“Except for the bottom line, the way TxDOT spends their money is not how we appropriate it.”

Ogden: TTC plans may be scrapped

9/12/08

By Philip Jankowski
Taylor Daily Press
Copyright 2008

In an interview with the Taylor Daily Press, State Sen. Steve Ogden revealed a possible new course for the controversial Trans-Texas Corridor.

Instead of building superhighways across the state, Ogden said, the state may opt to augment the Texas Trunk System, a web of rural highways that includes U.S. 79.

The plan would expand those highways to four-lane divided highways, while expanding urban infrastructure with toll roads.

“We need to limit that concept to existing highways,” Ogden said of the proposed network of superhighways and tiered rail systems. “I passed a bill last session that did that, but [Gov. Rick Perry] vetoed it. I’m happy to report that he may have changed his mind.”

One of the main reasons for backing away from the Trans-Texas Corridor concept is the daunting amount of funding necessary to complete the 4,000 mile road project, he said. In 2002, the project was estimated to cost the state $145.2 billion to $183.5 billion. In today’s dollars that amount has grown to about $169.9 billion to $214.7 billion, according to current inflation figures.

Included in the price is the cost of acquiring more than half a million acres of right of way for the 1,200 foot wide corridor, which has drawn much ire from communities - including Taylor, Granger and Coupland - that lay in study areas.

“I don’t think there ever was a possibility that that could occur,” Ogden said. “There never was the funding.”

Despite the possible change in direction for transportation, Taylor already is a step ahead of the rest of the trunk system as far as expansion goes. The county and city recently approved an interlocal agreement that effectively took portions of U.S. 79 in East Williamson County out of the Texas Department of Transportation’s jurisdiction for construction purposes so they could be expanded at a quicker pace.

Construction has already begun east of Taylor.

Ogden said he will work to avoid budget shortages that led the county and city to turn their backs on TxDOT by placing more oversight on how the department spends its money. The Texas Legislature’s Transportation Committee recently decided to give the problem-beleaguered department a cash infusion of $1.5 billion.

Currently the Legislature writes TxDOT’s budget, but the department has not followed recommended appropriations, Ogden said.

“Except for the bottom line, the way TxDOT spends their money is not how we appropriate it,” he said.

Ogden said there is legislation in the works that would require TxDOT’s spending to fall more in line with legislative recommendations.

And as chairman of the Finance Committee, Ogden is in a unique position to be influential on how that money is spent.

“I’ll write their budget,” he said. “We’re going to better align their budget with the state’s budget.”

© 2008 Taylor Daily Press:www.taylordailypress.net

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Hot air from Hardcastle: “We have killed the TTC in the Legislature so many times, and the governor would bring it back."

A solution to energy woes

September 12, 2008

David Rupkalvis
The Graham Leader
Copyright 2008

State Rep. Rick Hardcastle said a ticket of John McCain and Sarah Palin is exactly what Texas needs, especially when you consider Palin’s experience in the oil and gas industry.

Hardcastle told the Young County Republican Women that he has worked with both McCain and Palin and considers both excellent choices to lead the country.

“John is a friend of mine,” he said. “He’s a mentor of mine because he says it like it is. I’m excited, and Gov. Palin just adds to it. How neat is it to know you have a candidate who can get up, go moose hunting, field dress her moose and still get to work in state government?”

As chairman of the state’s Energy Commission, Hardcastle said a lot of his time is spent working to ensure Texas never runs out of power. One thing he has learned over the last year is there is no one answer to the state’s future energy needs.

“We’re going to try to include everything in the mix,” he said. “We have the most abundant coal in the world. We’re working on uranium in Texas. We have five applications out today for nuclear power. Each one of those will replace four existing power plants.”

In addition, Hardcastle said wind energy, biofuels, natural gas and even oil will play a role.

The big push in rural Texas is wind energy which Hardcastle called a huge “blessing” and a huge “challenge.” He explained that wind energy has been a lifesaver for small counties in rural Texas. At the same time it is causing major headaches because the state is having a hard time controlling the electricity that is put in the power transmission system.

Hardcastle explained that by federal law, wind farms are permitted to put energy into the system at all times. Since the lines only carry so much, it makes it difficult to gauge what to expect because the wind speeds are constantly changing. He did say the state is working to expand its transmission system to handle both wind and power plant electricity.

The final answer to the state’s and nation’s energy woes is yet to be determined, but Hardcastle said he is confident Americans can find a solution.

“Energy is going to be a big debate,” he said. “We need an Apollo project in energy. When the government decided we were going to the moon, we got kevlar, we got radial tires, we got a whole lot. We need that kind of effort in energy.”

Hardcastle also said despite claims from Democrats that there could be a political power shift in Texas, he fully expects to be part of the majority in January.

“The opposition has this great dream that they will take us out and have a new speaker of the house,” he said. “As of yesterday, they had a chance to pick up one seat in the Senate, and there’s three seats that are competitive in the House. We don’t expect things to change a whole lot except to keep getting better.”

While high prices for oil and natural gas have put a crimp on the budgets of many Texans, it has been a big boom for the state.

“We have money in the bank,” Hardcastle said. “We can finance our schools, we can finance more property tax relief. All that is there because of the severance tax in oil and gas.”

Hardcastle said the new legislative session could have some political fights as legislators work to resolve differences on key issues. One area where he expects the debate to be especially heated is in appraisal caps.

“Several new people are talking about appraisal caps,” Hardcastle said. “Appraisal caps are a really dangerous proposition. How do you put a limit on local government? Voters can do that through the ballot box. It will continue to be an issue. We expect quite a fight this year.”

Another key issue in 2009 will be eminent domain. The Legislature passed an eminent domain law last year, but it was vetoed by the governor.

“Eminent domain is coming back,” Hardcastle said. “There was some really petty stuff that caused it to get vetoed last time. Hopefully we’ll put it together so it won’t get vetoed. We’re hoping to get there.”

One issue that isn’t likely to pass the Legislature is the Trans Texas Corridor, Hardcastle said. While transportation is still a key issue, the Trans Texas Corridor is not the way to do it, he said.

“We have killed the Trans Texas Corridor so many times,” Hardcastle said. “It has a life of its own. We’d kill it in the Legislature, and the governor would bring it back. That’s another reason you stay in local government. A little thing like that can take off on its own. We’re working to keep it killed.”

© 2008 The Graham Leader:www.grahamleader.com

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"Once you cover up rural Texas with concrete you can't change it back."

Planning committee meeting with EPA about Trans-Texas Corridor

Related Link: Texas 391 Commission Alliance

Sept 10, 2008

By Mystic Matthews
KTRE-TV (Lufkin / Nacodoches)
Copyright 2008

GROVETON, TX - The Trinity-Neches Texas Sub-Regional Planning Committee, or TNT, is set to meet with the Environmental Protection Agency next week.

TNT says TxDOT has not given enough thought to the environmental impact of the corridor, and they need the EPA to examine the findings they will get from TxDOT about the TTC.

"We're not in opposition to improvement and expansion. We just want to make sure it's done right because once you cover up rural Texas with concrete you can't change it back," says Connie Fogle with TNT.

The Trans-Texas Corridor is expected to use thousands of acres in East Texas if it's built and TNT wants to make sure they realize the impact that it will have on human and animal life.

TNT says TxDOT'S plan is flawed and they want changes made before they will support the plan.

© 2008 WorldNow and KTRE:www.ktre.com

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Declining traffic hits Spanish Toll operator

Cintra's August traffic falls on main concessions

9/10/08

Reuters
Copyright 2008

MADRID - Spanish toll road operator Cintra (CCIT.MC: Quote, Profile, Research, Stock Buzz) said on Thursday that traffic fell for nearly all of its main concessions in August.

On Canada's 407-ETR road, traffic measured in daily journeys fell 4.8 percent in August from a year earlier, affected by the economic downturn and the fact there were two less working days in the month, the company said.

On the Indiana Toll road, traffic measured in daily journeys dropped 6.89 percent, and 6.66 percent on the Chicago Skyway, reflecting tariff increases and the economic slowdown in the United States.

Cintra's Spanish motorways reflected the impact of the domestic economic slowdown, with traffic measured in daily journeys dropping 7.25 percent on its Ausol I concession from a year earlier and 4.67 percent for Ausol II. The only motorways to show rises in traffic were the Madrid-Levante and the M4-M6.

At 0952 GMT, Cintra shares were 0.89 percent lower at 7.78 euros, while the blue-chip IBEX-35 had lost 0.71 percent. (Reporting by Judy MacInnes; editing by Rory Channing)

© Thomson Reuters 2008:www.reuters.com

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"We’re not just a little Podunk city and you can’t run us over."

Highway plans spurs formation of group

Related Link: Texas 391 Commission Alliance

9/10/08

Elaine Ayo
San Antonio Express-News
Copyright 2008

St. Hedwig has homes on large lots and a longtime tradition of rural living. And folks there want to keep it that way.

“We want to be able to maintain as best we can the reason we moved out here in the first place,” said Kathy Palmer, the city’s planning and zoning commissioner.

But a new master plan and recently updated zoning maps are no match for a proposed route of Trans-Texas Corridor 35 that would slice straight through the city of about 2,000 people and create headaches for several city departments, officials said.

With neighboring Wilson County, St. Hedwig has created the South Central Texas Sub-Regional Planning Commission , the ninth such commission formed in the state since last year and the first in the San Antonio area.

St. Hedwig officials say the commission is a way to ensure the state hears their concerns about the corridor proposal, which follows FM 1518 and cuts across the western third of the town’s 30 square miles.

An alternate route being considered would follow Interstate 35. None of the routes for the proposed network of statewide toll roads have been finalized.

State law allows the creation of such commissions and requires state agencies to coordinate plans with them “to the greatest extent feasible.” “The term ‘coordination’ is actually very important,” said Dan Byfield, president of the American Land Foundation, an organization dedicated to protecting property rights. “It creates a great amount of power for the local unit of government, that (the state must) work with them. They can’t ignore them.”

Byfield and his wife, Margaret Byfield , executive director of another property rights organization called Stewards of the Range, have been helping local governments in the proposed paths of two TTC projects running between Mexico and the Dallas-Fort Worth area and between Mexico and the Texarkana-Shreveport area.
Concerns over the corridor route may have sparked the formation of the commission, but its potential impact is broader, Wilson County Commissioner Larry Wiley said.

“What we’re wanting is to put ourselves on a more level playing field with other government agencies, to represent the health, safety and welfare of the city, of our county,” Wiley said.

The South Central Texas Sub-Regional Planning Commission had its first meeting July 31 and has another scheduled for Sept. 23 at 2 p.m. at the St. Hedwig City Hall at 13065 FM 1346.

Board members want to finish devising the structure of the commission before inviting other area entities to join, Palmer said.

“It’s making folks aware we’re not just a little Podunk city and you can’t run us over,” Palmer said. “We have a plan.”

Portions © 2008 KENS 5 and the San Antonio Express-News:www.mysanantonio.com

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$500,000 model used to pitch Trinity Toll Road Park for developers

Trinity River project's backers unveil detailed model

September 9, 2008

By RUDOLPH BUSH
Dallas Morning News
Copyright 2008

A massive scale model of the planned Trinity River park was unveiled today at the Trinity Trust, capturing in minute detail what backers of the long-delayed project hope will be a cornerstone of Dallas’ development.

At 20 feet long and more than 7 feet wide, the model portrays a 10-mile path of the park. It includes much of downtown, the medical district and neighborhoods north and south of the river.

For the first time, it offers a large scale, three-dimensional view of the Trinity’s planned toll road, two white Calatrava-designed bridges, large man-made lakes and the river meandering past lawns, ball fields and forest.

“It’s a vision. It shows our citizens, the community and our neighborhoods our vision,” said Dave Neumann, chairman of the City Council’s Trinity River Corridor Project Committee.

The model, which cost more than $500,000, was built by Oak Cliff artists Charles and Susie Kendrick. It sits inside the Trinity Trust building at 1444 Oak Lawn Ave.

It will be open to the public from 10 a.m. to 7 p.m. beginning Wednesday.

Those viewing hours continue through Friday. Then, beginning Monday, the model can be viewed from 10 a.m. to 5 p.m. on weekdays.

Much of what appears in the model has yet to be built inside the real levees. Dallas Mayor Tom Leppert has set a goal of 2014 to see major elements of the park, including the toll road, in place.

He said he remains optimistic that goal can be reached but warned that it will take great effort.

“This is $2 billion. It’s a complex project. Nobody should get the feeling this is easy. It’s going to take a lot of hard work,” he said.

Funded by Alon USA, the model will give the project a boost for two reasons, the mayor said.

First, the public will be able to get a firsthand look at how the Trinity could look. Second, it will give prospective donors a real sense of where their money is going, he said.

The model is impressive. Even the roof pitches of the tiny homes dotting the neighborhoods north and south of the Trinity are accurate.

It took more than a year and a half to build, and there is still work to be done.

But what it represents may not be what ultimately appears inside the Trinity’s levees.

The city is still awaiting a federal environmental study on the placement of the toll road. That will surely affect its final position inside the levees. That, in turn, will affect the placement of the major lakes and the surrounding parks.

Funding remains a crucial question as well. Despite voters’ approval of the toll road project last year, the final cost of its construction isn’t certain.

That cost, to be borne in part by Dallas taxpayers but largely by the North Texas Tollway Authority, likely will affect its construction schedule.

Still, city officials and the private backers of the project are eager to see the huge and meticulously detailed rendering that sits now inside the Trinity Trust building become a reality sooner than later.

rbush@dallasnews.com

© 2008 The Dallas Morning News:www.dallasnews.com

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San Antonio toll road backer joins Bracewell & Giuliani

Krier's New Post An Example of an Emerging Field

Will help companies deal with complexities of government

September 8, 2008

By Jim Forsyth
KQXT-FM
Copyright 2008

150 years ago, businesses began hiring lobbyists to get things from government. Today, government has become so complex and regulations have gotten so challenging, that a new type of professional has emerged, the skilled 'navigator' who helps businesses deal with the increasingly complex mix of governments and regulations, 1200 WOAI news reports.

That's the role that long time Greater San Antonio Chamber of Commerce President Joe Krier will play as head of the Public Issues Management Group of the powerhouse law firm Bracewell & Giuliani.

"A lot of what companies do are not unlike political campaigns, when it comes to getting where they want to go," Krier said.

Krier, who is an attorney who once was associated with Bracewell and Giuliani's predecessor firm, will not be practicing law, and he will not be a lobbyist. He will be playing a new and still evolving role, by working with businesses to help them protect their reputations, their assets, and their focus as they face an ever growing minefield of regulations and an even faster growing array of agencies, authorities, and quasi-governmental agencies, especially at a time when local, county, state and federal agencies, along with the new breed of quasi-governmental bodies and entities like Regional Mobility Authorities, wield more and more influence and often conflict with one another.

"These are major businesses that have issues that cross government and business and public lines," he said.

Examples of Public Issues Management include helping businesses which rely on military contracts deal with the Base Realignment and Closure Commission, and working with businesses which rely on transportation to navigate the increasingly complicated debate over toll roads, without the businesses becoming identified with one issue or point of view.

"I've spent the last twenty years at the intersection of business and government," Krier said. "I have been giving businesses and CEOs what I thing was thoughtful advice. I now have an opportunity to provide that type of advice to major companies that have issues that cross these same lines, and to do it in partnership with one of this country's greatest law firms."

Krier says a lot of companies in this area are dealing with business issues that have a governmental component, and businesses which are in the public eye.

"We think these businesses could benefit from the kind of thoughtful advice and counsel that I can provide as to how you manage that issue to achieve your business goal, and to do it as part of a larger team, to use their own lobbying people and public relations people in a more useful way."

He says he will fashion 'strategic campaigns' similar to campaigns which resulted in the approval of the Alamodome and the AT&T Center.

Krier joked that the rumors that his wife, former County Judge and current USAA Vice President Cyndi Krier, told him to get off the couch and get back to work are untrue.

"Doing nothing and trying to do it very well for the last six months was something I wasn't very good at," he said.

© 2008 KQXT-FM:www.q1019.com

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TxDOT on withholding $ 1.1 billion error: "We really wanted to make sure we got our explanation right."

Texas Department of Transportation deficient in competency, transparency

9/8/08

Editorial
Fort Worth Star-Telegram
Copyright 2008

A state auditor’s report takes the Texas Department of Transportation to task for a huge $1.07 billion bookkeeping blunder that the agency kept largely under wraps for about four months before finally making it public.

We’re not sure which to be more disturbed about — the abysmal bookkeeping or the disappointing lack of transparency in state government. But on both counts, you can register us as alarmed.

As a result of the error, TxDOT officials believed in August 2007 that they had $4.2 billion available for contract awards for transportation projects, the report by State Auditor John Keel said. But by October, they realized that they had counted $581 million in bond proceeds twice and included $488 million in Texas Mobility Fund money even though those funds already "were required for existing projects," the audit said.

The result was that TxDOT had only about $3.1 billion for new contract awards for transportation projects, or about $1.07 billion less than it had projected.

TxDOT warned its district engineers and regional transportation officials in a Nov. 30 memo that the agency’s "immediate cash flow situation . . . is showing a significant downward trend." But the agency didn’t specifically disclose its $1.07 billion bookkeeping blunder until a Feb. 5 state Senate hearing.

TxDOT spokesman Chris Lippincott said the agency delayed the disclosure because "we really wanted to make sure we got our explanation right." Or perhaps the agency really wanted to avoid a major embarrassment.

In any event, TxDOT should have divulged to transportation officials and the general public in October that it suspected a major error in its funding calculations and would offer a more-precise final explanation after an investigation.

That would have been much more forthright — in other words, shooting straight with Texans whose hard-earned dollars finance road construction through their payments of state and federal gasoline taxes and toll fees.

TxDOT has taken some laudable steps toward correcting its systemic bookkeeping problems and making the agency’s operations more transparent.

It also should be noted that there was no evil intent associated with TxDOT’s erroneous funding calculations. Nor was any money stolen or missing.

The $1.07 billion blunder, and its delayed acknowledgment, undermined TxDOT’s credibility and raised questions about its competency. It must be more upfront about its problems in the future, lest its reputation be further tarnished.

© 2008 Fort Worth Star-Telegram:www.star-telegram.com

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"People still need to drive and drink water, no matter what happens with the economy. It's not my job to worry about public policy."

You pay a lot more

What happens when the city leases public assets to private investors?

9/7/08

By Susan Chandler
Chicago Tribune
Copyright 2008

The price to park your car for an hour in the Millennium Park Garage has risen 31 percent, to $17, since the garage was leased to Morgan Stanley in 2006.

The cost to drive an auto across the Chicago Skyway is now 50 percent higher than it was in 2004, when Australian and Spanish investors paid $1.83 billion for a 99-year lease.

Could an $8 airport pretzel be next? How about a $10 luggage cart?

Those are real questions facing consumers as the city moves ahead on a landmark plan to lease Midway Airport to private operators.

Mayor Richard Daley has been ahead of the curve leasing public infrastructure such as the Skyway and underground parking garages as a way to raise cash. So it wasn't much of a surprise that in 2006 Chicago's Midway became the first large hub airport to apply under a Federal Aviation Administration pilot program to test privatization at five airports around the country.

The privatization of public assets has sparked a debate among academics and urban officials across the country about whether the leasing of bridges, roads and other infrastructure is a smart way to manage public resources over the long haul or just a desperate quick fix.

Because the phenomenon is so new, less has been said about what happens to consumers when they go from being taxpayers using public facilities to customers of a for-profit business.

It turns out they pay a lot more.

In the early years, price hikes by new owners are usually fixed and modest, experts say, but over the years, owners generally have more latitude to raise prices: Tolls go up, parking rates rise and the cost of using an airport takes off.

In Australia, for example, parking revenue at the nation's five major private airports has soared 77 percent since 2002, even though passenger counts only rose 41 percent. Now that country's consumer commission is investigating why it costs more to park at Sydney Airport than London's Heathrow. Meanwhile, in the case of Midway, the city has discussed a deal with the airport's biggest tenant, Southwest Airlines, to freeze the airline's costs for six years in return for its support of the privatization plan. If such a plan is finalized, the new owner would have to find ways to hike revenue other than raising the rent paid by airlines.

John Schmidt, the attorney representing the city on Midway, said there are ways the new operator can increase airport revenue without gouging travelers: cut costs and bring in more retail and dining options.

Private airports have five times the retail sales of their public counterparts, Schmidt said, and some have turned themselves into luxury shopping malls. "You'll be tempted to buy a Gucci handbag or a new computer. You have the advantage of captive markets."

Under the Skyway deal, no proceeds were spent on easing traffic congestion, which concerned transportation experts. Of the estimated $2.5 billion to $3 billion from a Midway lease, $1.2 billion would be used to pay off airport debt with the rest going toward underfunded public pensions and infrastructure investments. Bids from the five groups that passed city muster are expected in about a month.

Shortsightedness cited

Critics worry, though, that elected officials are selling the city or state's future revenue at a discount for a fat payoff today without imposing the spending discipline that would balance the budget.

"You're giving up the future returns. Each of these is a one-shot deal," said Jonathan Peters, a finance professor at the City University of New York. "Selling your assets is not a solution to overexpenditures. It buys you time but it doesn't solve the fundamental problem."

The debate is likely to heat up as state and city coffers experience shortfalls from the slowing economy, which is showing up in reduced revenue from taxes on retail sales, gas and real estate transfers. News of a $420 million shortfall in city revenue in 2009 already has some politicians calling for more infrastructure deals. In Springfield, Gov. Rod Blagojevich says the answer to the state budget crunch is simple: Let him lease the Illinois Lottery.

The argument in favor of such transactions is that government should take advantage of investor demand for assets to remove itself from non-essential services that can be more efficiently provided by private operators.

But State Sen. Jeffrey Schoenberg (D- Evanston), who has studied the proposed privatization of the Illinois Tollway, believes public officials are being outnegotiated and leasing too cheap.

Ninety-nine years is too long for a public asset to be leased, Schoenberg argues, because no one can see that far into the future. Few leases in Europe, for instance, run more than 40 years. He also thinks there should be formulas that allow taxpayers to benefit from the upside if deals pay off more handsomely than expected. Spain and others have insisted on such clauses in some of their asset leases.

In the Skyway deal, investors "covered their investment in a few years," Schoenberg said. "Therefore, everything else was gravy."

The real pain for Skyway drivers hasn't been felt yet, but when it is it will be intense, experts predict.

"The toll-escalation clauses are very aggressive. The real escalated portion comes later on," said Peters, the finance professor. In the early years of the lease, which is detailed in a lengthy concession agreement with the city, the amount tolls can be raised is fixed. Then, the owner gets to pick a formula to calculate toll increases, and one of them likely will allow for annual increases of more than 5 percent.

By 2017, cars will pay $5 to cross the Skyway, a 100 percent increase from 2004. By 2050, a Skyway trip could cost as much as $29.30, according Peters' analysis.

"The Skyway may look painless now but in 25 years or less, there will be people camped out in City Hall over these tolls," warned John Foote, senior researcher with Harvard's Kennedy School of Government. "In 25 years, the tolls won't be acceptable."

Lisa Schrader, a spokeswoman for Paul Volpe, Chicago's chief financial officer, said Skyway drivers saw "almost immediate improvements," such as the introduction of electronic tolling. She also pointed out that the Skyway had not had any toll increases for 12 years. "It was clearly underpriced by any standard."

Flexible spending

Mortgaging public assets is nothing new. When cities sell municipal bonds, that's exactly what they are doing—taking in money from private investors and paying them back with interest over time. More than 50,000 state and local entities issue municipal securities and more than 2 million separate bond issues are outstanding.

Yet municipal bonds have a drawback from a politician's point of view. The money raised usually goes for a specific purpose. The proceeds of a hospital bond offering would go to construction costs. A tollway offering would pay for upkeep or extension of the roadway.

A long-term lease, however, is usually not constrained in the same way. For example, Daley used the Skyway proceeds to pay down city debt and sock away $500 million in a permanent reserve fund that raised the city's credit rating and lowered its borrowing costs.

About $100 million was spent on social programs such as heating assistance for low-income households and transition assistance for felons..

"We were told to put some into human capital as well as hard capital," Daley told the Tribune's editorial board after presenting his 2008 budget. "People want to see something visually from the sale of assets."

Investors prefer long-term leases over bond offerings too, because once they take control of the asset they can raise prices, employ non-union workers and find other ways to boost financial returns.

Proponents of infrastructure leases say taxpayers also benefit because there are many functions private operators can perform better than government.

"Government should not be taxing its constituents to provide service people can get in the private sector," said Laurence Msall, president of the Civic Federation, which generally supports the city's privatization efforts.

Dana Levenson, the city's chief financial officer when the Skyway deal was done, agrees: "Parking garages, toll roads and any other municipal entities that have profit-making potential should be considered for outsourcing."

In 2007, after a little more than two years on the job, Levenson left the city payroll to join the Royal Bank of Scotland's Chicago office, where he is working on infrastructure deals.

Few deals match Skyway

The eye-popping price paid for the Skyway has cleared the way for dozens of sell-offs of public assets around the country. But few of those follow-on deals have come close to its favorable terms.

For instance, Chicago's second deal—the lease of the Park District's four underground parking garages—had a considerably smaller payoff and no safeguards for taxpayers on how high the new owner can raise parking rates.

The city would have reaped the same amount of revenue from the parking garages in 30 years even if it didn't raise parking rates as the new owner already has done. If the city had raised parking rates by 20 percent, it would have recouped its $563 million windfall in 25 years. If it had hiked rates by 40 percent, it would have earned the same half-billion dollars in only 20 years, and it would still own the garages.

Levenson said the lease saved the city the $65 million cost of renovating the East Monroe Street garage. Because the garages are not monopolies, the Park District was willing to give the winning bidder unfettered power to raise parking rates, he said.

Schrader echoes that, saying, "The concessionaire must keep rates competitive to drive traffic and increase revenues. In fact, rates now appear to be consistent and, in some cases, lower than surrounding areas."

The Park District is using $122 million of the lease proceeds to build five field houses and 50 playgrounds around the city. But expenses will rise because of the upkeep on the field houses, and the Park District's revenue stream has shrunk. Those two things could collide in the future as the facilities age, experts say.

The Skyway deal whetted the appetite of politicians nationally.

"After the Skyway, we got a bunch of phone calls from our clients saying, 'Can you explain how this works? We have lotteries and toll roads,' " said Mark Florian, the recently departed head of Goldman Sachs' public sector and infrastructure banking group.

Some politicians backed off because of public resistance. New Jersey Gov. Jon Corzine, a former Goldman Sachs investment banker, has declared that leases of public assets are off the table. Texas Gov. Rick Perry has signed a bill placing several restrictions on private toll roads that will make future deals much harder to do.

Investors like possibilities

Even so, pension funds and other institutional investors are eager to sink a share of their pension funds into infrastructure because it provides steady streams of cash with relatively little risk.

The Illinois State Board of Investment, which manages more than $11 billion in pension assets for state employees, is now devoting 5 percent, or almost $600 million, of its portfolio to infrastructure.

The fund is trying to hit an 8.5 percent annual return with a modicum of risk, said Bill Atwood, executive director.

"What managers are looking for is regulated assets. As long as you can be confident about the future of the revenue stream, you can predict returns," Atwood said. "People still need to drive and drink water, no matter what happens with the economy. It's not my job to worry about public policy."

schandler@tribune.com

© 2008 The Chicago Tribune:www.chicagotribune.com

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