Saturday, October 11, 2008

"Even the rosy projections advanced by CTRMA and their friends at JP Morgan aren't enough to cover the debt service on the bonds used to finance 290E"

Tolls : So what is CAMPO up to?


Copyright 2008

On Monday, CAMPO's Transportation Policy Board will be meeting to discuss some some issues and make some decisions. Among them is the vote to accept the terms and conditions of the financing of the 290E Tollway. And therein lies the rub... apparently, even the rosy projections advanced by CTRMA and their friends at JP Morgan (the investment banking subsidiary of JP Morgan Chase) aren't enough to cover the debt service on the bonds used to finance the road. Which is a real problem in this market. I'd ask you to forget, for a moment, the fact that the credit markets are effectively frozen still, especially for road bonds. This'll all make sense in that context.

Apparently, JPM is pricing the interest rate on the bonds to, what I would assume, a level that would allow them to carry the bonds on their balance sheet. But they are dangling a carrot. If CAMPO will agree to bind 290E AND 183A into the same project as part of a system then they'll reduce the interest rate. Of course, there's no word on the existing bonds used to finance the 183A road. Or the performance vs. projections of that road. What is known is that CAMPO is being asked to guarantee the bonds on 290E with revenue from 183A.

Now, one of the arguments for toll roads is that they are financed by user fees (not evil taxes). The interesting thing in this situation is that 'user fees' from one population are being used to bolster the financing, in effect subsidizing, the users fees on another project. This would make sense if the two roads had user overlap. Or even if they were close to one another.

These roads don't have overlapping user populations AND they are separated from one another by, well, most of Austin.

And now, I have some questions...

1) If we're not worried about 'user fees' being used to pay off projects where they were assessed, in effect spreading the burden evenly, why don't we spread it as evenly as possibly (and as cheaply for taxpayers) by increasing the gax tax?

2) What about the money that TXDOT has been authorized to raise? Surely our legislators can find a way to get some of THAT money out of TXDOT to fund this project.

CAMPO needs to realize this ISN'T the best time to raise money to build something. Whether the situation will cure in a week or a year, the reality is that 290E is not a pressing project especially given that it can't fund itself. Further, we're less than a month away from an election that is definitely going to change the legislative makeup of DC and possibly Austin. Everyone in politics knows that infrastructure is definitely needed and will be necessary to bring us out of this recession... and the mood has certainly shifted from financing that investment with tolls.

CAMPO should table this until at least March, 2009. It's the only responsible thing to do.

YES! I got through this entire post without calling you any of you names or deriding your intelligence. Don't think that'll continue, especially if you vote to approve these draconian terms and conditions. Simply put, and I mean no offense, none of you have a solid background in structured finance. Simply put, JP Morgan does NOT have the best interests of CAMPO in mind. You should dig VERY deeply into the structure of this and the covenants.

CAMPO Transportation Policy Board
Monday, October 13, 2008 at 6:00 p.m.
University of Texas, Joe C. Thompson Conference Center, Room 2.102
Dean Keeton and Red River, Austin, Texas

© 2008 McBogger:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Friday, October 10, 2008

Austin toll road schemes paved with bad projections

Fitch has “negative outlook” on Austin toll bonds


Ben Wear
Austin American-Statesman
Copyright 2008

Fitch Ratings is not bullish on TxDOT’s three Austin toll roads.

The rating agency’s outlook on bonds sold by TxDOT for the roads — Texas 130, Texas 45 North and the Loop 1 extension — is “negative,” according to a release from Fitch earlier this week. The problem is that the traffic on the three roads, while it started fast, shows signs of falling short of longer-term growth projections.

“The Negative Rating Outlook reflects the strong possibility for traffic growth to be significantly less than originally forecasted … ,” the release said.

The roads, or part of them, first opened Oct. 31, 2006, which was actually ahead of schedule. Actual toll collections began in January 2007, so the money started rolling in early. And both Texas 45 North and Loop 1 had good traffic immediately, much higher than projections. Texas 130, meanwhile, mostly still goes through cow country and the 49-mile Austin segment wasn’t completely finished until this spring. It’s performance has only in the last few months reached original projections.

The problem for Fitch is the trend. Growth in traffic even on Loop 1 and Texas 45 North has not been what TxDOT was hoping for.

“The 2005 forecast assumes traffic growth at 89 percent and corresponding revenue growth of 97 percent over the fiscal 2008 to fiscal 2011 time period,” Fitch says. “While the project is starting at a higher base, given current trends it is Fitch’s assessment that this growth appears less likely on the more developed SH45/Loop 1 segments.”

Fitch does go on to say that Texas 130 might benefit next year when the Texas 45 Southeast toll road opens. That 7.1 mile-long tollway will connect the south end of Texas 130 to Interstate 35. Then there’s the coming southerly 40 miles of Texas 130, from Mustang Ridge near Austin down to Interstate 10 at Seguin. And over time, there will be more development along Texas 130 and that will make traffic and revenue increase.

But all three of those things were anticipated when the projections for the three-road project were made in 2002. That forecast showed that the project would continue to be in the red for decades and would need TxDOT to cover most of operations and maintenance costs. And we all know the financial strains that TxDOT is facing.

© 2008 Austin American-Statesman:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


"The financial system of the future will be less tolerant of the super-leveraged deals that have dominated discussions of private toll roads ..."

Credit worries affecting both public and private efforts to build roads, bridges


Michael Lindenberger
The Dallas Morning News
Copyright 2008

How badly is the Wall Street implosion affecting cities and states -- and, say, toll road authorities? Pretty badly, if they are trying to borrow money right now.

That's the word from Ken Orski, editor and publisher of Innovation Briefs a must-read transportation newsletter that often touts the benefits of private investment in infrastructure but does so with fairness and rigor.

On Thursday, he wrote to recap a meeting of transportation officials in New York that included remarks by top bankers.

A sober assessment of the present state of the financial markets was offered by a senior Wall Street executive highly knowledgeable in transportation financing. The full spectrum of debt-funded infrastructure funding alternatives is under pressure, he reported. Most states are in a massive budget review as the impact of reduced revenues is beginning to emerge. Credit spreads have widened significantly and the overall borrowing costs, including Private Activity Bonds, have increased appreciably. There has been a record postponement of new bond issuances and a cancellation of at least one proposed PPP deal.

The debt market is already affecting Texas transportation agencies.

NTTA is looking to convert the final piece of the short-term debt it acquired to buy the State Highway 121 contract in the next month or so -- and so far the prospects for doing so cheaply are dim. TxDOT, which has some $500 million in variable-rate financing, has seen its rates go through the roof.

But what is most interesting about Orski's comments is his report that private firms, too, are feeling the pinch.

The PPP project he alludes to is in St. Louis, where Missouri officials have decided to scrap plans to use private funds to repair or replace some 802 bridges. The culprit? Credit worries over the past year that made "private financing" too expensive, the state said.

When the state introduced the plan two years ago, it was offered as a new model for states wanting to repair or replace hundreds of decaying bridges without issuing more bonds. The approach had gained national attention following the Minneapolis bridge collapse last year.

Now, the state will go forward with the project, but pay for it the old-fashioned way: Issue bonds and pay back the debt over time.

Looking to the future, the Wall Street executive saw a changing capital market, with more costly municipal financing and severely constrained bank financing driving down valuations and reducing the number and size of projects.(However, in a follow-on discussion, the executive saw a ray of hope--several municipal bond deals totalling in excess of one billion dollars have come to market in the last few days, albeit at elevated interest rate yields).

That's an interesting perspective, for a bunch of reasons. For one, private firms looking to invest in Texas infrastructure have maintained throughout the credit market turmoil that the credit worries have reduced neither their appetite nor their capacity to pay big dollars for toll roads.

The U.S. Secretary of Transportation has argued for years that private firms have some $400 billion in capital worldwide, ready to invest in toll roads and other projects.

But if that number is fast shrinking, or if the firms with the money begin to favor other markets in Europe, that leaves the American tax payer with the full bill for improving the system. That suits some just fine, but most parties -- including Speaker of the House Nancy Pelosi and Rep. Eddie Bernice Johnson of Dallas -- have come around and now say private capital is an essential part of the mix for building the roads, bridges and other transportation assets the nation so badly needs. They argue that it's a matter of degree.

For his part, Mr. Orski sees the problems on Wall Street as temporary, especially considering how long a project it will be to truly rebuild our infrastructure. But the financial system of the future, he predicts, will be less tolerant of the super-leveraged deals that have dominated discussion of private toll roads in America. Instead, the upfront payments will be smaller and states will insist on greater controls.

That should be good news for those who distrust the private sector's involvement in public infrastructure. But he worries that the companies will simply take their money to other countries in Europe and elsewhere where the idea of privatized roads and bridges has deeper roots.

© 2008 The Dallas Morning News:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Thursday, October 09, 2008

Surprise! CAMPO will convert 290 East freeway into a toll road without public hearings .

Toll funds may underwrite new toll roads


KXAN-TV (Austin)
Copyright 2008

Exploding development and increased traffic continues to take a toll on Central Texas roadways. A proposed toll road is revving up controversy. The Manor Expressway will cost $623 million to build. Some said the way it is expected to be funded violates an agreement the CAMPO board made.

CAMPO Board Member and Travis County Commissioners Court member, Sarah Eckhardt, does not like the idea of using tolls collected from 183A as collateral to build the Manor Expressway toll road. Meanwhile, the director of the Central Texas Regional Mobility Authority said in this credit crisis there are not many other options.

"The liquidity in the market place has dried up, so you have to use extraordinary means to keep your program going," said Mike Heiligenstein, CTRMA Executive Director.

Manor Expressway or 290 East project will go from 183, across 130 and run into Parmer Lane. It will stretch 6.2 miles and will have up to 12 lanes in some sections. Crews will rebuild the existing lanes of 290 as frontage roads and add six lanes between them. The $623 million project could start as soon as 2009 and be finished in 2013.

"The people of North Travis and Williamson County gain because 290E/Manor Expressway will be completed," said Heiligenstein.

Once the Manor Expressway is built, to drive on it motorists will pay from 15 to 20 cents each mile. CAMPO Board Member Eckhardt thinks the money paid by drivers on 183A should be used to maintain 183A. Eckhardt's biggest issue with the plan, however, is CAMPO is expected to move forward with the plan without public hearings.

"We developed a process ,so when it did come to question whether we would combine revenue from one road with another we would have that public conversation," said Eckhardt. "That is the promise we made."

Still each month the project is delayed is expected to cost an additional $5 million. CAMPO Board Members with vote on the issue on Monday, Oct. 13.

© 2008 KXAN-TV:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


"Having 15 major North Texas projects all being planned as toll roads should scare the living daylights out of everyone. "


Down the road to financial ruin


The Dallas Morning News
Copyright 2008

Re: "TxDOT buys time with borrowed funds – $1.5B in bonds will help keep projects on track – for now," Monday news story.

There is no doubt that the Texas Department of Transportation is taking Texans down a path of a financial crisis of its own making.

Rather than relying on toll roads as the panecea for our future infrastructure, why not adopt a pay-as-you-go gas tax? Does the governor really want to tax drivers through toll roads to raise the necessary $25 billion to $50 billion?

My research has shown that most toll road revenue predictions fall short. Maybe this is intentional to help sell the debt to investors.

It sure would be nice to understand where the current gas tax money is going, because having 15 major North Texas projects all being planned as toll roads should scare the living daylights out of everyone. This doesn't sound as if using toll roads in the future will be optional.

Ralph Bouvy, Plano

© 2008 The Dallas Morning News:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Wednesday, October 08, 2008

Heiligenstein: US 290 East freeway to toll road conversion may be financed using US 183 toll road as collateral.

City manager asked to evaluate financial crisis


Copyright 2008

AUSTIN-- Austin City Council Member Lee Leffingwell and Mayor Will Wynn are asking City Manager Marc Ott for an update on the city's financial position in light of the "ongoing national financial crisis."

Leffingwell said he sent an email to Ott Wednesday afternoon asking for perspective on funding items like the ability to maintain staffing and services at current levels.

"I don't think there's any serious discussions about actual layoffs or anything along those lines right now," Leffingwell said.

Still, Leffingwell said he wanted an open discussion of the city's current financial position. Leffingwell also called for an update on the ability to execute a voter-approved $567 million bond program from 2006 and city worker pensions.

"How is the current credit situation?," Leffingwell asked. "Should the city decide that it can go forward with implementing some of this, are we going to be able to access the credit to do it?"

Already, the Central Texas Regional Mobility is noting a tougher-than-expected climate for financing its next toll project, which is expected to be US 290 East toward Manor. At a workshop session on Wednesday, CTRMA Executive Director Mike Heiligenstein laid out an updated plan for financing the toll road, which will include using the US 183A toll road as collatorial.

Leffingwell said he also wants know projections on whether the city's current 3 percent projections for sales tax revenue will fall into the negative during this budget year. The 3 percent sales tax projection accounted for $160.8 million in city revene in 2009 according to the Austin city budget.

"I think it goes without saying that it's very uncertain times right now," said Leffingwell. "I think it's important that we come out and say those things in public."

Calls to Austin Mayor Will Wynn were not immediately returned Wednesday night. City of Austin Public Information Manager David Matustik said Ott and city staff already are working on projections for how the financial crisis will affect bonds and "commercial paper" acquisitions.

"They were planning on getting another update together anyway," said Matustik. "He's going to facilitate this request."

The Austin City Council will meet again Oct. 16.

© 2008 KXAN-TV:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Tuesday, October 07, 2008

Truth Be Tolled sequel premieres 10/30/08 in San Antonio, Texas

Truth be Tolled: Turf Special Edition

Premieres 7 p.m. Thursday, Oct. 30, at the Palladium Theater, 17910 West Interstate 10 in San Antonio.

Come by at 6 p.m. to meet the "cast and crew."

© 2008 Truth Be

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


State disclosure laws make it easy for lawmakers to conceal potential conflicts of interest

Lax state laws allow cozy lobbyist-lawmaker ties


Associated Press
Copyright 2008

Texas House Speaker Tom Craddick is in business with a lobbyist but can't say who. Fellow Rep. Sid Miller finally disclosed his lobbyist dealings, but only after someone complained.

And then there are Reps. Kino Flores and Jim Murphy: their day jobs intersect with state government interests but their state disclosure forms don't say that.

The four state legislators are not the only Texas politicians whose personal business interests have sparked scrutiny. Texas has a part-time "citizen Legislature," so state lawmakers need regular jobs, too.

But some legislators take jobs that coincide with state business, a tie government watchdog groups say creates too-common conflicts of interest that should at least be fully disclosed, if not barred outright.

"The ethics laws in Texas and other states are there so that people can decide whether these elected officials are acting in our best interest or in their own best interest," said Jennifer Peebles of Texas Watchdog, a non-partisan group focusing on government transparency and ethics. "In these cases it sounds like the public doesn't know anything about it."

Craddick, a Midland Republican who wields tremendous influence in state government, revealed in recent disclosure filings that he and a registered lobbyist have common business interests. The law requires he list the company involved — in this case development company Centro Caswell, LLC. But Craddick isn't required to name the lobbyist. And his spokeswoman, Alexis DeLee, said Craddick doesn't know who it is.

"The general partners informed him that one of the partners — not one of the general partners — is a lobbyist," DeLee said. "The speaker does not know who it is. Therefore there is no conflict of interest."

Miller, a Stephenville Republican, has ownership in a political and commercial phone bank company that was co-founded by A-list lobbyist and consultant Todd Smith. More than half of Miller's campaign expenditures since 2000 — $576,000 — have gone to Smith, and some of that went into one of the companies they both own shares in, E-Communications Advantage.

Miller and Smith's business relationship isn't illegal but he's supposed to disclose it — and didn't. Miller corrected his disclosure forms on Sept. 25, the day after a supporter of his Democratic opponent signed a complaint filed with the Texas Ethics Commission.

"It was an oversight," Miller told The Associated Press. "I'm not perfect."

Smith said he saw no conflict in a lawmaker paying a consultant who invested in the same company with the lawmaker while lobbying the Legislature.

"I don't know why that would be a conflict," Smith said. "They (the phone bank company) do good work. I also try to buy products from companies I own stock in." The two men also own shares together in an Internet start-up called E-Campus Nation, Miller said. Even Miller's corrected disclosure forms don't mention Smith by name, and there's nothing in the law that requires it.

Craig Holman of the liberal watchdog group Public Citizen called the failure to provide details of lawmaker-lobbyists deals "almost pathetic."

"If there is an actual business relationship between a lawmaker and a lobbyist and that relationship does not get disclosed to the public, that just cries for resolution," he said. "That is a major problem."

An Austin grand jury slammed the state's weak disclosure rules in 2006. The panel, in a rare public report, complained that it couldn't get to the bottom of corruption allegations against an unnamed "high-profile" public official because of toothless Texas ethics laws.

"We have become aware, then outraged, by the 'loopholes' and 'vagueness' which seem to be common for self-serving legislative laws and codes," the 2006 grand jury report said. "Public officials . . . are allowed to hide behind the lax and vague codes."

The panel highlighted a controversial but common — and legal — practice: listing self-employment as an occupation without specifying clients or major sources of income.

Flores, D-Palmview, told AP he has worked as a management consultant for the last 10 years for McAllen-based D. Wilson Construction. The company has received large state contracts for university buildings and other projects.

At least two of D. Wilson's state contracts — for a birding center and a veterans cemetery in Mission — were made possible by legislation Flores sponsored, records show. Flores saw no conflict because the law doesn't require that he list individual clients or major sources of income. And he hasn't done so since 2006, records show.

"If you're not an employee . . . that's what we were advised to do," Flores said.

Non-employee status was cited by another legislator, Republican Jim Murphy of Houston. Murphy serves both as a state legislator and general manager of the Westchase District, a state-created economic development agency that has the power to levy property-tax assessments on commercial property. But his financial disclosure lists Murphy's employer as District Management Services, a consulting business that relies mostly on his work with Westchase.

Though the state constitution prohibits legislators from collecting pay from two state entities, Murphy said an attorney general's opinion blesses the arrangement as long as he is considered a contractor and not an actual employee.

Murphy makes $240,000 a year from the Westchase District, and $7,200 a year as a state representative.

Murphy said since becoming a legislator and Westchase contractor he no longer does hiring or firing — and doesn't sign the checks. But internal documents show the only change in the before-and-after organizational chart is his title, which went from "president" to "general manager."

Also unchanged: He remains the Westchase C.E.O, still "oversees operations" and continues to represents the board externally.

Murphy said he sees no conflict in working for two state entities but would support enhanced disclosure in the Legislature.

"I'm a pretty big fighter for accountability and transparency," he said.

© 2008 Associated Press:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Monday, October 06, 2008

Economic woes are taking their toll on toll road projects.

Road Construction Scaled Back

Oct 6, 2008

Reported by Aaron Smith
KCEN-TV Channel 6 (Waco-Temple-Killeen)
Copyright 2008

Economic woes are taking their toll on road projects. The Texas Department of Transportation announced they will be postponing some projects while moving forward with others.

The intersection of highway six and FM 185 in McLennan County was scheduled to see a 36.5 million dollar widening project in the next four years. But, TXDOT says pump the brakes, its being postponed. Some drivers were both understanding and concerned. David Haynes says, “It’s not something you can really put off for any extended period of time."

Spokesman Ken Roberts says it comes down to money, specifically higher material costs and a decrease in gas tax dollars because drivers are cutting back. “So, all of those things added together result in less money being available for projects.” Roberts said Monday afternoon. The project is not completely cut, just put on the long term list, which could take 25 years.

TXDOT says there will be other cutbacks. TXDOT had also planned to expand I-35 to include toll lanes. That project is also now on the back burner, or really scaled back. It will now only include single toll lane additions in each direction in Waco city limits. The toll road is still in the planning stages and several public meetings will be held before all plans are finalized.

Other parts of I-35 will still be expanded to include one extra lane in each direction, but they will not be toll lanes. A 9.4 million dollar project at the intersection of Bagby Ave. and Sun Valley will go ahead as scheduled. TXDOT says areas that are seeing higher growth will be given priority.

© 2008 KCEN-TV Channel 6:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Treasury plans to dole out no-bid contracts due to "compelling urgency" of the crisis

Treasury rescue hires must mind fiduciary duty


Copyright 2008

WASHINGTON- The U.S. Treasury Department said on Monday it will waive some rules on hiring money managers to oversee a $700 billion financial rescue program and those outside agents will be bound by a fiduciary duty to the Treasury.

"As financial agents, asset managers will have a fiduciary agent-principal relationship with the Treasury with a responsibility for protecting the interests of the United States," the Treasury said.

The Treasury also outlined the principles that it hopes will mitigate the conflict of interest of outside contractors performing services in conjunction with the program.

Companies wishing to do work for the Treasury will have to present a report on possible conflicts of interest and how they will mitigate those conflicts.

"Treasury may obtain non-disclosure agreements and (conflict of interest) agreements in advance of," awarding a contract, the Treasury said in a statement.

The fourteen-point guidelines to prevent conflict of interest released on Monday will soon be replaced by a more comprehensive plan to keep Wall Street firms from unfairly profiting from their government work, the Treasury said.

The sweeping plan that became law last week will let financial institutions sell failing assets to the Treasury so that they can cleanse their balance sheets and return to normal lending.

The Treasury said that it will hire some outside agents without the customary competitive bidding citing the "compelling urgency" of the current financial crisis.

(Reporting by Mark Felsenthal and Patrick Rucker; Editing by Andrea Ricci)

© 2008 Reuters:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


TxDOT believes credit crunch will "make tolls and public-private partnerships more palatable to opponents."

Crisis on Wall Street affects our streets, too


Copyright 2008
Houston Chronicle

Since the credit crisis came to a boil last week, Houston-area governments have taken notice.

The city restructured $423 million in bonded debt, a move that was planned before the shock, but that certainly proved timely. The crisis also spurred the City Council to draw $100 million out of cash reserves to fund construction projects, rather than use commercial paper on which interest rates had spiked.

Similar increases for bonds also could affect the Houston Independent School District, with a $400 million bond issue coming up, and Harris County, with $3.8 billion in outstanding debt.

Naturally, the Texas Department of Transportation, Harris County Toll Road Authority and Metropolitan Transit Authority are sharing in worried watchfulness.

"If Congress takes action, this might all be moot in a couple of weeks," said John Barton, TxDOT assistant executive director in Austin.

But if worst-case scenarios come true and a major depression follows, then, as Metro CEO Frank Wilson put it, the transit agency's troubles "will be insignificant compared to the rest of the world."

How it hits TxDOT

The credit crisis comes at a bad time for TxDOT, already saddled with cleanup and road repairs after Hurricane Ike.

Until state law changed in 2003, the department was a pay-as-you-go operation. Now, it uses bond funding for 40 percent of the $14 billion worth of projects under contract in a typical year, Barton said.

To retire those bonds and pay $2 billion a year for maintenance, TxDOT relies on the state motor fuel tax of 20 cents a gallon.

Motorists also pay a federal tax of 18.4 cents that funds a large share of federal highway construction.

Although there's not much TxDOT can do about interest rates, Barton said the department is "sort of insulated" from revenue losses as long as Texans keep filling their gas tanks.

On the other hand, he added, they may drive less.

Barton said no TxDOT projects under way would be interrupted by rising interest rates. As to those on the drawing board, he said, "We're just going to have to wait and see."

One likely effect of a continued crunch, he said, is to make TxDOT's policy of financing most new roads via tolls and public-private partnerships more palatable to opponents, "since it does bring private equity to the table."

Moving ahead

County Judge Ed Emmett said the toll road authority has more than $800 million in the bank and, if necessary, could build two long-awaited projects, the northeast quadrant of the Sam Houston Tollway and the Hardy Toll Road extension to downtown, with that money alone. Both projects will break ground soon, he said.

Edwin Harrison, the county's director of financial services, said the authority also has $2.3 billion in bonds outstanding, but the interest rate is locked in at an average of about 4.5 percent and could not be affected by future increases.

These bonds, however, do not apply to the two projects above, nor to construction of toll lanes along Hempstead Highway or U.S. 290, Harrison said.

Metro's advantage

Metro has one advantage over the other two agencies: Its main revenue source is a 1-cent sales tax that rises with inflation and is based on a variety of goods, not just motor fuel or toll road use. The agency has collected $520 million from the sales tax in the past 12 months and has cash reserves of $134 million.

At present, Metro is "pretty much a cash business," said Wilson. Compared to its 2008 budget of about $800 million, he noted, current debt is $143 million.

But the debt will increase sharply next year when construction of five light rail lines and the rest of the Metro Solutions plan get under way.

All of the current debt is in commercial paper, a short-term form of borrowing that is refinanced in segments on a schedule. The interest rate is volatile, but it can come down as fast as it goes up.

Harrison said the commercial paper rate was 1.74 percent a week on Sept. 11 and jumped to 5.25 percent a week later. The county also uses commerical paper.

"If Congress does something about this credit crunch, it could drop right back down," he said.

Wilson said Metro can sustain its present operation and that there are grounds for believing the crisis will pass before Metro Solutions is seriously affected.

"I think the situation is so extreme that it will get itself worked out," he said. "Congress, such as they are, will have to deal with it. There are so many aspects to our economy that will feel the pain in a very serious way before any of that touches Metro."

To an outsider, the credit crunch is just one of several things that must end happily for Metro to realize its plans.

Under a 2003 transit referendum, no more than $640 million in bonds may be issued for Metro Solutions.

To cover the remaining cost — and some estimate the total well over $3 billion — it will need 50 percent federal funding and probably substantial help from private companies seeking joint developments with Metro around transit facilities.

Wilson said he does not expect the federal funding to dry up, even in a major economic setback, since transit infrastructure is an investment that can spur lasting development and send tax dollars back to Washington.

Meanwhile, Metro is buying right of way, clearing a rail route in the East End — and still trying to reach a contract with Parsons Transportation Group to build and operate it all.

© 2008 The Houston Chronicle:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE


Sunday, October 05, 2008

Building on borrowed time

TxDOT buys time with borrowed funds for Dallas-area projects


The Dallas Morning News
Copyright 2008

State transportation officials are poised to issue billions of dollars in debt to help speed road construction, a move that will keep Dallas-area projects on schedule for now but will do little to shore up the state's long-term road-funding crisis.

The Texas Department of Transportation will likely begin issuing $1.5 billion in bonds within 60 days, pending the recovery of the nation's upended credit markets, and is taking steps to borrow another $6.4 billion over the next few years.

Historic turmoil in the credit markets is already costing the department hundreds of thousands of dollars in extra interest payments each week on some of its smaller loans, and any efforts to borrow much more will be complicated – and likely delayed – if the markets do not improve.

Credit worries aside, the decision to borrow billions enables TxDOT to end months of hand-wringing over whether it will have the money to complete projects local officials throughout Texas have been depending on. Late last year, the agency announced it was going broke and would have to delay some of those projects.

The new borrowing will allow the state to keep projects on schedule. But the big debt will do nothing to reduce the state's long-term shortage of road funds and could make paying for future projects more difficult as interest costs grow.

"Borrowing money does have the benefit of building projects faster," said Michael Morris, North Central Texas Council of Governments' transportation director. "Borrowing money does nothing for building more projects [in the long term]. Some people will be confused that building projects faster solves the problem, but it doesn't address the total funding need."

Mr. Morris says North Texas' transportation needs are $50 billion ahead of expected tax revenues between now and 2030. Some critics call those numbers too pessimistic, but everyone agrees that the number is big. Conservative estimates have said statewide needs will outpace funding by $50 billion to $60 billion.

Meeting last week in Austin, Texas Transportation Commission members said the bond program won't fix a basically busted system – and could make things worse if the Legislature doesn't eventually provide new tax funds.

"The system for funding TxDOT is fatally flawed," said Ned Holmes of Houston, one of five members of the Texas Transportation Commission that runs the department.

A political problem

Few leaders in Austin disagree with Mr. Holmes.

But while lawmakers, the governor and TxDOT all seem to agree Texas needs more money for roads, consensus on a solution beyond more borrowing has proven devilishly difficult to reach.

One camp argues that, of course TxDOT is going broke, given that state gasoline taxes have remained flat since 1991, at 20 cents per gallon. However, efforts to raise the tax rate have been dead in the water for years.

"As far as the gas tax goes, there is simply no appetite in the Legislature for that. None at all," said Allison Castle, press secretary for Gov. Rick Perry, said. "To make a real difference, you'd have to raise it 50 to 55 cents per gallon. Raising it a nickel or two would be just giving false hope."

But even simply indexing the 20-cent-per-gallon rate to inflation would have a huge impact over time, said Senate Transportation Chairman John Carona, R-Dallas. He said he is going to press for that this session.

"If we had had the courage to do that two years ago, we'd be in a substantially better place already," Mr. Carona said.


For the past five years, the governor has pushed instead to build more toll roads and then to borrow heavily against future revenue.

"Toll roads are fair, as they are essentially user fees, and drivers can decide whether to use them or not," said his spokeswoman.

Opposition to tolls, especially private toll roads, was a powerful force during the 2007 session, and even lawmakers who say some tolls are helpful also argue that Mr. Perry has pushed too hard for tolls.

"We have 15 major highways proposed in Dallas-Fort Worth, and all 15 are planned as toll roads," Mr. Carona said. "In that situation, you can no longer say tolls are an option for motorists. If they are all built, you won't be able to drive anywhere in Dallas without using a toll road."

Mr. Holmes, too, acknowledged the governor and the agency under former chairman Ric Williamson had been too focused on tolls as the solution.

"They came up with a solution that did not require TxDOT to go to the Legislature to ask for new funds," he said. "But tolling was never going to work by itself."

Ready to borrow

For now, the only solution lawmakers and the governor have agreed on is to borrow another $8 billion.

It's not a new direction. From 2002 to 2007, the department first went on a borrowing spree – and then a building spree, much to the delight of traffic-clogged regions like North Texas. In those years, the department spent as much as $5 billion a year in construction contracts.

But by 2007 TxDOT had spent the money and was left with flat revenues, rising costs and hefty interest payments. TxDOT says it has about $2.5 billion in tax money to spend on major road contracts annually, about half what it was spending in recent years. It also warns that soaring maintenance costs could soon eat up as much as $2 billion a year.

"We're fast going to be at a place where we simply have to tell the locals, we're out of the business of building new roads," said Commissioner Ted Houghton of El Paso.

To delay that, TxDOT is ready to borrow again. But those new dollars will only delay, not solve, the department's long-term funding crisis.

More time may be what TxDOT needs most of all, said Mr. Holmes, who reluctantly supported the new borrowing.

"It's going to take some time – this next session, the next one and maybe one more after that – before we reach a real solution," he said.

© 2008 The Dallas Morning News:

To search TTC News Archives click HERE

To view the Trans-Texas Corridor Blog click HERE