6/16/07

Editorial For Worth Star-Telegram

The fight over a contract to build a 24-mile toll project on Texas 121 in Denton and Collin counties has developed with the intensity of bare-knuckles boxing. There won't be blood on the floor when this fight is over (fortunately), but tempers are flaring, and billions of dollars are at stake.

With the 40-member Regional Transportation Council scheduled to pick a winner on Monday, no clear favorite has yet emerged between the two bidders.

The North Texas Tollway Authority offers $2.5 billion upfront and $833 million worth of annual lease payments for the contract to build the road and collect the tolls for 50 years. The Spanish company Cintra, in partnership with JPMorgan Investment Management, is offering $2.15 billion upfront and $717 million over the life of the contract.

The two sides are fighting so hard because the Texas 121 project, in the booming-growth area from north of Grapevine to U.S. 75 in Collin County, is expected to offer especially lucrative toll revenues for the winning bidder.

Cintra seemed to have the deal locked up until state legislators stepped in with a law. A law painfully crafted in the just-ended legislative session says that local public entities like NTTA must be given a shot on toll road projects, tilting the odds in their favor if private offers aren't clearly superior.

That's the way it should be. NTTA is saddled with the responsibility of helping the North Texas region build its transportation network. If plum projects like Texas 121 are snatched away by private bidders and NTTA is left only with the pits, the agency can hardly be expected to succeed.

So far, Cintra has not landed a knockout punch.

At an RTC meeting on Thursday, Texas Department of Transportation officials said they favored the Cintra bid, basing their reasoning primarily on contract issues that already have been worked out with Cintra and not NTTA.

The RTC's financial adviser, Price Waterhouse Coopers, came down marginally in favor of Cintra's bid, but with numbers that NTTA and some RTC members reasonably questioned. Discounting for various elements of risk over time, the number-crunchers valued NTTA's bid at $3.2 billion to $3.4 billion. They put a value of $3.8 billion on Cintra's bid, noting that its downside risks are limited by the already-negotiated contract. But that analysis boosted the Cintra bid's value by $200 million because of federal taxes. How is that a benefit to the state or the region?

And Price Waterhouse Coopers also gave Cintra credit for $700 million worth of "interoperability payments," a complicated system of fees that amount to revenue sharing between the state's major tollway systems. The sharing results when a driver from one area uses an electronic toll payment system (TollTag in North Texas) to drive on a tollway in another part of the state. NTTA officials said the analysis was based on a flawed understanding of how the system works and how much financial benefit it provides.

Under RTC members' questioning, Price Waterhouse Coopers representatives estimated that Cintra and its investors would take home $700 million in profits from the Texas 121 project. That's money that would stay in North Texas and be invested in other roads if NTTA wins the bid.

And North Texas drivers? Congestion has grown enough that earlier objections to toll roads have faded to something more akin to "Just give me a way to get from here to there."

That's the RTC's job. Come Monday, after being presented with a final round of informational briefs from the bidders, the consultants and the RTC staff, the council members must decide this contest. It's not an easy decision, but it is time to make it and get the road built.