NTTA felt pressure to skip 121 bid

Officials claim pattern of intimidation

June 8, 2007

By Danny Gallagher, Staff writer, PLANO COURIER STAR

Some current and former North Texas Tollway Authority board members said they felt pressured by the Texas Department of Transportation (TxDOT) into not competing for the State Highway 121 toll project and unsure about what would happen if they didn’t sign a regional protocol agreement in August of 2006.

“I think it’s pretty clear TxDOT has not been encouraging us to get in and compete,” current NTTA board chairman Paul Wageman said.

James McCarley, a former executive director of the Dallas Regional Transportation Council, said, “It wasn’t widely known at the time but the NTTA has been strongly encouraged not to explore (SH) 121.”

Gov. Rick Perry and TxDOT officials announced on Feb. 27 that the Spanish company Cintra Concesiones de Infraestructuras de Transporte had been granted a conditional award to build and operate an SH 121 toll road in Collin and Denton counties for 50 years. After an outcry of protest from legislators, the North Central Texas Council of Government’s Regional Transportation Council asked the NTTA to submit a proposal, which it did last month. State Sen. Florence Shapiro said she believes the NTTA are competing equally for the project for the first time.

“They (NTTA) are the entity that has served this region for the last 40 years and to just toss them out willy nilly with no rhyme or reason other than they (TxDOT) want the private sector take over the most lucrative toll road in the nation was unacceptable to me,” Shapiro said. “Give them a level playing field, let them compete with the same tools that are available and see which one’s better and that’s now what NTTA has for the first time.”

Collin County wanted NTTA deal

In 2005 Former Collin County Judge Ron Harris said Collin County wanted to work with NTTA on SH 121 by forming its own local entity and licensing it to NTTA, an idea he credits to Collin County Commissioner Jack Hatchell.

“I wish I could say it was mine,” Harris said. “He said why don’t we get NTTA to submit a proposal to do the whole road?”

The plan was formed and taken to TxDOT, Harris said.

“We got that moving and everybody seemed very united and comfortable with it,” Harris said. “Then we went to that ominous TxDOT commission meeting…and the TxDOT commission didn’t receive it well at all. They just said it should be a foreign corporation, and I can’t say that was their words but that was the thought behind it, that they didn’t want, in essence, NTTA to do it.”

All private bidders for the SH 121 contract were foreign corporations.

In fact, county officials said in March and April 2006 that TxDOT warned Collin County that funding for other county projects, such as U.S. 75 improvements, might be in jeopardy if it proceeded. “We could end up with a whole heap of nothing,” Commissioner Joe Jaynes said at the time.

Dave Denison, NTTA’s Denton County appointed board member, said he felt a lot of pressure came down on the NTTA to stay away from the project.

“I never saw anything official to this fact, but I always felt TxDOT really did not want the NTTA or the public sector involved in the process, and by the public sector, I mean the NTTA,” Denison said. “They said we could submit, but I always got the distinct impression they didn’t want us to submit. I just think the process seemed to be geared for a private proposal rather than a public one. Some of the things required in the submittal process didn’t fit a public agency like the NTTA.”

‘Never see the light of day’

Dave Blair, former NTTA chairman, said he received comments that any proposal NTTA made would “never see the light of day.”

“I also heard from one of their financial advisers, Greg Carey (managing director with Goldman, Sachs & Co.), I believe it was a TxDOT Transportation Summit in the summer of last year [2006],” Blair said. “He pulled me aside and, whether it was a friendly gesture or a message from someone else, I never asked, but he unmistakably told me if we made this proposal, it would ruin the NTTA.”

Goldman, Sachs spokesman Michael DuVally said, however, "That’s not our recollection of how the conversation went, and secondly, I would point out that the issue raised is not germane to the bid that’s currently on the table.”

Bill Hale, TxDOT’s Dallas district engineer, called Blair’s comment “bull.”

A regional decision

While this was going on, however, the NTTA was receiving another message: That the decision about who got the SH 121 contract was a regional one.

Wageman and Collin County leaders came home from a December 2005 meeting with the Texas Transportation Commission leaders with the news that Texas Transportation Commission chair Ric Williamson told them it was a local choice.

“The chair, on more than one occasion said it was a regional decision,” Wageman said after that meeting.

“We’re still alive,” Hatchell said at the time. “We asked them to consider the NTTA just like they would a private company.”

“They agreed to work with the NTTA if they submit a proposal through the Regional Transportation Council,” he said. “Any excess revenue could go back to Collin County for its use.”

Such an agreement would have been similar to one made with Denton County in late 2004, though that deal did not include the NTTA. The Denton County accord called for approval of toll roads on SH 121 from near DFW Airport to the Dallas North Tollway. The cities involved n Coppell, Carrollton, Lewisville and The Colony -- would receive money for additional projects to ensure mobility in and out of the city, such as improvements to Farm to Market Road 423, Interstate 35E, FM 544, and Freeport Parkway in Coppell.

Warnings of bankruptcy

This year, though, the words were harsher. A memo surfaced at TollRoadsNews.com in April, credited to TxDOT staff, that stated an analysis of NTTA’s proposal found it would lead to bankruptcy and “to avoid this shortfall, NTTA would increase toll rates beyond the Regional Transportation Council’s (RTC) policy,” according to the memo.

TxDOT also asked the Texas Legislature to let them take over regional tollway projects. According to TxDOT’s 80th Legislative Session agenda, TxDOT asks lawmakers to amend state law to “explicitly authorize TxDOT to acquire county toll projects and regional tollway authority projects and vice versa.”

Blair said he believes the legislative agenda was meant to apply pressure to NTTA to stay out of the 121 project.

“That’s kind of the way I took it, that they did not want us specifically at that time on SH 121,” Blair said. “That just was my perception. I have no idea why they were thinking about it…I didn’t know why they did it. It was just my perception of it, that they were doing it because they didn’t want us involved in their projects.”

Hale denied the legislative request was meant to serve as a threat to the NTTA.

“Some other toll agencies wanted to go into the market and sell their assets to raise money,” Hale said. “It wasn’t to take over NTTA or HECTRA (Harris County Toll Road Authority). If they offered it to the market, TxDOT would have liked to offer a proposal on that sort of thing and we needed legislation to do that.”

Protocol under pressure

Blair said given the pressure they were under, the protocol agreement seemed like a better deal at the time. He said NTTA would have to spend approximately $5 million on constructing a proposal in a couple of months whereas Cintra’s proposal took more than a year to complete.

“When the 121 deal came up and we decided to take a crack at it, it was very obvious to me and several other board members that TxDOT was going to fight us to the end to get 121,” Blair said. “In the meantime when TxDOT came to us and said, ‘Hey guys, we’ve got this protocol we’d like you to look at that basically said it would allow you to be the operator of all the tollways in your district for five years.’ We looked at that and said we think this is a better deal for us right now than trying to fight this 121 project, so the board decided that we would accept the protocol.”

Wageman said the protocol gave NTTA “very little.”

“It had three projects we already had: the east extension of the George Bush Turnpike, the phase three extension of the Dallas North Tollway and Southwest Parkway in Tarrant County,” Wageman said. “TxDOT would not allow us to compete for the [SH 121] project and also be the toll collector if we were unsuccessful. We couldn’t collect tolls for a private firm if we submitted a bid...We felt we could, but that was not the view of TxDOT.”

It was the NTTA’s idea

Hale said the NTTA suggested the protocol.

“TxDOT had a ‘minute order’ that authorized TxDOT to make a proposal that allowed NTTA to be a compactor on the project as well as with the private sector. Then in July, they (NTTA) submitted a request for private partners to come in and help them with their proposal because their public sector compactor could not be competitive. We called them in and that’s when we started hashing up the protocol.”

Since then, the protocol has been rescinded by TxDOT and NTTA has submitted their bid to the Regional Transportation Council for review.

Jose Lopez, Cintra’s U.S. president, said NTTA was the agency applying the pressure after they chose to sign the protocol and remove their bid.

“They chose to be with the winning horse and be the mandatory supplier,” Lopez said. “Then they were going to the political world and telling stories around and gaining favor from the politicians and trying to win this way. It’s like saying we cannot win on their plate, so let’s go to the underground.”

Superior proposal

Wageman said he feels NTTA has the “superior proposal.”

“Obviously, we’re very concerned about the transparency of the evaluation process and that it’s not biased,” Wageman said. “We’re going to insist that it be fair to us…I think the public demands that it be a fair and transparent evaluation process.”

Lopez said he believes Cintra’s proposal is better.

“What if the economy doesn’t go well? What if oil prices go very high for the next few years? If it fails with us, that’s OK for Texas. We lose our equity and our project and the project is the region’s again and they can sell it again probably at a lower price,” Lopez said. “If this happens when NTTA is on the project, NTTA must raise tolls.”

Michael Morris, the North Central Texas Council of Governments’ Director of Transportation, said he wants both proposals to receive a thorough and balanced examination.

“I think there’s a definite public interest to find strengths and weaknesses of the public financial sector approach and the private financial sector approach, so we’re back to where wanted to be year ago,” Morris said. “I just wish we had gotten this in the fall, but we’ve got it now and we’re moving forward.”

McCarley declined to offer any further comment after he was contacted a second time. Hatchell could not be reached for comment.

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Timeline

November 2004 n Texas Transportation Commission approves deal with Denton County cities to allow tolls on SH 121 in exchange for funding of important county road projects.

November 2005 n Collin County and four cities along the 121 corridor (Frisco, Allen, McKinney and Plano) requested the NTTA submit a proposal to TxDOT to fund the Collin County portion of the roadway.

December 2005 n Texas Transportation Commission chair Ric Williamson tells NTTA and Collin County leaders that the decision of who wins the SH 121 contract is “a local one,” and that the state would work with NTTA as it would a private firm.

February 2006 n RTC rejects NTTA’s proposal

April of 2006 n RTC adopts series of policies for application to the 121comprehensive development agreement procurement. These include mandates that 75 percent of expected revenue be paid up front.

May 2006 n TxDOT issues a draft “Request for Detailed Proposals for SH 121” to the short-listed firms for industry review

June 2006 n The RTC adopts recommendations to the Texas Transportation Commission for the evaluation criteria for the 121 project; NTTA said they authorized their staff to develop a proposal for the Collin and Denton counties portions; TxDOT says NTTA brings up the concept of a protocol agreement

July 2006 n NTTA publishes a notice of intent to use private companies to prepare their proposal; TxDOT issues a letter outlining their concerns of their “private partner;” Former NTTA Chairman Dave Blair said he is told at a TxDOT Transportation Summit by a Goldman & Sachs employee that a 121 proposal would “ruin the NTTA”

August 2006 n NTTA board approves protocol agreement and rescinded their authorization to make a proposal

February 2007 n Spanish-based Cintra Concesiones de Infraestructuras de Transporte wins 121 toll bid

April 2007 n Texas House passes toll road moratorium bill; NTTA announces interest in preparing another proposal

May 2007 n TxDOT memo criticizing NTTA’s proposal posted at TollRoadsNews.com; NTTA submits 121 proposal to RTC

SH 121 FACTS

*The project: A 25.9-mile State Highway 121 toll road from U.S. 75 in McKinney to the western junction of Business 121 in Coppell/Lewisville.

*Status: Operational, all-electronic toll road from western terminus to FM 544 in Carrollton; main lanes under construction from FM 544 to Preston Road in Plano/Frisco; service roads from Preston Road to U.S. 75.

*Cintra bid: $2.8 billion ($2.1 billion up front; $700 million in concession payments). Total economic impact of $5.06 billion.

*NTTA bid: $3.333 billion ($2.5 billion up front; $833 million in annual payments). Total economic impact of $6.3 billion.