May 7, 2007

TOLLROADSnews

Texas DOT have at last broken their silence over the state legislature's month long rampage through the state's tollroad program. In a four page letter of response dated May 4 to a question from state Rep Fred Hill (north Dallas County) about the impact of HB1892 on projects in the Dallas area TxDOT executive director Michael Behrens says it "will delay projects currently in procurement... and may cause some projects to be halted altogether."

The letter says that the bill continues to contain provisions allowing local government to take over state highways. This Behrens says "challenges the framework of federal statute and puts the state in violation of federal laws."

SH121 in jeopardy

If HB1892 becomes law TxDOT will have to negotiate required changes to the SH121 concession with Cintra. TxDOT was planning to finalize the contract by June. There is no mention in the letter of NTTA possibly topping Cintra's bid and taking the concession from the company - as happened within days.

Behrens says HB1892 would require three contract provisions of SH121 to be renegotiated with Cintra (and JP Morgan):

(1) competing facilities provisions
(2) the buyback formula
(3) the start date of the 50 year term

Behrens says that HB1892's buyback formula banning consideration of future toll revenues "materially impacts the risk to Cintra that the state will terminate the contract... and results in termination compensation considerably lower than contemplated when Cintra submitted its proposal."

Cintra will have to "price this risk" and either reduce the concession fee or withdraw their proposal.

Buyback formula of HB1892 a killer clause

The TxDOT chief then says flatly the new buyback provision will likely kill the whole concession program: "The buyback requirement is such a stark change in the CDA (concession) program we feel this bill may prevent the state from entering into any concession agreements in the future."

The bill would require such drastic renegotiations these may produce protests by proposers, the withdrawal of Cintra, and FHWA directing the department to cancel the procurement. If any one of these eventuate the procurement would have to be restarted with a delay of 12 to 18 months.

HB1892 mandates that concession fees be spent only in the TxDOT district in which the project is located - the Dallas District in the case of SH121. Under the concession as agreed by the regional transportation council (RTC) projects were also to be supported in the Fort Worth district - illegal under HB1892. All these projects would be defunded.

SH161's procurement would have to be changed half way through the process, raising many of the same problems as with SH121.

Topping rights to public toll authorities may drive off investors

HB1892's granting of topping rights to NTTA "may cause proposers to withdraw from the procurement," Behrens says.

40 year limit would turn Loop-9 a loser requiring subsidies

Loop-9 as a connecting facility to TTC35 could be granted to Cintra under their TTC35 contract or competitively bid. In either case, says the TxDOT chief HB1892's 40-year limit would turn a self-funding concession into one requiring a state subsidy. Loop-9 would therefore be delayed until TxDOT found funds for the subsidy.

Three toll lane projects - DFW connector, North Tarrant Express and I-635 LBJ - would require renegotiation midway through procurement like SH161 with the same possibility of the program collapsing. The DFW Connector would be ineligible for planned funding from the SH121 concession, so new funding would have to be found.

"If the SH121 CDA is delayed and the concession fee reduced many of the non-tolled projects that the RTC intended to fund with those payments will no longer have funding. The RTC will have to make decisions on the projects to be cut."

This will produce "significant adverse environmental impacts... on the region's ability to meet air quality standards."

HB1892 institutes a moratorium on concessions outside Dallas Ft Worth which expires the day after the state's authority to enter into concessions expires, Behrens notes, so without positive action to renew the program "there will be no new CDA (concession) projects."

Investors will go elsewhere

In the current climate, Behrens says, "developers will be very slow to return to Texas, if they return at all."

By the time the moratorium expires (Sept 2009) it is likely investors will have committed their funds to Florida, Virginia, Georgia, California and other states where they are welcome, the letter says.

The Dallas-Ft Worth area regional council had asked TxDOT to evaluate SH183, I-30/US80, US67, SH170 and SH360 for concessions, Behrens says, but TxDOT will cease development of these projects until a new funding source is identified.

HB1892 "an obvious violation" of intent of federal law

Behrens says that even with added statements purporting to help the state comply with federal law "the sweeping powers and unilateral decisionmaking of counties, regional mobility authorities and regional tollway authorities under HB1892 (are) an obvious violation of the intent of federal law regarding the state's ultimate responsibility."

The bill "fractures the state's ability" to provide a state network, Behrens charges.

"The ability of local and regional entities to exercise unilateral authority under HB1892 to use the existing state right of way also results in an encumbrance on TxDOT property that will raise the cost of issuing toll revenue bonds or prevent their issuance altogether..."

The state's ability to negotiate concessions including shadow tolls (pass-through tolls in Texan) will be weakened or precluded.

Unless the legislature renews the concession program or provides a new funding source "the state will be able to invest very few dollars in new capacity on the state highway system in the near future," TxDOT says.

There will be drop in new capacity funds from 2010's $435m, 2011 $388m, 2012 $170m and 2013 $34m.

All projects mentioned "may experience delays of months if not years" and it is possible some will never be built, Behrens concludes, thanking Rep Hill for the opportunity to comment.

the TxDOT letterhead on which Behrens writes has at the bottom of the page:

 

BACKGROUND

HB1892 has now passed both houses of the legislature almost unanimously. The governor Rick Perry is almost certain to veto the bill, but there are clearly the numbers (two-thirds) to override his veto and halt Texas big roads program.

The supposed exemption of projects in the Dallas Ft Worth area is an illusion.

TOLLROADSnews 2007-05-08