TTC must defend process,
confirm Cintra selection

June 27, 2007

TOLLROADSnews

EDITORIAL: It would have been convenient for the Texas Transportation Commission which meets tomorrow (Jun 28) to decide if Dallas area politicians had voted recently 27/10 in favor of Cintra, the winner of their concession procurement, instead of the other way around. Higher levels of government love to be able to say they are respecting the decisions of local government.

At stake is Texas' reputation as a place where officials keep their word. Or do they opportunistically change the rules in the end game just because a ambitious political hustler (Paul Wageman - no one in the toll business outside Dallas had heard of the guy this time last year) takes control of the board of directors of the local public toll authority, throws out the CEO, tears up a protocol agreement with the state, and exploits a redneck movement against 'foreign takeovers of our roads' to establish a local tollroad monopoly and make his name as a some kind of latterday Sam Houston beating back the 'spanicks.

NTTA has been one of the best public toll authorities in the country. They pioneered the technologies which have transformed the toll business - transponder toll collection and openroad tolling, now cashless tolling with video. They have built several great tollroads and operated them very efficiently by the standards of public toll authorities. They have generally kept costs under control and generated a surplus that they have plowed back into improvements for the public benefit.

Until the recent takeover they behaved like a confident and honorable public authority, open, candid, and businesslike.

Invariably their line on SH121 was: "We've looked at it. We think it may be viable at some time in the future, but for now it looks marginal. We have higher priorities. We are heavily committed to a bunch of better projects..." and they'd reel off eastward extension of the Pres George Bush Turnpike, northward extensions of the Dallas North, the Trinity and SW Parkways...

They expressed their self-confidence and openness to competition by saying: "If TxDOT and some investors think they can make SH121 work, good luck to them."

And so they signed an agreement with the state in which they agreed not to bid for a concession on SH121 while getting a guarantee of five years doing toll collection for the chosen concessionaire.

It was on that basis that the Texas Transportation Commission set in process the procurement of a concession - in their odd bureaucratic lingo, a CDA. Texas state officials got a dozen or more companies to participate in a competitive procurement investing millions of dollars in proposals and the process. Toward the end of the procurement local officials balked at some of the details. State officials handed off power to negotiate the final shape of the agreement to regional officials. The Cintra CDA was shaped by those same officials in the Dallas Ft Worth region who disgracefully voted recently 27/10 to dump the contract in favor of the rule-breaking last minute intervention by the NTTA.

NTTA clearly won the PR, media and political battle. They got in early with $billion numbers that seemed to look better than Cintra's. If anyone reminded them of their agreement to stay out of the SH121 procurement they played victim of the big bad state DOT, suggesting somehow they'd been threatened almost with guns to their heads to sign that thing. Baloney. 

Also baloney was the idea that with NTTA you'd be keeping the dollars at home, where otherwise they would disappear into Delaware, or Barcelona. NTTA would have to sell bonds and raise bank loans on a national and global scale just like Cintra. It would have to borrow more, actually, than Cintra which can enlist equity. Servicing capital sends money out of the region if that capital is raised out of the region regardless of who is raising the capital and regardless of whether it's bonds, bank borrowings or shareholder dividends. It's a quite phony issue - a distinction without any real difference.

But there are important and real differences. Cintra is contractually committed to annual payments, to living within toll caps, and to forgoing their toll concession rights if they should breach any of the contractual commitments.

NTTA by contrast retains complete discretion over toll rates. They cannot subordinate any annual payments to their other debt. They pledge the revenues of other tollroads to the SH121 debt.

NTTA unlike Cintra cannot be put off SH121 if they fail to live up to their commitments. They stay regardless of their performance.

NTTA tried to confuse the issue of interoperability payments, used low discount rates to obtain inflated values for risky future revenue streams, made claims about traffic and revenue and other financial modeling and then refused to release them. They were all empty assertions and promises. Talk about hustlers!

Cintra's is clearly the more solid.... no, Cintra's is the only solid proposal for SH121.

TOLLROADSnews 2007-06-27