Thursday, November 03, 2011

"Prior to Rick Perry, TxDOT had ZERO debt. Now it’s racked up over $31 billion."

Perry’s ‘Wall Street-ification’ of TxDOT


Terri Hall
Copyright 2011

Rick Perry and the GOP-dominated Texas Legislature are presiding over the most fundamental transformation of the Texas Department of Transportation (TxDOT) in its history. Gone are the days of Dewitt Greer, who led the Department in its glory days when it was lean, super-efficient, and projects were well-managed and cost effective. Greer was known for eschewing debt and nixing anything that wasn’t a good deal for the taxpayer.

Now, under Perry, he’s left professional certified engineers behind and chosen political hacks, bankers, and campaign donors to run TxDOT, recently installing Jeff Austin III, a banker, as a Transportation Commissioner and Phil Wilson, former Perry aide and lobbyist for an energy company who donated over $1 million to Perry through the Republican Governor’s Association, as the new Executive Director. Even before Wilson spent a single day on the job, Perry and the Legislature bumped-up his salary by $100,000 in a down economy when every other state agency has experienced cuts. Perry’s Transportation Commission just authorized Wilson to expand his executive officers up to five, bringing the total for annual salaries of the entire executive team to more than $1.5 million.

Why? Because Perry and the Legislature think they can run TxDOT like a private, Fortune 500 company, with their big six figure salaries, and more importantly, make it a major player in the Wall Street bankster club. They think charging motorists’ tolls are akin to a ‘user fee’ like the free market. Well, TxDOT’s ‘product’ isn’t like potato chips or an iPhone. It’s tasked with building and maintaining our PUBLIC highway system -- and public safety and efficiency, not private profits, should remain its primary mission.

We already know what happened to public safety under these new design-build ‘innovative financing’ contracts that are not competitively bid....ten pillars on the US 290 interchange had to be torn down and re-built. We already know what happened when Perry and the Legislature launched TxDOT headlong from a pay-as-you-go cash system into a complex matrix of debt instruments, it had a $1.1 billion ‘accounting error’ (counting bond proceeds twice). Prior to Perry, TxDOT had ZERO debt. Now it’s racked up over $31 billion.

Our public roads are monopolies where ‘free market’ principles don’t apply. Tolls aren’t true ‘user fees’ when boatloads of public money, like gas taxes, are used to build the road and then TxDOT or worse, a private corporation, charges taxpayers again to drive on it.

Efficiency has been replaced with a new layer of bureaucracy (Regional Mobility Authorities) and a massive network of inefficient toll projects, toll collection nightmares, and doing anything and everything to cover the debt propping-up unsustainable toll roads that aren’t financially viable. Public safety has been replaced with profit-driven initiatives like increasing speed limits to 80 MPH in order to drive more traffic to corporate-run toll roads (See Exhibit 7).

TxDOT has become putty in the hands of private interests at the expense of taxpayers and property rights. It’s not uncommon to see the likes of Goldman Sachs slithering around the Dewitt Greer building pimping its ‘innovative financing’ techniques while positioned to profit handsomely from them. After all, a trader finally said on BBC what we all know is true: “Goldman Sachs rules the world." Innovative financing simply put is building roads with a complex series of taxpayer-backed credit cards. These techniques include monetization of debt, multi-leveraged debt (using borrowed money to secure more borrowed money), ‘creative’ accounting and contracting, and public subsidies for private profits. The same sort of tricks that caused the financial collapse in Greece (and subsequently the Euro) and the sub-prime mortgage crisis in the United States.

Boy, does Texas need a new Dewitt Greer to recapture the highway department that once was the envy of the nation. But it’s clear by Perry’s recent appointments, that he has no intention of doing so. His cronyism is too ingrained for him to resist the temptation to steer billions in public road contracts to potential donors for his struggling presidential campaign. Not while he can have his cake and eat it, too -- to say he’s making TxDOT run more like a private company, while, in reality, he's hijacking the highway department and turning it into a tool to grease Wall Street bankers.

The downward spiral at TxDOT will continue as it clings to these ‘innovative financing’ tools that prime our public infrastructure for massive taxpayer bailouts. So much for Perry’s claim that he’s fiscally responsible and has balanced budgets. His Wall Street-ification of TxDOT will surely fail as it did with Fannie Mae, the housing crisis, and financial crisis in Europe. Rest assured, Perry and state lawmakers will tap Texas taxpayers to bail them out.

© 2011

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