are largely fiscal in nature. They include declining tax revenues flowing into the Highway Trust Fund due to improvements in vehicle fuel economy and a possible slowdown in the growth of vehicle-miles traveled (VMTs); public opposition to higher fuel taxes; and the sheer magnitude of the infrastructure deficit which overwhelmes the bonding capacity of state and local governments.But motivation to partner with the private sector also includes recognition of some positive b enefits of private sector involvement, such as willingness of private concessionaires to contribute equity capital, do the job faster, introduce innovation and assume operating and financial risks.

As several elected officials have pointed out to us, engaging the private sector in the task of modernizing the nation’s infrastructure may be the best way to ensure the continued growth of the nation’s transportation capacity without imposing an unacceptable fiscal burden on American taxpayers or burdening future generations with further debt.

The viability of the partnership model depends, of course, on the willingness of the private sector to invest in public infrastructure assets. On that score there appears to be little doubt. Our inquiry has revealed an impressive number of private equity funds (72 by one count) dedicated to investments in infrastructure. In the aggregate, they are estimated to have raised in excess of $120 billion. After leveraging the estimated equity capital pool through bank loans and the capital markets, the infrastructure funds could support investments in the range of $340 to $600 billion.

Skepticism About PPPs Persists

Skepticism about PPPs and questions about the proper role of the private sector in infrastructure development persist. The two-year moratorium on PPPs in Texas and strong opposition to the "monetization" of the New Jersy Turnpike have been vivid reminders of the continued opposition to tolling and private sector involvement. A more recent example has been the failure of two bills in the California legislature to establish an Office of Public-Private Partnerships to promote PPPs among local agencies (AB 2278), and to authorize state agencies to enter into public private partnerships to support infrastructure development (AB 2600).

Further evidence of anti-PPP sentiments comes from public employee unions. The Service Employees International Union (SEIU) has been particularly aggressive in its campaign to police the authority of states' employee pension funds to invest in private equity companies - a major source of investment capital for public-private partnerships. Having failed in this effort in California, the union has switched its attention to the state of Washington. Among the union's demands is that the State Investment Board (SIB) which manages public pension money, weigh the private equity companies' "corporate behavior" before it could invest in them. By prevailing in its demands, the union would, for all practical purposes, deprive public-private infrastructure partnerships of a major source of investment capital.

Opposition to PPPs Has Many Faces

Much of the opposition to public-private partnerships is motivated by a belief that the public interest demands strong public oversight over investment decisions relating to public infrastructure. Advocates of this point of view in Congress and elsewhere argue that the national road system is "a public good" that should be provided and maintained by the public sector to serve the public interest. They contend that a series of private toll concessions would lead to "cherry picking," resulting in a patchwork of uncoordinated facilities that would undermine the integrity and connectivity of a national highway network. PPP opponents are particularly critical of contractual "non-compete" provisions, diversion of upfront lump-sum lease payments to non-transportation purposes and long-term leases of existing toll facilities. Referring to the 99-year lease of the Chicago Skyway and the 75-year lease of the Indiana Toll Road, Sen. Jeff Bingaman (D-NM, at right), chairman of the Subcommittee on Infrastructure of the Senate Finance Committee observed, "I think we ought to reconsider the perverse incentive that the tax code creates for such long leases...If current depreciation rules lead to forms of investment that we judge to contravene public policy, then the Finance Committee should consider changing those rules...".

These concerns are legitimate and need to be addressed, observed the participants in our survey, noting that recent concession proposals provide for strong safeguards to protect the public interest. But opposition to private sector involvement is motivated by more than just an altruistic desire "to protect the public interest." Rather, we have found that it is fueled by a complex mix of motives. Some people are concerned that a widespread use of PPPs would shift more power over infrastructure development to the states and weaken the federal role in transportation.

Congressional lawmakers are opposed to PPPs because they suspect private sector involvement would lead to an erosion of congressional control over public investment decisions and reduce opportunities for earmarking.

Public employee unions worry that transportation facilities under private management would lead to a loss of union jobs and prevent unions from organizing workers at those facilities. The trucking industry fears that private road concessions would lead to rapidly escalating tolls.

And some Beltway interest groups and lobbyists are concerned that private sector involvement would decentralize decision making to the states and lessen their ability to influence the transportation program at the federal level. To the extent that many of the public-private partnerships are likely to involve foreign entities, there is also concern - justified or not - about foreign control of strategic transportation assets.

PPPs at the Crossroads

There are well founded speculations that Congress may attempt to assert oversight over public-private partnerships and place conditions on long-term toll road concession agreements, ostensibly "to protect the public interest."

The House Transportation and Infrastructure Committee is rumored to consider establishing a regulatory commission to oversee public private partnerships. An influential member of the Senate Finance Committee has raised the possibility of amending the federal tax code to prohibit "excessively long" concession lease terms.

Some interest groups in the trucking industry and public employee unions may be expected to vigorously applaud congressional moves to assert oversight and impose regulatory restraints on PPPs. There are indications that the National Transportation Infrastructure Finance Commission also will recommend certain legislative restrictions on private toll road concessions.

Whether efforts to rein in PPPs will come to pass, and if they do, how onerous the restrictions will be, remains an open question. So far, there have been few signs of any organized attempts by PPP proponents to change congressional minds. Ongoing advocacy efforts of various PPP coalitions appear fragmented and uncoordinated. This may change as we draw closer to the reauthorization deadline and as the House Transportation and Infrastructure Committee makes its intentions better known by releasing a preliminary legislative proposal (next February, we are told).

Of particular importance at that time will be the posture of the governors and state legislatures. Will they go along with recommendations for federal controls over PPPs or will they assert the right to determine for themselves the conditions of locally negotiated partnership agreements? Above all, will the current level of experience with long-term concession-based public-private partnerships offer state officials and legislators sufficient confidence and comfort level to champion this novel approach in the face of determined congressional and labor union opposition?

How this complex interplay of political forces will eventually play out in the post-election environment may ultimately determine whether the private sector will become a major partner in the efforts to renew the country’s transportation infrastructure. Or will private capital (especially foreign capital), faced with mounting legal restrictions and regulatory barriers in the U.S., turn its attention to investment opportunities abroad and deprive fiscally strapped state and local governments of much needed resources to modernize and expand America's infrastructure? That is the bottom-line question.

© 2008 Cascadia

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE