Saturday, April 11, 2009

"Why does this porcine process continue?"

Toll road idea full of pork


Kathy Williams, Assistant City Editor
Sherman Denison Hearld Democrat
Copyright 2009

OK, I'm going to say it, "I'm fed up with pork."

That word's been thrown around a lot lately. And I'm on record saying that spending on projects that create jobs, give more people pay checks right now when our consumer economy needs a boost, is a good thing.

But, I define pork as public money used for projects that benefit a limited number of influential people. And further, pork is public money used contrary to the needs and priorities of the majority of people who pay those taxes. If it addressed common needs and dreams, it would not be fat, it would be investment.

Tuesday morning I read that public officials, volunteers and paid, had used their influence with state officials to secure $10 million worth of our resources to study bringing a toll road through largely unpopulated areas of Grayson County. Not only that, but they plan to use a loophole in the law -- one the Legislature is considering closing -- to replace part of a free road with the toll road.

Grayson, Texas and U.S. taxpayers already are paying to build, widen, improve and extend State Highway 289 north of SH 56 and up to near Pottsboro. TxDOT, the Grayson County Regional Mobility Authority (none of them people you and I voted for) and Grayson County Commissioners Court, have decided this should become a toll road.

Grayson County has issued $63 million in bonds to pay for SH 289. TxDOT agreed to pay us back through "pass through tolls;" that means reimburse us per car once the road is ready. Now that it'll be a toll road, meaning drivers will pay to drive on it, who will repay us and where will any extra revenues go?

All that depends. Commissioners project they will have about $7 million left over from bonds, once they split what's left over with the company that's supervising the building. But Grayson County ponied up millions of dollars in right-of-way payments and has incurred untold expenses like time from salaried staff who have worked on the project. The county will be paying about 5 percent of the debt service for building SH 289. In the end, it's a state highway, under state control.

The faces of those who have worked to "secure the funding" for a toll road are hidden from us. Of course there are open sessions where elected officials have voted. But we never even hear the names of those who speak one-on-one with RMA or Texas Transportation (TxDOT) commissioners. They are accountable only to the governor.

We are not privy to what they tell our local elected officials. There is no public on-the-record discussion. We will never learn what promises were made, what we got or gave up in the "negotiations." We only know the official ayes and nays. Why does this porcine process continue? There are better ways.

The city of Sherman just completed its draft of a Comprehensive Master Plan. The federal government's long-and short-range transportation planning process involves local elected officials and is submitted for public scrutiny and comment on its priorities.

This year, the Metropolitan Planning Organization (federal-local planners) updated priorities. This was particularly urgent work because of federal stimulus money that might come to the area. It sounds like a darn good idea to me -- identify the projects most needed to prevent traffic deaths and injury and promote smooth traffic flow.

For it to work, we have to pay attention. That means you and me. To be clear: Sherman, the Sherman-Denison MPO and TxDOT personnel have spent hundreds of thousands of our taxpayer dollars in planning public services. A Grayson County toll road appears as the least priority of 15 unfunded projects in the new draft MPO plan.

Priorities 2-5 would reverse the on and off ramp in front of Sherman Town Center; fix the roads that back up traffic to Travis Street behind Town Center; construct turn lanes from Travis to the U.S. 82 frontage road; and widen the bridge over U.S. 75 at Loy Lake. The first priority is to widen FM 691 at U.S. 75. That will be completed under the stimulus package.

If you've sat forever or feared for your life around Sherman Town Center and along Travis either side of U.S. 82, understand that completing projects 2-5 would cost $9.668 million. And the money to widen Travis Street is not on TxDOT's radar. That will have to be done with city or county funds.

The other down side to this big ol' ham of a project is that it will open up sparsely populated areas to sprawling growth -- the worst kind of growth you can get. It benefits only those who know where the roads are going and buy up the land for a sea of gaudy franchises, billboards and two-acre ranchettes. Who's going to pay for extending utilities, roads, law enforcement and fire fighting into those growth areas?

Sherman has done a stellar job in planning for its growth for the next 20 or so years. Consultants and everyday residents, business owners, developers all took part in developing the draft plan -- conservative and smart. It looks at not just preserving but elevating the quality of life aspects of a town that knows who it is and honors its history.

So how did the state loopholes get gotten through for $10 million to study building a road that won't be needed for 30 years or so -- a road that takes travelers away from Sherman's retail heart? The State Senate smiled on private toll roads Monday, refusing to let the law allowing them -- and the public protections in that allowance -- expire. The bill is still alive in the House and could stop there. TxDOT admits it can't afford to maintain existing roads and is turning that responsibility over to local taxpayers. There's a bill for that, too.

A Grayson County toll road is a 20th century solution to a mid-21st century issue, so fight the fat and call your state legislators.

KATHY WILLIAMS is assistant city editor of the Herald Democrat.

© 2009 Sherman Denison Hearld Democrat:

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Friday, April 10, 2009

Toll Tax Promoter Gov. Rick Perry to Crash 'Tea Party'

San Antonio Tea Party shouldn't limit protest to feds


Jaime Castillo
San Antonio Express-News
Copyright 2009

The organizers of a national wave of Tax Day Tea Parties next week have the right idea.

They say the nonpartisan demonstrations, including one in front of the Alamo on Wednesday, will gore every deserving ox — financial institutions that made bad loans, free-spending members of Congress on both sides of the aisle, and the past and current presidential administrations.


It's never a bad thing when Americans gather peaceably and scare politicians into thinking the public is starting to pay more attention to them than to “American Idol.”

But why stop at the federal government?

The thousands expected at the Alamo and other sites around Texas should tell the state's leadership what they think about them, too.

We know Gov. Rick Perry will be an interested party.

The long-serving Republican on Wednesday posted a YouTube video on his Web site.

“It's a day to get together with fellow patriots all across the state of Texas,” he tells viewers. “Send a message to Washington, D.C. Let 'em know what you think about the bailouts, all this stimulus, all this runaway spending that's going on.”

That's great. More power to the people.

But what's good for one bailout package should be good for all of them.

Ever since he became governor in 2000, Perry has overseen one bailout after another of the state budget on the back of the taxpayer-funded highway fund.

Once dedicated to nothing but building and maintaining state roads, the highway fund has become a piggy bank for state lawmakers to pay for items that have nothing to do with improving transportation and alleviating congestion.

The “stimulus” to nonhighway portions of the state budget totals $1.57 billion in the current two-year budget.

Perry has treated highway funding like an experiment in which he controls all the variables to get the outcome he wants.

The highway fund is running out of money, but the 20-cent-a-gallon gas tax, which has been static since 1991, is off-limits.

The highway fund is being raided, but neither Perry nor anybody else in state leadership has had the courage to make the tough decisions necessary to put a stop to it.

The solution? Perry's longstanding vision to build a network of toll roads to generate revenue for other projects.

If Gov. Perry wants Congress to live within its means, the best tea-party message he could send is to lead by example.

© 2009 San Antonio Express-News:

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Wednesday, April 08, 2009

"This measure, he doesn't get to veto."

GOP lawmakers have shown resistance to Perry multiple times during Texas legislative session


The Dallas Morning News
Copyright 2009

AUSTIN – Democrats always have chafed under the rule of socially conservative, fiscally tight Rick Perry. But in the current legislative session, it's not the opposition party that's pushing back.

Republicans raised red flags over the governor's transfer of $50 million from a job creation fund to his alma mater. Republicans spearheaded legislation to accept more than $550 million in unemployment insurance stimulus money, despite Perry's decision to reject it. And Republicans are offering a constitutional amendment to let the Legislature return to Austin to override a governor's vetoes.

In addition, when the session began in January, Perry designated five priorities "emergency items," waiving all rules so the GOP-controlled Capitol could speed them to him in 30 days. His charge hardly lit a fire: He will be lucky to get any of the bills in 90 days.

"With Democrats, he does not get along well at all," which is understandable, said Rep. Lon Burnam, D-Fort Worth. "The more important question is how he's perceived by the Republican members."

Perry's aides say the governor's relationship with lawmakers is good. But in the House, Burnam said, most members are frustrated, "because a lot of people work hard and are serious about their work and he won't engage."

Friction between the governor and Legislature is as old as Texas. But Perry also has the eroding effects of longevity. He is in his record fifth session as governor, with an equally record-breaking 203 vetoes in his rearview mirror.

He also has a history of making bold decisions – such as turning down a half-billion in stimulus money or his failed mandate to inoculate teenage girls against the human papilloma virus – without consulting lawmakers.

Perry press secretary Allison Castle said the governor – a former House member and lieutenant governor, meaning he presided over the Senate – has engaged with lawmakers, having almost daily conferences with some.

On the stimulus funds, the governor has always said he would not accept federal funds with strings attached that would leave the state on the hook for long-term spending, she said.

"He was very clear from Day One that this bailout, this stimulus package was bad public policy," Castle said.

His unilateral transfer of $50 million from the Texas Enterprise Fund – a deal-closing fund for relocating businesses – to the Emerging Technology Fund so it could be awarded to a Texas A&M University pharmacology research center is an argument over process, not the merits of the project, Castle said.

Perry's communications director, Mark Miner, said the tussle with the Legislature is all part of the legislative process.

"When you have all these elected officials under one roof, there's always going to be give and take, and differences of opinions. Anytime they all agree is when the public should be concerned," Miner said.

SMU political science professor Cal Jillson said it goes further than that with Perry and the Legislature.

"The support for Rick Perry has always been very thin," Jillson said, adding that the policy tweaks and compromises of a legislative process are not Perry's strong suit.

"He's more ideological than pragmatic," Jillson said. "He's been a solid politician during the good times for the Republican Party, but it's not clear he has a second gear."

His vetoes of popular GOP-sponsored legislation have sparked the movement to allow lawmakers to return to Austin after a session and consider veto overrides, Jillson said.

"It's anti-Rick Perry, but it's not a good idea," he said. "If the governor lost the veto, it would make the office inconsequential. It would slip to one of the very weakest in the country."

House members, who overwhelmingly passed the proposed constitutional amendment on veto overrides last Wednesday, were prompted in some part by bitter memories. Many cited a highly popular 2007 eminent domain bill (it passed the House 143-0 and the Senate 29-1) that would have limited a city's ability to take private property for redevelopment. Perry vetoed it, saying it would open up cities and other entities to lawsuits.

Rep. Frank Corte, R-San Antonio, a usually strong Perry supporter, voted for the override amendment as a matter of good policy. But he also was a co-sponsor of the eminent domain bill last session.

"Hey, I'm a tort reformer," Corte said, as a way of saying he also is opposed to ginning up the lawsuit mill. "The governor felt justified in what he did, but I felt that he threw the baby out with the bath water."

This year, he has a similar eminent domain proposal, but it is written as a constitutional amendment, which would go to the voters for approval, bypassing the governor.

"This measure, he doesn't get to veto," Corte said.

The veto override measure still must go through the Senate, though, and then voters would have to approve it in a November statewide election.

Most lawmakers – especially Republicans – said they do not wish to speak ill of the governor, who is preparing for a likely challenge by U.S. Sen. Kay Bailey Hutchison.

"His relationship in the House is member to member, but it's fine generally," said Rep. Dennis Bonnen, R-Angleton.

Appropriations Chairman Jim Pitts, R-Waxahachie, said he would never have chosen to pick a fight with the governor over the transfer of money to Texas A&M.

"It's what I perceived as right and wrong. It's sure not political," Pitts said. "On some matters, we agree to disagree."

And Rep. Gary Elkins, the Houston Republican who authored the veto override amendment, said some of Perry's actions probably helped the 131-16 support for his proposal.

"It could be a wave," he said. "But it's not aimed at Perry. We don't know who's going to be governor in 2011."

© 2009 The Dallas Morning News:

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"A state transportation kitty artificially propped up with borrowed money, steeped in debt payments and potentially headed for disaster."


More money for transportation? Not this session

Stimulus cash forestalls changes in how state pays for roads.


By Ben Wear
Austin American-Statesman
Copyright 200

Not much was happening around the Texas Capitol on Feb. 17, but still it might have been the worst day of the legislative session for the Texas Department of Transportation.

That's when President Barack Obama signed the federal economic stimulus bill at a Denver museum, effectively sending $2.25 billion TxDOT's way. That largesse, to a great degree, explains why the financial aspirations of the agency and its supporters for more Texas transportation dollars are foundering this session.

Despite what amounted to a written promise in August by the state's top three leaders to stop sending about $1.2 billion of transportation dollars to the Texas Department of Public Safety every two years, the 2010-11 state budget passed by the Senate last week removes only a tiny slice of that "diversion." Then Tuesday, the House Appropriations Committee, when it approved its take on the budget, chopped away all but a small piece of $2 billion of TxDOT money that was in the Senate version.

Efforts to raise money for moving freight rail lines out of urban areas have generated little momentum this session. And, in what has become something of a trend the past few sessions, efforts have gone nowhere to increase the state's gasoline tax — frozen at 20 cents a gallon since 1991 — or allow it to float with inflation.

The net result of this, some legislators say, is a state transportation kitty artificially propped up with borrowed money, steeped in debt payments and potentially headed for disaster. The state, according to a study released in December, needs to spend about $14.3 billion annually on transportation over the next 22 years.

The Senate's two-year TxDOT budget is $17.1 billion, or about $8.6 billion each year.

"The fact that we only reduced diversions by a mere $21 million tells me that folks here in the Capitol are not yet ready to take this issue seriously," said state Sen. John Carona, R-Dallas, chairman of the Senate Transportation and Homeland Security Committee. "We're about 24 to 36 months from TxDOT basically saying we can't do any new roads."

About 10 percent of the proposed TxDOT budget would go to debt service on roads already built. Another 20 percent or so would be borrowed money. TxDOT until early this decade had no debt — state law didn't allow it — and its income went to operations and construction.

The Legislature's budget chiefs, meanwhile, charged with producing a balanced $180 billion two-year spending plan in a tight economic time, said that given other needs they gave TxDOT what they could.

"We did not think this was the year to be able to change those diversions," said Rep. Jim Pitts, R-Waxahachie. "We came into the session with over a $2 billion shortfall. We didn't have money for textbooks. And there was a hurricane."

Rep. Helen Giddings, D-Dallas, who chairs the appropriations subcommittee that sculpted TxDOT's piece of the budget, explained the decision to leave diversions alone and cut the $2 billion.

"We felt like there was such a nice infusion of funds from the federal stimulus," she said.

In the current two-year state budget, about $1.6 billion from Fund 6, a state bank account fed by gas taxes and vehicle fees, went to parts of state government other than TxDOT. The bulk of that, $1.2 billion, went to the DPS.

In August, with TxDOT balking at selling more road bonds because of the future drain on gas taxes, Gov. Rick Perry, Lt. Gov. David Dewhurst and then-House Speaker Tom Craddick sent a letter urging TxDOT to immediately sell $1.5 billion in bonds. The agency did so.

This came at the end of a year in which TxDOT basically shut down spending on new or expanded roads, both because an accounting error led the agency to believe it had $1.1 billion more than it did and because federal transportation grants had been lower than expected.

Sell the bonds to build roads "through the fall and spring," the three leaders wrote, "until we can work with other elected officials to provide additional solutions." That included, the letter said, a plan "to end the practice of funding the Department of Public Safety with gas taxes that are needed for road construction."

Sen. Steve Ogden, R-Bryan, chairman of the Senate Finance Committee and thus the Senate budget guru, said the Legislature can't be held to a commitment made before the financial earthquake of last fall.

"When that letter was written, the stock market was at about 11,000 and we weren't in a giant recession," Ogden said. "There's a lot of things that have changed. We wrote a good budget for TxDOT."

The Senate version of that budget is about 2 percent below the authorized spending in the current budget cycle. An exact number for the House version wasn't available. But without the House's preferred cut of $2 billion — to be borrowed under a 2007 state constitutional amendment and paid back with general state revenue rather than gas taxes — TxDOT would see a budget cut of more than 11 percent.

The Senate and the House, which is expected to vote as a full body on the budget at the end of next week, will work out their differences in a conference committee, so it is likely that at least some of that $2 billion would be restored.

"More and more of the 'money' you're seeing going to TxDOT is borrowed," said Sen. Kirk Watson, D-Austin. "At some point, we're not going to be able to borrow any more money.", 445-3698

© 2009 Austin American-Statesman:

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Tuesday, April 07, 2009

You too can be an Investment Banker

innovative financing

Texas Senate votes: Every new highway in Texas should be tolled, either by a public agency or a private corporation.

Private toll roads get new lease on life, and new leash


By Ben Wear
Austin American-Statesman
Copyright 2009

Private toll road leases, which engulfed the last Legislative session in controversy and were partially banned for two years, would live for another six years under a bill passed 29-2 by the Senate this afternoon.

But under a separate bill, which passed minutes earlier, those agreements would become less likely and those that did occur would have additional controls.

Senate Bill 404, sponsored by state Sen. John Carona, R-Dallas, would extend the authority for such long-term toll road leases by another six years to Sept. 1, 2015. If the bill doesn’t pass, signing all but a handful of such agreements would become illegal this September.

The companion bill by state Sen. Robert Nichols, R-Jacksonville, is Senate Bill 17, which has three main features:
  • Local toll road agencies, such as the Central Texas Regional Mobility Authority, would get first shot at doing a toll road as a government-run highway. If that agency said no, then TxDOT could choose to build and operate it. Only then, after both the local agency and TxDOT had said no, could the road be put out for bid as a long-term lease with private companies. Even then, the local agency would get the first opportunity to negotiate a deal.
  • If there were such a contract, the “non-compete clause” would be more limited than is allowed in current law. Such clauses typically restrict where a government could build a free road in the vicinity of a tollway. Under Senate Bill 17, all interstates and all highway projects in the area’s 25-year plan at the time a toll road lease is signed would be exempt from the non-compete restrictions. And after 30 years — most leases last 50 years — there would be no non-compete restrictions.
  • Under current law, if a private tollway opened and was profitable, the state could buy it back only by paying “fair market value.” Nichols contends that under that vague standard, the state could be on the hook for a huge amount and that litigation would be inevitable. His bill would require that the original contract set out specific buyback amounts for the life of the contract on at least five-year intervals.
The sole no vote on Senate 17 was state Sen. Wendy Davis, D-Fort Worth. She also voted against the Carona bill, along with state Sen. Glenn Hegar, R-Katy.

Get more Legislative coverage inside the Virtual Capitol

© 2009 Austin American-Statesman:

Texas Senate smiles on toll roads


By Peggy Fikac
San Antonio Express-News
Copyright 2009

AUSTIN — Transportation officials could enter into new agreements with private companies to operate toll roads — with restrictions — for at least six more years under a pair of bills approved Monday by the Texas Senate.

The measures, which still face House consideration, are the latest steps in a long battle over leasing toll roads to private companies.

Lawmakers allowed the public-private partnerships in 2003. In the face of critics' outcry that the state was selling key assets, they later put a moratorium on new agreements, with exceptions.

Both the moratorium and the ability to enter into such agreements are set to expire this year, requiring legislative action if the Texas Department of Transportation and regional mobility authorities are to be allowed to continue using the financing tool.

“In a session like this, where new dollars for transportation are so limited, you have to rely on tools like this, even though they may not be your first choice,” said Sen. John Carona, R-Dallas, chairman of the Transportation and Homeland Security Committee and sponsor of the bill to allow private toll road agreements.

Toll opponent Terri Hall of Texans Uniting for Reform and Freedom disagreed.

“Texans made their position perfectly clear last session when they pressured 169 lawmakers to put the brakes on privatizing our public infrastructure,” Hall said by email.

Carona's bill would extend the ability of TxDOT and regional mobility authorities to enter into comprehensive development agreements through 2015, but only if protections included in another bill also take effect. Some projects would have two years longer.

The protections, in a bill by Sen. Robert Nichols, R-Jacksonville, include specifying that local authorities and then the state have first right to develop a project — to be publicly owned and operated. Nichols' bill also says a contract with a private entity must specify a purchase price in case the state ever needed to buy back the project.

Hall said the protections could be waived. Nichols' office said steps in the process could be waived, but not protections.

Carona said he expects the House to be a “tougher challenge” for the legislation, and Hall said she hopes it will die there.

Portions © 2009 San Antonio Express-News:

Texas Senate backs new guidelines for toll road development


The Dallas Morning News
Copyright 2009

AUSTIN – The Senate approved new guidelines for future toll road development Monday, including rules that give public entities the first crack at projects over private firms and would forestall a repeat of the bidding war that erupted over State Highway 121 two years ago.

The bill establishes a process for toll road projects as well as protections for the public, said Sen. Robert Nichols, R-Jacksonville. It passed 30-1.

Under the proposal, public entities, such as the North Texas Tollway Authority, would have the first right of refusal to develop the roadways, and all public avenues of financing would have to be exhausted before it can be turned into a private equity project. The bill also defines vague clauses that have been in past development contracts – such as the state not being allowed to build competing roadways for 50 years. This would be changed to a 30-year agreement not to build a roadway within four miles of the center-line of the existing toll road.

Nichols said his proposal advanced public projects over private development.

"State and local entities will build and operate a road in the public's interest, not the shareholder's," he said.

Sen. Wendy Davis, D-Fort Worth, was the sole dissenter. After the vote, she said she was concerned that the measure took all competitive bidding out of a toll road project. For instance, with SH 121 running through Collin and Denton counties, the NTTA initially said the state should pay it to develop the toll road. When the state put the deal out for bids, the Spanish firm Cintra offered nearly $3 billion to operate the toll road for 50 years. NTTA belatedly joined the bidding process and beat Cintra's offer.

Separately, the Senate removed the requirement that the executive director of the Texas Department of Transportation be a professional engineer, saying it was more important that the director possess good managerial skills.

Both bills now go to the House for consideration.

© 2009 The Dallas Morning News:

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Monday, April 06, 2009

“It’s not enough for the legislature to vote on some enabling legislation … and never have to take responsibility for any deal that is signed.”

Report raises red flags with toll road privatization


By David Tanner, staff writer
Land Line Magazine
Copyright 2009

Look no further than the Indiana Toll Road for an example of how the public gets the short end of the stick when toll roads go private, says the author of a report on public-private partnerships.

Authors of a report for the Public Interest Research Group are urging states to exercise caution when considering similar ways to leverage public infrastructure for cash.

“They’re really dictating for generations how these major thoroughfares are going to be governed,” author Phineas Baxandall, a senior analyst for tax and budget policy for PIRG,” told Land Line following the release of the report titled “Private Roads, Public Costs.”

The report stresses the need for the public interest to be protected as states consider privatization deals as a way to generate transportation dollars.

Baxandall said Indiana Gov. Mitch Daniels was one of the first governors to follow through with leasing a toll road to the private sector. The $3.85 billion paid by investors for the Indiana Toll Road remains the largest private transportation deal to date.

Mistakes were made that leave the public holding the bag, Baxandall said.

“To further the Mitch Daniels example, he is funding a 10-year transportation plan with a 75-year lease,” Baxandall said.

“Starting in year 11, he’s not getting revenue from the tolls, but the public is paying higher tolls. It’s not until year 11 that it will kick in, so for the first 10 years, it seems like a really sweet deal.”

Mike Joyce, director of legislative affairs for the Owner-Operator Independent Drivers Association, said the report nails the issue of privatization on the head.

“This report really encapsulates the points and the red flags that we’ve raised over the years about private toll roads as they relate to the highway user,” Joyce told Land Line.

“The system that is in place today takes advantage of states that are not well-prepared to negotiate with firms that have already done the calculus. This is a wonderful report to highlight the areas where the U.S. and states need to become stronger at negotiating these deals.”

Baxandall and the other two authors of the report say that long-term toll-road leases should not last more than 30 or 35 years. The Indiana deal was signed to last 75 years until 2081.

“They’re really dictating for generations how these major thoroughfares are going to be governed,” Baxandall said.

Baxandall has some suggestions, including the reform of state laws to protect the public by going beyond “enabling legislation” for public-private partnerships.

“There has to be a vote of the full legislature on a final deal,” Baxandall told Land Line. “It’s not enough for the legislature to vote on some enabling legislation … and never have to take responsibility for any deal that is signed.”

To read the PIRG report, click here.

© 2009 Land Line Magazine:

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"Privately funded toll roads have overestimated traffic, leaving companies in financial tatters."

Toll road a dead end for investors


Adele Ferguson
The Australian
Copyright 2009

IF Winston Churchill was alive today he might well have applied one of his most famous quotes to the fiasco going on at BrisConnections: "It's a riddle, wrapped in a mystery, inside an enigma: but perhaps there is a key."

In BrisConnections' case, the key might well be its solvency. In a directions hearing in the Supreme Court in Melbourne last week, there were allegations that the company might well be insolvent.

If this is the case, the Corporations Act will be thrown at the directors. For starters they will be in breach of their fiduciary duties for continuing to trade while insolvent, and their statements over the past few weeks regarding how to vote at the extraordinary general meeting would be fair game for any number of class actions.

On a lesser scale, if financial conditions have deteriorated since they last reported in February, they will be in breach of the ASX listing rules, specifically those relating to continuous disclosure.

Given BrisConnections chairman Trevor Rowe also sits on the board of the ASX, it would put him in an even more tenuous position than he already is. He is also on the board of QIC, which took up a stack of shares in BrisConnections as part of the float.

To this end, BrisConnections has agreed to send a detailed report to unitholders, setting out its financial position, including the contents of a report to directors by accounting firm Deloitte.

These reports will be crawled over by all and sundry to work out the real value of the company.

But it would be even more illuminating to independently test the traffic forecasts against the forecasts used in BrisConnections earnings model.

Or better still, get access to the forecasts that were used in the models of the two unsuccessful bidders for the project.

Talk around the traps is that the No.2 and 3 bidders, the Northern Motorway consortium and the NorthConnect Motorway consortium led by Baulderstone Hornibrook, produced traffic forecast figures that were significantly lower than those served up by the winning BrisConnections consortium, which included Macquarie Capital Group and Leighton subsidiaries John Holland and Thiess.

BrisConnections has an earnings model based on future traffic projections. Unfortunately for it, many of the privately funded toll roads have overestimated traffic, leaving companies in financial tatters.

Some of the less successful public-private partnerships over the past few years include RiverCity Motorways, which is building Brisbane's North-South bypass tunnel and is trading at an 85 per cent discount to its $1 issue price.

Others include Lane Cove Tunnel tollway, which missed traffic forecasts and forced its backers to write off the value of the asset in their books. Sydney's Cross City Tunnel was another disaster and ConnectEast Group, the owner of Melbourne's EastLink toll road, has failed to meet traffic forecasts and recently went to investors to raise money to help cover its debts.

But none has caused as much of a fracas as BrisConnections. It was a white elephant from the get-go. Established to build and operate a 6.7km toll road between inner Brisbane and the airport, it raised $1.2 billion by offering units priced at $1 upfront, with two further instalments of $1 each payable over the next 18 months. Within months, the first instalment tanked to 0.001c a share.

The question now being asked is, if the next instalment goes ahead on April 29 and, like the last one, falls to 0.001c a share, will shareholders have to wait another nine months for the third instalment to be paid before an efficient market is restored?

The problem is this: the lowest a stock can trade on the ASX is 0.001c a share. In the case of BrisConnections, its 0.001c share price is not what the market thinks it is worth. Having a 0.001c floor artificially inflates the share price. If shareholders were allowed to sell out for less, they would. There is little doubt this stock would be trading in negative territory.

This then raises the question as to whether BrisConnections is trading in an efficient and informed market. And why did the board, headed by Rowe, allow trading to continue when institutions were dumping the stock at an artificially inflated price, which was then picked up by retail investors, many of whom did not know they had to pay another two instalments?

Either the board or the ASX should have thought about placing this stock in a trading halt.

Questions also need to be raised about why stocks aren't allowed to trade in negative territory, particularly those with instalments looming. The situation now makes a mockery of the role of the ASX in creating an efficient market. The situation wasn't helped when the board decided to cut the dividend and postpone its payment. It's fine for them to postpone the dividend until after the second instalment, but to cut the dividend to 0.005c was a shock to investors who had invested for the dividends in this company.

The board left them with a loss of 99.99 per cent of their investment, no dividends to speak of, and a bill of $2 a share looming.

As one shareholder said: "For BrisConnections to take investors' first dollar, renege on their dividend promises, and expect investors to stump up the next instalment is a sad indictment of the BrisConnections' board's grip on reality. The prospectus, and their presentation, stated that all funding is locked in, the construction contract is locked in ... how can conditions deteriorate, when you do not even trade?"

Interestingly, their accounts reveal BrisConnections had to take a hit of more than $300million from an interest rate hedging on the debt.

If the project falls over, then the banks have another $300 million-plus at risk.

There is a huge amount at stake for all concerned.

Retail shareholders have already lost a fortune, and if they are forced to pay up the next instalment, many will face financial ruin.

The main building contractor, Leighton Holdings has already written down a third of its investment to $130 million and, if the $4.8 billion project collapses, it will blow a big hole in its forward workload.

The Queensland Government has already contributed land and cash worth $1.5 billion to the project and is under pressure to buy the equity, which will blow a big hole in its budget.

There are clearly two camps at war: the financiers and the sponsors. In the first camp are the lending banks, led by ANZ and Deutsche. As an infrastructure expert said: "If they could cancel the project now they get out of jail." What that means is they could write off the money given to the project so far, which is a few hundred million dollars, buy debt and equity and limit the loss. "However, if the project goes ahead, they will have $4.8 billion invested in a project worth probably half that," he said.

In the second camp are Macquarie, the builders and the Queensland Government, who want the project built. As far as they are concerned, once the project is built, the financing can go bad and shareholders and the banks can fix the problem.

It explains why it is in the interests of Deutsche Bank for Nick Bolton to be successful and the project to fall over. Bolton, with almost 20 per cent of the stock, has called for the company to be wound up on April 14. He is being portrayed in the media as a maverick shareholder. Cynics believe Bolton is being supported by the financier faction, but there is no evidence of this and Bolton has denied the allegation in the press.

Macquarie is stuck between a rock and a hard place. It loses money under every scenario.

But the least worst is to keep the project alive long enough for the instalments to get paid, to pay back their equity bridge facility. Put simply, if the instalments get paid, retail investors and Deutsche reduce the size of Macquarie's loss.

It is an almighty mess and it doesn't help the cause of Australian infrastructure, market integrity or the role of boards as representatives of all shareholder interests. Rowe has put himself and his reputation in the firing line. The outcome will become clearer after the extraordinary general meeting.

© 2009 The Australian:

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Sunday, April 05, 2009

"With this kind of 'system' in place, makes me consider going out of my way not to use our new toll road."

Toll Road Blues


Raves, Rants, & Roses
Tyler Morning Telegraph
Copyright 2009

Whoever designed our toll road must have taken engineering drawings depicting 1940’s highways. It looks like old Highway 45 between Houston and Dallas, which in ancient times was the main thoroughfare between the two cities. It appears outdated for the times, although the price for use is 21st Century, if you forget to pay, or don’t pay.

Remember when we were told to try it out, use it and see how you like it, etc. at no charge for about a month? Wrong. My son used it one time during this “trial” period and got a $5 greetings (bill) in the mail for a $1.30 toll charge.

Well, to make a long, painful story short, he didn’t pay it. I thought it wasn’t worth the hassle, so later I sent them a $5 check back in January, just to get them off his case.

Apparently the check got lost in the mail, or didn’t get posted, but today he gets a bill from some “financial” system company out of Wisconsin (would you believe) for $51.30. That’s $1.30 for the original toll fee, plus (hold on) $50 for “administrative fees, for a total of $51.30. Makes you wonder how much they pay their CEO. With this kind of “system” in place, makes me consider going out of my way not to use our new toll road.

It’s actually not that convenient for me, nor does it save that much time by its use; plus, if you make a mistake about it being free or not, it might just cost you the equivalent of a couple tanks of gas.

Buster Barlow

© Copyright 2009, Tyler Morning Telegraph:

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