DMN: Texans to pay "stiff tolls"

Link to article here.

Here’s the most elitist attitude in print from transportation bureaucrats pushing this oppressive toll taxation (“managed lanes” are toll lanes):

“The managed-lane approach will give people a choice between traffic for free or a fast ride for a price.

What about all the gas tax we’re paying? Wanna know where it’s going? DPS, Tourism promotion, mental health, and enhanced benefits for employees in the Attorney General’s office. Then, the federal highway program won’t send some of our gas taxes back to Texas unless we spend it on “enhancements” like $18 million rest stops with FREE WI-FI!

Add to that, the vehicle sales tax paid for roads is getting dumped into general revenue instead of going to roads. Ending the diversions of the vehicle sales tax amounts to $2-$3 BILLION a year and yields more than a 10 cent per gallon gas tax increase would. Ending this diversion alone could nearly triple the money for roads WITHOUT RAISING TAXES! They opine we’re not giving them enough money to keep up with demand, but in reality they’re pilfering our money and spending it on things that have nothing to do with roads.

N. Texas highway improvements come with a toll: Expect construction snarls for 5 years, stiff tolls after that

12:00 AM CDT on Sunday, April 18, 2010

By MICHAEL A. LINDENBERGER / The Dallas Morning News
Dallas-area traffic has been among the worst in the nation for years, and for many commuters it’s about to get a lot worse before it gets better.

Call it growing pains, or just one big mess, but construction has either already started or soon will on no fewer than a half-dozen of the most heavily traveled – and already backed up – traffic corridors in North Texas, as the region embarks on what may be the most aggressive road-building program in the country.

Commutes will be lengthened and lanes closed as orange vests and red taillights become as common on our highways as bluebonnets in Burnet.

And when it’s over in five years or so, many of those same drivers will be stuck in traffic as crowded as ever – unless they want to pay hefty tolls to keep moving.

Nearly all of the biggest highway improvements will add more toll lanes. They involve just about every important corridor in the region, from the complete reconstruction of part of LBJ Freeway in Dallas to the unsnarling of the Grapevine Funnel, now known as the DFW Connector, to the extension of State Highway 161 in Dallas County and the eastward march of the Bush Turnpike.

Some projects, like the LBJ Freeway and the North Tarrant Express in the mid-cities, will combine rebuilt free lanes and improved access roads with brand-new and especially expensive toll lanes. Others, such as Bush Turnpike extension and Highway 161, will be pure toll roads.

Only the DFW Connector, the fruit of 30 years or more of patient advocacy in the Grapevine area, will see the lion’s share of the improvement come in the form of free roads. But it, too, will include some tolls.

So, North Texas, this is the toll-road future you’ve been hearing about. And officials from Arlington to Austin to Washington say it’s the best government can do to keep up with traffic in the fastest-growing metro area in the country.

Lack of resources

“We’re dealing with the reality that we do not have the resources we need to keep up with our demands,” said Bill Meadows of Fort Worth, one of five members of the Texas Transportation Commission. “I know there are people who want to say, ‘Those dirty sons of guns, why didn’t they build it all free?’ Well, we could have done that, but you would have got squat.”

Officials at the Texas Department of Transportation have warned for the past year that money for major new projects runs out by 2012. That’s thanks partly to heavy borrowing in recent years that has left the state with big annual interest payments, eating away at already inadequate gas tax revenues.

Critics of Gov. Rick Perry’s toll-road-first emphasis, and of his no-new taxes mantra, would add that he’s failed to push the Legislature to consider higher taxes that would have reduced the state’s reliance on tolls.

But on top of those issues is something simpler still: As time passes, and more roads are added, Texas’ massive inventory of highways and bridges – some 193,308 miles in all, the most in the U.S. – gets older and larger every day, meaning maintenance costs are a growing burden. Last year, Texas spent $2.98 billion on maintenance, and will spend about that much this year.

Meanwhile, Dallas-Fort Worth added almost 100,000 residents last year, and 1.3 million in the past decade. As regional planners like to say, nearly all of them brought a car, but none packed any new roads and bridges in the moving van.

“Let’s face some realities and look at the growth of this state over the past 25 years,” said Meadows, an insurance executive who was vice chairman of the North Texas Tollway Authority before Perry named him to the commission. “There are vast areas of Texas losing population, but the opposite is happening here. Given this growth, our roadways are going to be a lot more congested.”

Traffic jams have been a way of life in Dallas, and in most big cities, for decades. And the recent stimulus-funded surge of smaller construction jobs has made this spring especially busy. And with more than 1,000 workers building Dallas Area Rapid Transit’s Green Line to Carrollton and the Orange Line to Irving, traffic problems and lane closures have become routine.

But to keep all that congestion from turning the highways into permanent parking lots, North Texas has added to the regular mix of highway projects a set of marquee projects across the region, all built at the same time and nearly all of them using a new approach to keep traffic moving once they are done.

For now, it will mean a lot of taillights for drivers.

Widening the Funnel

One project already under way is the DFW Connector in Grapevine, a massive rebuilding of part of State Highway 114/121 and State Highway 26 near the airport and downtown Grapevine.

It will widen some areas to 24 lanes, including new frontage roads and four new express tolled lanes. Lane closings and other traffic bothers have already begun and will continue until the work is complete in 2014.

“I think people here are optimistic, they are just tired of all this traffic,” said Jerry Hodge, a former public works director for Grapevine who now works as liaison between the city and the private firms building the connector.

“There is a little bit of question about how bad is it going to get in the meantime. But the other side is that they are relieved to see this happen.”

He noted, as did officials throughout the region, that modern highway contracts nearly always carry stiff requirements that encourage builders to keep as many lanes open during the day as possible, and sometimes impose big fines for shutdowns during rush-hour.

Mitigation efforts aside, Maggie Smits of Colleyville has already noticed the traffic snarls near her office on Grapevine’s Main Street, and especially when she takes her husband to and from the airport.

“I picked him up Thursday night, for example, and coming out of the north side of the airport onto 114, they had blocked that exit. So we took the bridge over to the back way and took 26 all the way home. It took forever.”

When the cones near the DFW Connector are finally put away, drivers like Smits will see real improvement. Most new lanes will be free, and the troubling interchanges that have bottlenecked the region for years will be smoother.

But for drivers in other areas of North Texas, the payoff won’t be as neat.

The dilemma is best illustrated on the LBJ Freeway in Dallas, routinely listed as one of the country’s most traffic-clogged corridors.

Drivers now have three free lanes in each direction, with a narrow HOV lane occupying what used to be the shoulder. Beginning next year, those lanes routinely will be reduced to two – and occasionally fewer than that – as the private toll operator Cintra and its partners completely rebuild the road.

When it opens, probably in 2016, the new LBJ will be an engineering marvel. In place of the current lanes will be four free main lanes. And tucked underneath the cantilevered top lanes will be three brand-new lanes half-dug into the earth like an open channel.

Those three new lanes won’t be cheap, as they will help usher in something new for North Texas: dynamic pricing for toll roads that means the more drivers need them, the more they will cost.

Opening toll rates during rush hour likely will be about 50 cents per mile, more than three times the rates NTTA charges on its roads. Depending on demand, the rates could reach 75 cents or more.

Managed-lane concept

Michael Morris, transportation director for the North Central Texas Council of Governments, said the new LBJ will be a good deal for drivers in North Texas.

Those who won’t pay tolls, he said, still will have four rebuilt lanes to choose from. And frontage roads will be improved and made continuous.

Besides, experts have long warned that so many drivers would like to use LBJ Freeway that trying to build enough free lanes there to keep traffic moving would require at least 16 lanes in each direction. Morris noted that’s neither feasible nor wise. The managed-lane approach will give people a choice between traffic for free or a fast ride for a price.

Cintra, which also is developing the North Tarrant Express, will be contractually obligated to keep toll traffic moving at 50 mph or more at all times, a commitment it will keep by jacking up toll rates when traffic gets heavy.

Meadows said he knows some residents will feel let down when they see that the only sure escape from traffic will come with a hefty toll.

“Here’s the thing,” he said. “It really depends on what your expectations are, what the citizenry expects. If my expectation is that my drive in to my office in Fort Worth, on what we call the free roads, is going to be like it used to be – that we are going to return to 1968, when the government built all the roads for free – I’m going to be really disappointed.”

Transit perks at Pentagon abused

Link to article here.

More waste, fraud, and abuse of our taxpayer money to report…note that 40% of our federal gas taxes go to transit. Plus, why should all taxpayers give government employees a FREE RIDE to work? Who subsidizes our commutes? No one!

Tuesday, May 4, 2010
Feds run off track with Pentagon transit perk
Misused aid gives more a free ride
By Jim McElhatton
Washington Times
Federal officials failed to keep track of how they doled out millions of dollars in transit benefits paid for Washington-area Pentagon employees to get to and from work, resulting in overpayments, double dipping and questionable public transit fares, a recent Pentagon review has found.

The increasingly generous subsidy, expected to cost about $60 million this year, pays workers to take mass transit or join van pools to help unclog the notoriously traffic-snarled roadways in and around the nation’s capital.

With the passage of the economic stimulus package last year, area federal workers across government saw their maximum transit subsidy rise from $120 per month to $230 per month.

But after reviewing a sampling of the more than 41,000 Pentagon workers who collected transit money in 2007 alone, the Pentagon’s office of inspector general recently reported on numerous problems.

Hundreds of workers, for instance, appeared to be double dipping by collecting public transit subsidies for bus or train fares at the same time they received parking benefits. And records for more than 30,000 workers in the transit-subsidy program were incomplete or inaccurate, according to the review.

The inspector general’s office declined Monday to comment on the report, and e-mails and telephone calls to the Washington Headquarters Services, the Pentagon agency that oversees the transit program, were not returned by deadline.

The findings were contained in an April 16 Pentagon report in which the inspector general ultimately made no recommendations, saying the military already had taken actions to “adequately address the internal control weaknesses.”

The audit prompted numerous changes in how officials manage the transit-subsidy program, including the start last summer of a program to automatically cross-check Pentagon parking records against the rolls of employees receiving transit subsidies.

Still, Pete Sepp, vice president of policy for the National Taxpayers Union, said the transit-subsidy program will remain a tempting source of easy cash for unscrupulous employees.

“The new safeguards provide fewer opportunities to cheat, but thanks to the huge increase in subsidies from the stimulus bill, there’s now more motive to do so,” he said.

“It’s not easy to detect, for example, someone who gives all the proper information about where they enter and leave the transit system, only to secretly bum rides to work when loaning his or her pass to someone else.”

Washington Headquarters Services contracts out various responsibilities for management of the transit program to the Department of Transportation.

The report wasn’t the first time Pentagon officials were put on notice about problems with the transit program.

In 2007, another inspector general audit found more than 14,000 employees collecting transit subsidies who had filed incomplete applications. Inspectors also reported that more than 900 employees had collected public-transportation subsidies while receiving parking benefits.

Transit subsidies have come under scrutiny elsewhere in government.

In 2007, the Government Accountability Office estimated that federal agencies had paid about $17 million in fraudulent transit payments. In some cases, employees were selling the nontransferable perks over the Internet.

In 2008, the State Department suspended one employee for a month after the employee was caught selling transit subsidies outside of a subway stop in Washington, according to an internal report on the case obtained by The Washington Times through the Freedom of Information Act.

The worker claimed ignorance, telling investigators that the fares were simply “government perks.”

In its report last month, the Pentagon inspector general’s office said it was referring 10 cases for criminal investigation.

The review also found “inaccurate or incomplete” records for all but 8,714 of the 41,279 workers who took part in the transit program. What’s more, about 5,000 employees overstated their benefits, resulting in more than a half-million dollars in overpayments.

Mr. Sepp said several of the reforms probably have weeded out “many if not most of the double dippers.” Still, he said, “ethically challenged” employees will be tempted to game the system.

“If federal officials truly believe that offering such generous benefits will ease congestion and clean the air, then the least they owe taxpayers, many of whom pay for transit out of their own pockets, is to prosecute fraud and abuse wherever and whenever it’s found,” he said.

NJ: Rest stops, toilets closed on freeways, remain open on toll roads

Link to article here.

Christie Shuts Toilets on Free New Jersey Roads to Save Money
By Dunstan McNichol
April 22, 2010
Businessweek

April 22 (Bloomberg) — New Jersey Governor Chris Christie wants to shut the last two rest-stop bathrooms on non-toll roads in the most densely populated U.S. state after this year to save $270,000.

“We just don’t have the money for the bathroom facilities,” Christie’s transportation commissioner, James Simpson, told members of the Senate Budget and Appropriations committee today during a hearing on his department’s $1.24 billion budget for the fiscal year that starts July 1.

The bathrooms scheduled to close under Christie’s plan are on Interstate 80 at the Pennsylvania border and Interstate 295 at the Delaware border. Parking areas at the rest areas will remain open for truckers under Christie’s plan, Simpson said. The closings will eliminate 18 maintenance positions, according to the department’s written response to questions from the nonpartisan Office of Legislative Services.

“Lavatory and tourism facilities will now be closed on all of the state’s non-toll roadways,” the response says.

Drivers will still find bathroom facilities on the New Jersey Turnpike and the Garden State Parkway. Those are two of the busiest toll roads in the U.S., according to the New Jersey Turnpike Authority.

Christie, a Republican who took office Jan. 19, last month proposed a $29.3 billion budget that includes $10 billion of spending reductions to help close a $10.7 billion deficit. The legislature, which is controlled by Democrats, is holding hearings on the proposal. A budget must be approved by July 1.

Simpson told lawmakers he is hoping to coax federal officials to give the state an exemption that would allow a private vendor to operate a cafe at the sites where the rest rooms are scheduled to close Jan. 1, enabling the bathrooms to stay open.

–Editors: Stacie Servetah, Ted Bunker

Forbes: Toll roads prohibit China from benefiting from its highway system

Link to article here.

The Cost Of Driving In China
Toll roads prohibit the nation from enjoying the economic benefits of its vast highway network.
Paul Midler 04.20.10
Forbes.com

HONG KONG – China will spend $300 billion on high-speed rail lines over the next 20 years. The world has seen nothing like it, and China-watchers have responded by drawing analogies to America’s transcontinental railroad, built in the 19th century, or its interstate highway system, built and expanded throughout the 1950s and 1960s.High-speed rail is not the only thing on the nation’s infrastructure to-do list. China’s General Administration of Civil Aviation has budgeted $62 billion to build 100 new airports by 2020. All of this new infrastructure is being seen as the signs of progress, but what has been missed is how high-speed rail and the new airports are a way for China to get around a major problem it faces–an exorbitant, toll-based road system.

Have a mind to jump in your car and drive from Guangzhou to Beijing? Don’t forget to bring your wallet. The expressways connecting the south to Beijing are expensive, and a trip to the nation’s capital will run you close to $200 each way. Driving on toll roads in China–and almost all of the country’s expressways cost money–runs an average of 0.5 yuan (7 cents) per kilometer, or nearly 12 cents per mile. For many types of cars, the tolls are greater than the cost of the fuel burned.

The jacked-up cost of auto travel in China actually makes high-speed rail seem affordable, but tickets for high-speed trains are still out of reach for most Chinese. The speedy rail line meant to connect Beijing to the southern province of Fujian was closed after only two months in operation due to a lack of commercial interest.

Other problems with China’s high-speed rail include poor planning. The high-speed rail lines connect only two, sometimes three, major cities. The tracks do not cover the country well; they will not necessarily take folks to where they want to go. They are by no means linked into a network, and already people are complaining that the rail stations do not connect properly to mass transit systems. For many who choose to take existing high-speed rail lines, it can take longer to get to the rail station than it does to ride the train from Point A to Point B.

Transportation infrastructure in China is a curious phenomenon. One of the observations made by New Yorker writer Peter Hessler in his travel book Country Driving is that while China’s expressways are clean and well-maintained, they are by and large empty. You can ride down many highways and find your car the only one in sight. What an odd contradiction for an economy said to be the world’s largest auto market!

Like it or not, the long-term potential of major auto companies in China–including Ford, Volkswagen, Honda and Toyota–is going to be affected by how the country deals with the high economic barrier posed by road tolls.

Japan is in the process of doing away with toll roads, which today account for 18% of its highway network (excluding the Tokyo Metropolitan and Hanshin Expressways). Japan’s Democratic Party pledged to give back thousands of kilometers of fee-based expressways as a political gesture, but the net effect will likely be to lift the economy ever so slightly.

China privatized its expressways as a way of quickly establishing an extensive network. While that was great for the short term, the policy decision means that the highway system may never belong to the public, that it will for some time represent corruption of some kind.

For all the latest headlines visit Forbes Asia.


Chinese leaders have no difficulty tearing down entire villages for the sake of a new high-speed rail line, but getting local and other stakeholders to agree on reforming the expressway system will be an enormous challenge in the not-too-distant future.Infrastructure is critically important to an economy; transportation is the cornerstone of commerce. A nation whose citizens move around unencumbered is better able to grow and do more business.China’s auto market is seen as an attractive long-term prospect for investors, but the Chinese continue to view automobiles more as status symbols than as means of conveyance. To get folks rolling down these roads, China will have to consider investing heavily in a different kind of “infrastructure”–the reduction of costs associated with auto travel.

Paul Midler is the author of the book Poorly Made in China: An Insider’s Account of the Tactics Behind China’s Production Game.

For all the latest headlines visit Forbes Asia.

Over 300 properties to be condemned for 290E toll project

Link to article here.

For anyone who still thinks toll roads don’t impact private property rights, think again. Here’s proof positive that an unnecessarily wide road expansion comes into play whenever TxDOT plans to toll existing roads. It must leave as many non-toll lanes as exist before the reconstruction. So most toll roads being done in Texas today require much larger footprints than would otherwise be necessary. Also, these toll lanes are largely underutilized (for “managed lane” projects only about 8% of the traffic can afford to pay the extra tax to access the new lanes). So this is a BIG price to pay for a project that won’t even provide congestion relief for the vast majority of commuters.

TXDOT wants 366 properties to widen 290 corridor
Public comment sought
Jay Blazek Crossley, Apr 16, 10.
Houston Tomorrow

The Texas Department of Transportation (TXDOT) has released the Final Environmental Impact Statement (FEIS) for a proposed project to add traffic lanes to the 290 corridor and fix the 610 / 290 / I-10 interchange.

Four of the additional lanes would be part of a new managed lane facility along the existing Hempstead Highway that would have variable toll pricing for private vehicles as well as HOV and METRO use, replacing the existing HOV lanes in the middle of 290.

The project identifies and preserves land for future transit use, but does not include implementation or specifics on technology or potential stops for transit. Construction could begin in 2011 and the total expected cost of the project is $4.65 billion.

The public now has the opportunity to comment on this proposed project.

The FEIS Notice of Availability Press Release states that TXDOT expected for the notice to appear in the Federal Register on April 16, 2010.  The Notice of Availability states “The FEIS wait period ends May 17, 2010.  Comments regarding the FEIS should be submitted to the Director of Project Development at the Texas Department of Transportation’s Houston District Office located at 7600 Washington Avenue, Houston, Texas prior to 5:00 p.m. on May 17, 2010.  The Texas Department of Transportation’s mailing address is P.O. Box 1386, Houston, Texas, 77251-1386.”

TXDOT states that the project will require the use of eminent domain to take 366 properties to acquire right-of-way, including two churches: Celebration Lutheran Church at 15815 House Hahl Road and Christian Family Church at 14406 Hempstead Road (no apparent website). Appendix D of the FEIS identifies churches, community groups, and civic associations in the area that were contacted and provided information to publish to their constituents on the proposed project. Neither of the churches proposed for eminent domain appear on the list.The proposed eminent domain needs will include 360 residences, including both single and multi-family, and 392 businesses, some of which are listed as multiple businesses on one property.

The Indirect and Cumulative Impacts section of the FEIS states that 413 acres of prime farmland would be converted directly for ROW use, although that information does not appear on Form NRCS-CPA-106, Farmland Conversion Impact Rating for Corridor Type Projects. This form is presented as Appendix A, although it appears incomplete. This form is a consequence of the Farmland Protection Policy Act, which seeks to avoid adverse impacts on American farmlands as a consequence of federal programs, including road projects funded by the Federal Highway Administration. The FEIS does not appear to give an estimate of the amount of prime farmland that will be lost as a result of indirect impacts of the road project, however it states that TXDOT expects that 5,000 to 7,500 acres of additional development will occur in the study area as a result of induced demand from increased lane capacity in the corridor.

TXDOT explains that induced development does not occur because increased highway capacity brings new development to the Houston region, but instead that TXDOT’s decision will allocate development to this area of the region as opposed to other areas.  Referring to a study by the Urban Land Institute, the FEIS notes in section 6.1.2 that “Regional development is primarily driven by regional economics and the major effect of highways is the distribution of development within a region. (FHWA 2004a; Cervero 2003; Hartgen 2003a and 2003b).”  TXDOT notes that the study area currently houses 184,000 acres of undeveloped land, approximately 130,000 acres that is used for pasture and farming, 14,000 of which is cultivated farmland.

TXDOT describes the area surrounding 290 as such: “The transportation network is discontinuous with self-contained, isolated developments with very little interconnectivity of the roadway network.” The proposed addition of freeway lanes will not address this issue. TXDOT instead states that the City of Houston Mayor Thoroughfare and Freeway Plan will be used at a later time to add major thoroughfares “to be designed and built as development occurs.” TXDOT continues: “Thoroughfares are built as development happens, leaving gaps between communities. Bikeways and sidewalks are discontinuous, existing only as part of individual residential developments or isolated public projects along bayous or parks.”

TXDOT summarizes the major changes between the Draft Environmental Impact Statement and the FEIS as such:

The Preferred alternative has the same general configuration as the Recommended alternative, with some changes in the number of proposed main lanes on US 290: 12 lanes from West 34th Street to Pinemont Drive (revised from 10 lanes), 12 lanes from FM 529 to Eldridge Parkway (revised from 10 lanes), and 10 lanes from Eldridge Parkway to Telge Road (revised from eight lanes).  Some direct connector and access ramp modifications were also revised.  The other major change in the Preferred alternative is the relocation of the transit reserve from north of the managed lanes along Hempstead Road to between the managed lanes and the UP railroad from IH 610 to BW 8.

The stated purposes of the US 290 Corridor projects are:

Reduce congestion in the US 290 corridor within Harris County,
Improve LOS and mobility on US 290 and Hempstead Road,
Bring the roadway facilities up to current design standards, and
Improve safety in the US 290 Corridor.

Main My290 project website
Full US 290 FEIS Report (link is to a webpage with a series of pdf’s)
Executive Summary
Section 6 – Indirect and Cumulative Impacts
Appendix A – Farmland Conversion Impact Rating for Corridor Type Projects
Section 1 – Need for and Purpose of Proposed Action
Public Comment and Response Report (This document includes written responses to the DEIS, transcripts from public meetings, and an attempt by TXDOT to respond to every issue raised in a manner that groups public comments into a series of questions)

Image credit: deltaMike

PA State Auditor blasts Turnpike Authority for "gambling" with taxpayer money

Link to article here.

Remember this is written by a toll road industry advocate, so the tone is pro-toll. It’s enlightening as to the financial chicanery being played with taxpayer money regarding interest rate swapping and other tricks with public debt that are not only risky, they’re downright malfeasance!

State auditor hits Penn Pike for “gambling” with $2.23 billion in interest rate swaps
Toll Road News
Posted on Fri, 2010-04-09

The state auditor-general in Pennsylvania, Jack Wagner has criticized the Turnpike for “gambling” with $2.23 billion variable interest rate debt tied to 26 different interest rate swaps. He said his office calculated the cost to terminate the swaps could be $146m – the equivalent of around three months toll revenues.

Wagner wrote in a letter to Turnpike CEO Joe Brimmeier: “Swaps are tantamount to gambling with taxpayer money and they have no place in the public sector.  With drivers already paying higher tolls mandated under Act 44, the Turnpike Commission must do all that it can to show Pennsylvanians that it is handling money wisely.”

In his letter to Brimmeier, Wagner urged the Turnpike Commission to:

– stop using swaps,

– conduct a financial assessment to determine the financial impact of its swaps, and

– hire financial advisers through a competitive selection process.

He asked Brimmeier to provide more detailed information about the Turnpike Commission’s swaps giving a deadline of April 19.

Wagner is quoted: “The fundamental guiding principle in handling public funds is that they should never be exposed to the risk of financial loss. Swaps have no place in public financing and should be banned immediately.”

Carl de Febo spokesman at the Turnpike said the commission is “reviewing that correspondence, and we have no comment at the moment.”

Wagner is a candidate for the Democrat Party’s nominee in the state governor election this November, since the incumbent governor Ed Rendell is term-limited out.

Populist politics?

Critics of Wagner will say he’s engaging in populist politics and pandering to people’s prejudice against complex financing instruments. Economists argue that all borrowing is risky. It is, they say, a gamble because future revenue streams to pay the interest and repay capital are uncertain, and because prevailing interest rates are unpredictable.

Interest rate swaps can – at a price – reduce the risk of interest rate volatility and such ‘hedging’ will make variable interest borrowing less of a gamble. Properly used they can be an insurance against big increases in interest rates on variable interest debt or on refinancing debt as debt matures.

To prohibit public authorities from hedging, they will say, could increase the “gamble” they take when they borrow – like prohibiting insurance.

But interest rate swaps that shielded borrowers in the boom turned out to be big lossmakers in the great financial crisis from 2008 on. Engineered to protect against rises in interest rates they turned into major lossmakers when interest rates plunged.

Carelessness and fraud

And many theoretically defensible swaps and auction rate securities seem to have been carelessly written, some were fraudulent. In addition many contracts just fell apart when the bond insurers lost their required credit rating. That risk had not been properly explained or considered.

Brian Chase an investment consultant and former Nossaman and Carlyle Group staffer says: “Frequently, we have seen that the public sector does not in fact understand the financial risks it has taken through its use of interest-rate swaps and auction-rate securities.”

Elaine Greenberg, top SEC official in Pennsylvania, has said there is widespread pay-to-play corruption and bid fixes in bond underwriting and derivatives transactions in that state.

Small cliques seem to get the great bulk of the profitable work of underwriting and legal and financial advice.

Size of debt may be biggest issue

But the biggest question of all may lie not in hedging via interest rate swaps but in the absolute size of the Turnpike’s borrowing relative to its income stream and its obligations.

How sound is the basis for the Turnpike’s huge borrowing – $6.11 billion at end December last year? Can the Turnpike realistically deliver on the fixed Act 44 obligations it has assumed to support unpriced and loss-making transportation elsewhere in the state?

Public authorities held to lower standard of liability disclosureGreenberg of the SEC told Business Week recently that public authorities like the Turnpike have not been required to fully disclose the liabilities they are taking on nearly as fully as investor owned companies.

So while they provide sexy subject matter for gubernatorial campaigning the interest rate swaps may turn out to be a trivial side issue compared to the fundamental question of whether the borrowing of these many billions is justified. Some say it isn’t clear that the proceeds of the borrowings been productively invested to generate cash flows five and ten years off to service that huge debt.

TOLLROADSnews 2010-04-09

Tea Parties bring critical mass to fiscal issues

TURF speaks to Dallas Tea Party
By Terri Hall
San Antonio Express-News blog
April 19, 2010

Though much maligned in the press, the Tea Party movement has the potential to bring much-needed attention to a host of fiscal issues that, if left unchecked, threaten to bankrupt the country. I was invited to speak at the Dallas Tea Party event at Quick Trip Stadium in Grand Prairie for its April 15th Tax Day anniversary, along with national talk radio host Mike Gallagher and Dallas talk radio hosts Chris Krok and Jeff Bolton. Fourteen-thousand concerned citizens from all walks of life, many political stripes, and of all colors gathered to express their concerns with a host of fiscal issues from government spending to unsustainable debt across a broad range of policies.

TURF Founder, Terri Hall, with national radio talk show host Mike  Gallagher

The new version of toll roads using “innovative financing” relies on heaps of multi-leveraged public debt (the same risky financial schemes that brought us the mortgage crisis and bailout era) and has caused our infrastructure to teeter on the edge of insolvency. Many in the DFW area heard for the first time about this new-fangled version of toll roads (totally different than the traditional turnpikes that have been in North Texas for decades) that co-mingle public and private funds and ultimately sells America’s public infrastructure to the highest bidder on Wall Street in order to generate quick cash for government. Think of it as a government bailout as a result of decades of out of control spending and a lack of properly funding legitimate priorities like public infrastructure.

Hall - Tea  Party.JPG

The crowd response was nothing short of amazing with shouts of “who’s responsible for this?” and “what a rip-off,” along with other sentiments of fiscal disgust. North Texas is under an all-out toll road assault, with virtually every new lane slated to be tolled and close to 600 miles of planned toll lanes. All three of the current public private partnership (PPP) contracts that will sell our roads to foreign companies are in North Texas: the DFW Connector, North Tarrant Express/I-820, and LBJ/I-635. These deals will charge extremely high tolls, 75 cents PER MILE, which is like paying $17 more for every gallon of gas you buy, just to use a single road!

Hall with Dallas radio talk show host Jeff Bolton

PPP contracts essentially give private corporations the power to levy taxes and it’s also opened the door to eminent domain abuse for private gain. PPPs are yet another example of socializing the losses and privatizing the profits that awakened the sleeping giant in the first place. Your average Joe is not gonna tolerate being taken to the cleaners for government irresponsibility nor for private gluttony.

With DFW and Houston comprising the largest population centers, their grassroots involvement on toll tax issues are critical to halting toll road proliferation and returning to sensible, affordable, and sustainable transportation policy in Texas. Clearly our elected officials have ignored the public outcry against tolls in Austin and San Antonio for years. But with the rise of the Tea Parties and the newly awakened electorate they represent, a massive, organized coalition can now be mounted against runaway toll taxation.

Fasten your seat belts, we’re in for a wild ride in the next legislative session!

Read the complete text of TURF’s Dallas Tea Party speech here.

Perry breaks state law, fails to report stimulus money

Link to article here.

Perry accepted $2 billion in stimulus money for road projects, 70% of which was slated to go to toll projects in a massive TRIPLE TAX scheme (gas tax, federal taxes to pay for stimulus, then another toll tax to use the road). It’s inexplicable that anyone would call this man a “fiscal conservative.”

Perry ducked state law on disclosing some stimulus money
Spending report was not posted on Web site as required.
By Laylan Copelin
AMERICAN-STATESMAN STAFF
Published: 9:39 p.m. Tuesday, April 13, 2010
Gov. Rick Perry has always publicly stiff-armed federal stimulus dollars, even as he accepted billions to balance the state budget and tens of millions that he could award to constituents.

He even ignored state law and his own executive order that require all state agencies and institutions of higher education to be “accountable and transparent” by posting their stimulus spending reports on their Web sites.

Until Tuesday, that is.

After a reporter’s inquiry, the Governor’s Criminal Justice Division began posting reports, some of them months old, on its Web site. Perry’s spokeswoman, Katherine Cesinger, would not elaborate on why the governor chose not to follow the law that he expected other state officials to follow.

State Rep. Jim Dunnam, D-Waco , who leads the House committee overseeing federal stimulus programs in Texas, said Tuesday that he isn’t surprised by the governor’s actions.

“Unfortunately, it’s a pattern of the governor publicly distancing himself from the federal stimulus while accepting the majority of the money,” Dunnam said. “They took $16 billion, and most Texans think they haven’t taken any of it.”

Last year, Perry accepted about $16 billion in federal stimulus money so lawmakers could avoid deep budget cuts or tax increases. But he refused to accept smaller amounts for unemployment benefits and education programs, saying that money came with “strings attached,” an argument his critics rejected.

Perry’s failure to file reports on the governor’s Web site involves only the money administered directly through his office.

The governor’s office has received about $92.2 million of the $110 million it requested from the federal government for law enforcement purposes. About $81 million has been obligated and $6.8 million disbursed, according to the Comptroller of Public Accounts, which maintains weekly reports of the state’s stimulus activities.

Perry’s office submitted the weekly summaries with totals, but Texans looking for greater detail were directed from the weekly report back to the governor’s Web site to find a report from 2006 — three years before the stimulus program existed.

Citizens looking for spending details would have had to navigate the federal site,

recovery.gov, where all agencies, including the Texas governor, must post reports.

The Legislature demanded more disclosure than posting to the federal site. The appropriations act requires each state agency and higher education institution to post stimulus reports on their state Web sites for easier public access.

In his Aug. 25 executive order, Perry cited those requirements when he directed state officials “to maintain transparency and accountability in all cases.” He also required every agency to designate a representative “to maintain a flow of current information relating to the receipt, deployment, management and use of funds received by the state and any of its political subdivisions or contractors” under the stimulus program.

The governor’s office has been hands-on in administering the money, with senior adviser Mike Morrissey running meetings with agency officials once or twice a week until recently.

The information on state Web sites varies. The Texas Department of Transportation has a “project tracker” that shows each construction project, contractors, amounts being spent and location. It can be viewed at apps.dot.state.tx.us/apps/project_tracker/stimprojects.htm.

Even the tiny Texas Commission on the Arts has a link to all National Endowment for the Arts awards in Texas at www.nea.gov/grants/recent/09grants/states2/arra.php?STATE=TX.

The public can view the efforts by the governor’s office at governor.state.tx.us/cjd.

Goldman Sachs accused of defrauding investors

Link to article here.

Goldman Sachs has been a key player in advising governments as well as private investors on infrastructure/toll road deals called public private partnerships. They’re instrumental in many deals in Texas and have swarmed our highway department, infecting them with their fraudulent schemes that exploit taxpayers. Perhaps if justice is truly served in this case, we may rid ourselves of at least one major canker in this fight.

SEC accuses Goldman Sachs of defrauding investors
Posted Friday, Apr. 16, 2010
By MARCY GORDON
AP Business Writer

WASHINGTON — The government on Friday accused Wall Street’s most powerful firm of fraud, saying Goldman Sachs & Co. sold mortgage investments without telling the buyers that the securities were crafted with input from a client who was betting on them to fail.And fail they did. The securities cost investors close to $1 billion while helping Goldman client Paulson & Co., a hedge fund, capitalize on the housing bust. The Goldman executive accused of shepherding the deal allegedly boasted about the “exotic trades” he created “without necessarily understanding all of the implications of those monstrosities!!!”

The civil charges filed by the Securities and Exchange Commission are the government’s most significant legal action related to the mortgage meltdown that ignited the financial crisis and helped plunge the country into recession.

The news sent Goldman Sachs shares and the stock market reeling as the SEC said other financial deals related to the meltdown continue to be investigated. It was a blow to the reputation of a financial giant that had emerged relatively unscathed from the economic crisis.

Goldman Sachs denied the allegations. In a statement, it called the SEC’s charges “completely unfounded in law and fact” and said it will contest them.

The SEC is seeking to recoup the money lost by investors and impose unspecified civil fines against Goldman Sachs and the executive, Fabrice Tourre. The SEC could enter into settlement negotiations over the amount if Goldman changed its stance and decided not to fight the charges in a trial.

The SEC said Paulson paid Goldman roughly $15 million in 2007 to devise an investment tied to mortgage-related securities that the hedge fund viewed as likely to decline in value. Separately, Paulson took out a form of insurance that allowed it to make a huge profit when those securities’ value plunged.

The fraud allegations focus on how Goldman sold the securities. Goldman told investors that a third party, ACA Management LLC, had selected the pools of subprime mortgages it used to create the securities. The securities are known as synthetic collateralized debt obligations.

The SEC alleges that Goldman misled investors by failing to disclose that Paulson & Co. also played a role in selecting the mortgage pools and stood to profit from their decline in value. Two European banks that bought the securities lost nearly $1 billion, the SEC said.

“Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” SEC Enforcement Director Robert Khuzami said in a statement.

But Goldman said in a statement that it never mischaracterized Paulson’s strategy in the transaction. It added that it wasn’t obliged to “disclose the identities of a buyer to a seller and vice versa.”

The charges name only Goldman Sachs and Tourre, who was a vice president in his late 20s when the alleged fraud was orchestrated in 2007. Tourre, the SEC said, boasted to a friend that he was able to put such deals together as the mortgage market was unraveling in early 2007.

In an e-mail to the friend, he described himself as “the fabulous Fab standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!”

Tourre, 31, has since been promoted to executive director of Goldman Sachs International in London.

Stanford University spokeswoman Elaine Ray said a student by the name of Fabrice Tourre received a master’s degree in management science and engineering from the school in 2001.

A call to a lawyer for Tourre, Pamela Chepiga at Allen & Overy LLP, wasn’t returned.

Asked why the SEC did not also pursue a case against Paulson, Khuzami said: “It was Goldman that made the representations to investors. Paulson did not.”

Paulson & Co. is run by John Paulson, who reaped billions by betting against subprime mortgage securities. He is not related to former Treasury Secretary Henry Paulson, a former Goldman CEO.

John Paulson was among the first on Wall Street to bet heavily against subprime mortgages. His firm earned more than $15 billion in 2007, and he pocketed $3.7 billion. He has since earned billions more, largely by betting against bank stocks and then buying them back after their shares plunged.

In a statement, Paulson & Co. said: “As the SEC said at its press conference, Paulson is not the subject of this complaint, made no misrepresentations and is not the subject of any charges.”

Goldman, founded more than 140 years ago, built a reputation as a trusted adviser to investment banking clients and for sending top executives into presidential Cabinet posts.

In recent years, it shifted toward taking more risks with its clients’ money and its own. Goldman’s trading allowed the firm to weather the financial crisis better than most other big banks. It earned a record $4.79 billion in the last quarter of 2009.

The complaint filed in federal court in Manhattan “undermines their brand,” said Simon Johnson, a professor at the Massachusetts Institute of Technology and a Goldman critic. “It undermines their political clout. I don’t think anybody really values being connected to Goldman at this point.”

He continued: “There are many people who – until this morning – thought Goldman Sachs was well-run.”

The SEC’s enforcement chief said the agency is investigating a wide range of practices related to the crisis. The prospect of possible legal jeopardy for other major financial players roiled the stock market.

Goldman Sachs shares fell more than 12 percent Goldman and lost $14.2 billion in market capitalization. The Dow Jones industrial average finished down more than 125 points.

The SEC appears to be taking a particularly aggressive approach with Goldman. Typically, cases are resolved by firms agreeing to a settlement before the charges are made public, said John Coffee, a securities law professor at Columbia University.

“The SEC has changed its style,” Coffee said. “They wanted to tell the world what they thought Goldman had done wrong.”

The charges come as lawmakers seek to crack down on Wall Street practices that helped cause the financial crisis. Congress is considering tougher rules for complex investments like those involved in the alleged Goldman fraud.

President Barack Obama vowed Friday to veto a financial overhaul bill that doesn’t regulate mortgage-backed securities and other so-called derivatives. Legislation in Congress would for the first time regulate derivatives, whose value depends on an underlying asset, such as mortgages or stocks. Senate Republicans oppose the bill.

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, is “pleased that the SEC is departing from the lax enforcement of the Bush administration and is returning to the SEC’s proper role of protecting investors in the marketplace,” spokesman Steven Adamske said.

The biggest loser in the alleged fraud was ABN Amro, a major Dutch bank, and the Royal Bank of Scotland, which acquired major portions of it in 2007. The SEC said the Royal Bank of Scotland paid Goldman $841 million to unwind ABN transactions.

IKB Deutsche Industriebank AG, a German commercial bank, lost nearly all its $150 million investment, the agency said. Most of the money the banks lost went to Paulson in a series of transactions between Goldman and the hedge fund, the SEC said.

IKB was an early casualty of the financial crisis. It issued a profit warning in 2007 saying it had been hurt by U.S. subprime mortgage investments. IKB was sold in 2008 to Dallas-based Lone Star Funds.

Ed Trissel, a spokesman for Lone Star Funds, declined to comment on the case.

The SEC charges come after Goldman Sachs denied last week it that bet against clients by selling them mortgage-backed securities while reducing its own exposure to them.

In an annual letter to shareholders, Goldman said it began reducing its exposure to the U.S. mortgage market in late 2006.

AP Business Writers Alan Zibel in Washington, Stevenson Jacobs in New York and Ashley M. Heher in Chicago contributed to this report.

New diversion of road tax discovered, citizens demand end to diversions

Link to article here.

Anti Toll Groups Would Back Gas Tax Increase
but only if ‘diversions’ from gas tax fund are ended
By Jim Forsyth
Friday, April 16, 2010

Leaders of the anti toll road movement in Texas are quietly notifying state lawmakers that they would support an increase in the state gasoline tax as an alternative to toll roads, but they are demanding some concessions in return, 1200 WOAI news reports.

Terri Hall, founder of the anti toll group Texans Uniting for Reform and Freedom, says an increase in the gasoline tax would be preferable to ‘out of control’ creation of toll roads.

The Texas gasoline tax, which is 20 cents a gallon, hasn’t been raised since 1991, and the move to more fuel efficient cars is drastically cutting into the amount of money available for highway construction and maintenance, which has led to talk of toll roads.

“The studies we’ve seen would show that somewhere between eight and ten cents a gallon would meet out road needs, without having to toll our roads,” Hall said.

Tax increases are very controversial in the Texas Legislature, with the Republican leadership and Governor Perry repeatedly indicating that they would oppose tax increases.

Hall says she would back the gas tax increase if lawmakers agree not only to completely end the controversial practice of ‘diverting’ gas tax revenue to pet projects in their districts, and if lawmakers consider using the state automobile sales tax for highway projects.

“We all pay vehicle sales tax when we buy a car, and that money is now going into general revenue, instead of to roads,” Hall said.  “My understanding is that there is $4 billion a year that we could put back into roads, without having to raise any taxes.”

The legislature is expected to be facing a massive deficit, as much as $15 billion, when the next session begins in January, and Hall concedes that with the state scrambling for general fund revenue, taking billions of dollars out of the general fund may not be politically feasible.