Source: Article

NOTE: This is the second in a three-part series on the transportation & property rights wrap-up to the 84th legislative session of the Texas Legislature.

Success can be measured as much by what didn’t pass as what did pass.

While anti-toll advocates may not be wholly pleased with their lack of progress in getting their bills through the 84th session of the Texas legislature that wrapped-up yesterday, they were successful in stopping many other bills that would have sailed through in prior sessions under former Governor Rick Perry‘s pro-toll leadership. Incoming Governor Greg Abbott‘s campaign promise to fix Texas roads without raising taxes, fees, or tolls immediately changed the atmosphere at the Capitol.

Indeed, during one of his debate’s with Democrat Wendy Davis he emphasized, “My plan does not involve any toll roads, period. I’m not interested in adding toll roads in my plan.”

However, despite Abbott’s pledge and focus on ethics and diminishing lobbying by former legislators, the influence of high-powered lobbyists, many hired by local governments and big business interests seeking special favors, continues to compromise pro-taxpayer and property rights bills despite changes at the top.

The Hall of Shame the taxpayers stopped:
• Several bills to privatize and toll public highways, known as public private partnerships (P3s). Senator Kirk Watson, Rep. Eddie Rodriguez attempted to sell-off I-35 to a private toll operator, and Senator Eddie Lucio and Rep. Mando Martinez attempted to sell-off FM 1925 in Cameron and Hidalgo counties. All bills would have extended the expiration date of the 23 existing authorized P3s until 2019.
• Watson and Rep. Celia Israel’s bill (SB 270, HB 594) to permanently force taxpayers to pay to reduce truck toll rates to the auto toll rate through taxpayer subsidies on the struggling SH 130 tollway.
• SJR 62 authored by Senator Robert Nichols would have gut any attempts at toll cessation and changed the Texas Constitution to permanently authorize system financing, a Robin Hood raid of toll revenues from one road to prop-up another necessitating the toll stay in place in perpetuity.
• Israel’s bill, HB 1324, to impose exclusive bus lanes on the shoulders of highways in Bexar, Travis, and Tarrant counties while autos remain stuck in traffic or are forced to pay tolls for congestion relief. Passed House, went nowhere in Senate.
• HJR 109 by Rep. Joe Pickett to give counties the authority to establish Transportation Reinvestment Zones that use local property tax appraisal increases (and sales taxes within the zone) to pay for state highway projects including toll projects (a double tax).

Property rights a mixed bag
Eminent domain and roads go hand in hand, and eminent domain in the hands of private companies is one of the worst infringements on private property rights imaginable. HB 565 authored by Rep. Cindy Burkett (Senator Bob Hall filed a similar bill in the Senate – SB 444) to strip a grandfathered private toll corporation of its eminent domain authority would have effectively stopped the controversial Blacklands toll road east of Dallas. But this bill was watered down to allow the company, Texas Turnpike Corporation (TTC), to still enter into a hybrid deal like a public private partnership. Toll rates on P3s are in excess of 80 cents per mile, and use public money to subsidize the potential losses of the private toll operator. TTC hired the lobby firm headed by the former Transportation Commission Chairwoman under Perry, Deirdre Delisi, whose mother is also a former legislator.

SB 1812 authored by Senator Lois Kolkhorst requires the creation of a current eminent domain database and that it be made available to the public in a searchable format. SB 18 that passed in 2011, required all entities with eminent domain to report that authority to the Texas Comptroller by December 31, 2012, or lose their authority. Over 5,000 entities registered. However, there has been no requirement for new entities to register since then, and there is no current database of legitimate condemners available to the public. Lawmakers cannot begin to restrain eminent domain authority until it’s fully known what entities have eminent domain power, including how many private entities wield this government condemning authority.

Kolkhorst’s SB 474 was successfully tacked onto HB 3474 (by Rep. Garnet Coleman) to allow landowners to recoup their legal fees from eminent domain proceedings if the initial offer was 20% below the final value of the land as determined by the court. This would force condemning entities to make truly bona fide offers at market values instead of low-balling landowners and making them incur expensive legal fees in order to get the true market value price for their land. However, the bill ultimately died.

SB 709 by Senator Troy Fraser is one of the worst anti-property rights bills to pass this session. It makes it harder for landowners to win a contested case hearing when neighboring developers try to harm them and their use and enjoyment of their property. Special interests like the Texas Association of Business, who want to speed up their railroad job of trampling on property rights (everyone but theirs, of course) lobbied hard for this bill citing that the contested case hearing process is being abused by environmental groups who are outside local communities who use it to stop facilities they don’t like.

But the bill went much further than that. It made the likelihood of affected landowners prevailing in a contested case hearing before a judge much slimmer since it shifts the burden of proof from the developer onto the landowner. Unless a property owner has deep pockets to hire legal counsel and scientific experts to prove their case, they’re unlikely to stop harm being done by neighboring developers.

HB 632 by Rep. David Simpson was narrowly defeated, by a vote of 77-59, which would have blocked any transfer of water from happening without that community’s consent. Many rural Texans are under threat by plans to transfer large amounts of local water to urban areas. Simpson’s bill would have given locals say before their water gets sent elsewhere.

Another threat to rural Texas is the plan by Japanese private developer, Texas Central Railway, to build a high speed rail line between Dallas and Houston. Senate rider #48 was added to the budget by Charles Schwertner to block any state funds from going to subsidize the controversial rail line. However, it failed to stay in the final bill after some of the most powerful lobbyists in the state fought it. This despite the claim by the company in Senate Transportation Committee testimony that it would not seek any state funds for its private project.

Source: Article

NOTE: This is the first in a three-part series on the transportation wrap-up to the 84th legislative session of the Texas Legislature.

The 84th session of the Texas legislature just concluded yesterday, but the fallout will be felt by taxpayers for decades to come. Over 75 bills were filed to replace or curtail tolling or to make it more transparent and accountable. When factoring in property rights and efforts to restrict eminent domain abuse, the total came to 96. So with a pipeline full of bills should have sent a strong message to leadership that the taxpayers sent elected officials to Austin to significantly curb if not stop toll roads. But the momentum quickly came to a halt when only a handful of anti-toll bills got a hearing, and very few key bills passed. Of those that did, most were watered down.

Transportation and toll road concerns have been front and center for many years as a toll road onslaught has taken hold across the state, but Texans overwhelmingly elected a new Governor, Greg Abbott, last year who campaigned against toll roads. He emphasized in the debates, “My plan does not involve any toll roads, period. I’m not interested in adding toll roads in my plan.”

So the expectation of voters is that Abbott is going to stop the march of toll roads. But Abbott’s sole focus during the session was getting additional funds to the highway department and restricting those funds to non-toll projects. Meanwhile, 100% of the state highway fund (comprised of gasoline taxes and registration fees), can and is being used to subsidize loser toll projects. In fact, over $6 billion has already been diverted to toll projects, which is a Texas-sized double tax.

The Texas GOP platform and grassroots advocacy groups want the flow of public money subsidizing toll roads to stop as well as to remove the toll once the road is paid for (ie -once the debt is retired). But neither the House nor Senate moved those bills. Only three of the grassroots’ top seven priorities made it through.

Rep. Jeff Leach tried to protect taxpayers from double taxation by offering an amendment to the budget to block state funds from from going to toll projects, but it failed by a vote of 89-52 (even after lawmakers watered it down). The Texas Department of Transportation (TxDOT) has a one trick pony that works most every time. They send out their troops to tell legislators if they stop the flow of public money to toll roads, all their projects will come to a screeching halt since virtually all new capacity is slated to be tolled, and these projects are using mounds of state money to do it. Leach filed an amendment to HB 13 to do the same, but it was blocked from even being heard by Speaker Joe Straus and his parliamentarian through executive fiat (outside the normal rules for how amendments get considered).

Senator Don Huffines who filed SB 1182 as well as a constitutional amendment to protect the highway fund from being raided for toll roads, also tried to tack it onto another bill (HB 13 or HB 20) in the Senate, but Lt. Gov. Dan Patrick ultimately failed to support it and Huffines was told it lacked the votes to pass. Without public subsidies, 99.9% of all currently planned toll roads could not be built. It would force the projects to be done as non-tolled expansion.

The big funding bill that did pass is SJR 5, which is a constitutional amendment that will come before Texas voters November 3. It was authored by Senate Transportation Committee Chair Robert Nichols to dedicate $2.5 billion of the general sales and use tax (above the baseline of $28 billion), and thirty-five percent of the vehicle sales tax (above the baseline of $5 billion) to non-toll highways. The general sales tax won’t be implemented until 2017, and the vehicle sales tax dedication won’t kick in until 2019.

Both provisions are subject to the whims of the legislature and can be suspended with a two-thirds vote, however, they cannot reduce the allocations below 50% of the anticipated amount. The sales tax dedication sunsets in 2032 and the vehicles sales dedication sunsets in 2029. A majority vote of the legislature can extend the dedication in ten year increments.

The far better version of this bill, HB 2686, by Rep. Matt Shaheen would dedicate 100% of the vehicle sales tax to the highway fund immediately and permanently. But after the legislature got a hold of SJR 5, it’s been watered down to the point of no longer being a reliable long-term revenue source.

Abbott campaigned on dedicating a portion of the vehicle sales tax to highways and made it an emergency item in his State of the State address. The purpose is to get a long-term, reliable revenue source for highways since, by law, TxDOT has to show how it will fund projects 25 years into the future and it cannot put a project into the long-range plan until it shows how it will it be funded.

Gasoline taxes alone have not been adequate to fund new capacity for quite some time, but fearing the wrath of voters if they raised the gas tax, the legislature at the cheerful insistence of former Governor Rick Perry, turned to toll roads as their get out of jail free card. However, paying tolls is ghastly more expensive (15 – 80 cents a mile compared to 1-2 cents a mile for a gas tax funded road) than any gas tax increase, so the punitive, escalating toll taxes have caused a backlash. The Texas Transportation Institute found in a survey last fall that of 15 possible transportation solutions, Texans ranked toll roads dead last.

Those pesky gas tax diversions
Another reason for the funding shortfall, which is a particularly sore spot with taxpayers, has been the legislature’s persistent raid of gas taxes for non-road purposes. So this session, the legislature did put an end to most diversions, funding the Department of Public Safety (DPS) through another source. Ending the DPS diversion does add an additional $675 million to the highway fund annually. However, twenty-five percent of the gas tax is still diverted to public education. To end it would require a change to the Texas Constitution, which the legislature is already doing with SJR 5, and they could have included an end (or even a phase out) of the school diversion on the ballot.

Instead of truth in taxation, the legislature chose to use some general sales tax to plug the road funding hole in SJR 5, when they could have used that same sales tax (which already funds schools) to replace the lost school funding in order to send 100% of the gas tax to the highway fund as taxpayers expect. This is a much simpler and more transparent approach, but that was rejected in favor of a complicated new formula the average citizen cannot possibly trace to the original tax.

Major boost to road funding
SJR 5 together with Prop 1 that passed in 2013 and was approved by voters last year, and the partial end to gas tax diversions, means a total net gain of $5 billion a year in new road funding is headed to the highway fund. By anyone’s measure, that’s the most significant infusion of highway money in a generation. You’d think this would stop the threat of toll roads in itself. But judging by the last two Texas Transportation Commission meetings chaired by Abbott’s new Commission Chair and former legislator Tryon Lewis, it’s business as usual at TxDOT. The only state funds approved by the Commission ($418 million) have gone to two toll roads – not freeways. Maybe he didn’t get the memo about Abbott’s campaign pledge.

HB 122 by House Transportation Chairman Joe Pickett will stop TxDOT from issuing new debt from the Texas Mobility Fund, a fund that almost exclusively subsidizes toll projects. Rep. Ron Simmons successfully amended the bill on the floor to block those funds from being used on toll roads (but only for two years). But even that wasn’t without a challenge. TxDOT’s one trick pony was trotted out once again, threatening lawmakers the amendment would stop all their projects. Pickett had to call in Chairman Lewis to call off the dogs and convince House members that the sky wouldn’t fall and projects would not stop if they restricted Texas Mobility Funds to non-toll roads. It sailed through the Senate with the amendment in tact.

Elimination of some toll roads coming?
Pickett also authored HB 2612 which requires TxDOT to give a report to the legislature on the possible elimination of some currently open toll roads. It will lay out a plan to accelerate the pay-off of toll debt or buy them out in a lump sum sooner. It does not apply to tollways funded completely with bond debt by another entity, like the Harris County Toll Authority or North Texas Tollway Authority (NTTA). It only applies to roads with state funding – not all toll roads.

So while passage of HB 2612 is progress, it doesn’t tell the whole story. Leadership in both chambers blocked the bill to eliminate all tolls once the debt is retired, SB 485 by Senator Lois Kolkhorst (and the House companion bill HB 1734 by Shaheen). SB 485 would also prevent most current toll projects from advancing due to the restrictions on Robin Hood financing schemes that rely on perpetual toll revenues from one road in order to finance and prop-up others that can’t pay for themselves known as system financing. HB 2612 by contrast requires a plan to eliminate some tolls, doesn’t end system financing, and does not prevent the current tsunami of planned toll roads across Texas.

Link to article here.

Grassroots ask lawmakers for ‘Toll-free Texas,’ unveil reform package
By Terri Hall
March 25, 2015
Examiner.com

Over one-hundred Texans fed-up with toll roads popping-up everywhere converged on the Texas state capitol Monday to unveil a package of toll road reforms, like taking the toll off the road when it’s paid for and preventing gas taxes from being used to build or bailout toll roads – a double tax. Rep. Scott Sanford (R – Collin) initiated the citizens lobby day sponsored by Texans for Toll-free Highways, Texans Uniting for Reform and Freedom (TURF), Texas Eagle Forum, Grassroots America, Lt. Governor’s Grassroots Advisory Committee Subcommittee on Transportation, and Texas Patriots, PAC. The groups advocated fiscal responsibility first when it comes to transportation.

With the infusion of over $1 billion a year in new cash from the state’s Rainy Day Fund with passage of Proposition One last November, citizens want to see toll roads restrained as the legislature contemplates sending more money to the Texas Department of Transportation (TxDOT).

The grassroots groups’ reform package includes:
1) Prohibit TxDOT from using gas taxes or any other public money under its control to build, bailout or provide loan guarantees for toll roads. If you use tax money to build it, it should be a freeway, not a toll road. Not one penny of tax money should support a toll road. (SJR 43/SB 1182 – Huffines)
2) Mandate tolls come off the road it’s paid for (when the debt is retired). This would also repeal ‘system financing,’ or Robin Hood theft of toll revenues from one corridor to build or finance another, necessitating the toll stay in place, leading to perpetual taxation in conflict with Art I, Sec 26 of Texas Constitution. (SB 485/HB 1734/HB 3725 – Kolkhorst, Shaheen, Sanford)
3) Remove all loopholes in statute that allow free highway lanes to be converted into toll lanes and prevent the downgrade of free main lanes to frontage roads, which is highway robbery and double taxation. (HB 1835/SB 1238/SB 937 – Sanford, Taylor, V., Kolkhorst)
4) Strip private toll corporations of their eminent domain authority. No Texan should lose their land so another private party can make a profit off of it. (HB 565/SB 444/HB 1004 – Burkett, Hall, Davis)
5) Ban any and all forms of public private partnerships (called Comprehensive Development Agreements in Texas) that charge prohibitively high tolls and represent corporate welfare, cronyism, punitive taxation. (Strongly oppose – SB 269/HB 3899/HB 1968/HB 2577/SB 1591 Watson, Rodriguez, Martinez, Lucio)
6) End all diversions of the gas tax and dedicate vehicle sales tax to the state highway fund. (HB 1/SB 1/SJR 5/SB5 – Otto, Nelson, Nichols)

Working toward a ‘Toll-free Texas’
Sanford made national news with the help of his colleagues Rep. Matt Shaheen and Rep. Jeff Leach when they filed nine bills they dubbed ‘Toll-free Texas’ that address the highway funding shortfall, as well as reduce, and eventually eliminate, toll roads. The bills also aim to put elected officials in the driver’s seat on toll decisions (HB 1183/HB 1834 – Sanford, Shaheen), and prevent unaccountable taxation. All told, there are 78 pieces of legislation that address restraining toll roads (and the toll bureaucracies) or finding ways to properly fund the highway department to end the reliance on tolling.

Some reform bills seek to make toll authorities and toll road financing more transparent and accountable, like requiring transportation-related entities to be comprised of elected officials (HB 2601/SB 748 – Larson, Campbell) and require them to broadcast their meetings (SB 1152/HB 3593 – Hall, Burkett). Shaheen wants to prohibit transportation lobbying by toll/transportation boards (HB 1257 – Shaheen), and Sen. Bob Hall and Sen. Lois Kolkhorst want to make traffic and revenue studies that forecast toll revenues public (SB 939/SB 1046/HB 2620 – Kolkhorst, Hall, Burkett). Currently, state statute allows this vital information to be kept secret from the public.

Sanford also introduced legislation to require voter approval of all toll projects (HB 3725). Regional Mobility Authorities are particularly unpopular. Rep. Lyle Larson wants to subject them to sunset review (HB 528). Sen. Don Huffines filed a bill to audit Regional Mobility Authorities (SB 1184/HB 3114 – Huffines, Dale), while Hall goes a step further and seeks to abolish them altogether (SB 1150). The grassroots welcome and applaud the tidal wave of proposed transportation and toll road reforms introduced this session.

Over the last 14 years, lawmakers gave these agencies new tools and a blank check with no real oversight. With tolls everywhere and the cost of driving escalating beyond Texans’ ability to pay, this undue tax burden has reached the breaking point, and taxpayers are demanding transportation decision-making be more transparent and accountable to taxpayers. Their top priority is ensuring not one more penny of tax money gets dumped  into loser toll projects that can’t pay for themselves.

Cathie Adams, President of Texas Eagle Forum, also emphasized the need to restrict road taxes to non-toll highways, “Texans want to make sure that their tax dollars are spent on building and maintaining their roads. We are weary of those who’d rather turn transportation funds into money making schemes for foreign investors.”

JoAnn Fleming, Founder of Grassroots America, drills down into the cost to taxpayers, ”Grassroots America strongly supports a toll-free Texas. It’s time to end the corporate welfare schemes that put taxpayers on the hook for toll road losses while the private investors are guaranteed profits. Using massive amounts of tax dollars and debt to prop up toll projects that can never pay for themselves is unethical and dishonest, but multi-leveraged tolling is not the only taxpayer abuse that must end this session.

“The Transportation Commission and the Texas Department of Transportation must be reformed. Simply shoveling more money into a broken, untrustworthy system will never fix it.Texans deserve the highest quality highways constructed at the very best price. Anything less is a failure.”

Chair of the Transportation Subcommittee to the Lt. Governor’s Grassroots Advisory Committee, Michael Openshaw, put it this way, “Debacles like SH 130 in Austin and the shortfalls at the North Texas Tollway Authority demonstrate the fiscal catastrophes of trying to get ‘innovative’ in tollway financing.  Add to that the absolutely ludicrous new trend of turning the failed attempt at social engineering represented by HOV lanes (which changed no one’s behavior) now being converted to a variable toll lane for profit, fosters financial elitism and turns already paid-for lanes into money makers.”

Lt. Governor Dan Patrick adds, “As I’ve said many times in the past, we’ve relied too heavily on debt and tolls. It’s time we give transportation funding the priority it deserves and dedicate $5 billion in transportation revenue to fund transportation spending. Dedicating this revenue available through Senate Bill 5 will allow us to return to a pay-as-you-go system for our roadways and steer us away from past practices.”

“The citizen groundswell against toll proliferation in Texas is heartening to see. Texans unfortunately have experienced firsthand how interstate tolling can stifle economic productivity and tax-away prosperity, unfairly penalize drivers with fines for tolls they don’t owe, and restrict access to roads paid for by the public. The efforts of Toll-Free Texas are commendable and reflect a broader awareness by people that tolls are the worst possible way to fund roads,” agrees Julian Walker, spokesman for Alliance for Toll-free Interstates.

“Texans have stood up against toll roads time and time again, and I’m proud to be a longtime friend to TURF and like-minded groups. Property rights and fiscal transparency should always take priority when we plan our roads in Texas,” Kolkhorst affirmed.

Reflecting the sea change against tolling, Senator Hall stated, ”Under the old pay-as-you-go concepts, toll lanes were once a viable option for funding road construction. However, with the introduction of private equity funding and exotic funding schemes, they have become a double tax on the public and a tool for governments to control population behavior.”

“Texas has been a beacon of job creation and innovation, which has led to rapid population growth in our state. But this growth has strained our transportation infrastructure. We must provide proper funding of our roads for Texas families and businesses without burdening them with higher Taxes. Toll roads are not the answer.  The government shouldn’t charge Texans twice to drive on their roads. Texans made their voices clear with the passing of Proposition 1, and we need to step up and fund our roads without increased taxes, tolls, and fees. We need the best roads in America.  We have neglected road funding for 30 years. It is past time that the Texas Legislature made it a priority to fund our roads,” advocates Huffines.

“Our Texas drivers and taxpayers demand a toll-free future. It is wrong to continue to subject them to the ‘double tax’ of transportation taxes and tolls. It should be our commitment to deliver toll-free highways for our constituents,” argues Shaheen.

“Texas Taxpayers expect and deserve a more honest and open government that properly addresses transportation infrastructure – one of the core functions of government –without raising taxes, increasing fees or adding onerous tolls. As Legislators, we have an obligation to invest in our state’s ongoing transportation needs in a responsible and transparent manner in order to sustain our state’s continued economic success and quality of life, and I laud Representative Sanford for his leadership and vision in advancing ‘Toll Free Texas’ for all hardworking Texans,” urges Leach.

Anti-toll advocates seem to have the momentum as both Governor Greg Abbott and the Lt. Governor campaigned on many of these reforms. But taking nothing for granted, the ‘Toll-free Texas’ grassroots coalition sacrificed their time and dime to come to the Capitol anyway, realizing toll entities, local governments, and transportation boards want the status quo and will lobby hard to water-down and defeat needed reforms. But given the support of the Governor, Lt. Governor, and Transportation Committee members, the winds of change are blowing in favor of taxpayers.

Link to article here.

Cintra, Macquarie file bankruptcy on Indiana Toll Road
By Terri Hall
Examiner.com
September 23, 2014

Yesterday, the two private, foreign corporations that tookover the Indiana Toll Road in 2006 filed for Chapter 11 bankruptcy. Former Indiana Governor Mitch Daniels sold it to Spanish infrastructure company Cintra and Australia-based Macquarie in a $3.8 billion, 75-year lease that raised eyebrows around the world.

Few thought a road could fetch so much money. It set off a chain reaction of state governments clamoring for quick cash to shore-up shrinking highway funding. Indiana used the money to build other highway projects, forcing Indiana Toll Road users to pay for other road expansion they don’t use. The state has long since spent the money in the short-term, but now the tollway is in long-term trouble.

When Cintra and Macquarie acquired the tollway, they immediately doubled the toll rates. The troubled road has failed to attract enough traffic to repay its $5.8 billion in debt still owed on the project. It shouldn’t surprise anyone that the road is in bankruptcy when they’ve doubled the cost to use it. In a true market approach, if not enough customers are buying your product, you lower the price, not increase it. The hedge fund and distressed debt investors that now own about 80% of the debt have agreed to allow Cintra and Macquarie to restructure their debt or dupe another company into buying it.

Former Penn State Professor Ellen Dannin explains how these companies cash-in even when they go bankrupt in Randy Salzman’s article on public private partnerships (or P3s) in Thinking Highways. She documents how these companies never intend to pay back the debt, but simply ‘mine the the code.’ The corporations first create a separate entity, usually with the road’s name in the title like Cintra and Macquarie did here with their Indiana Toll Road Concession Company, in order to protect the parent company from losses.

They structure the deals to be extremely long leases so that they can depreciate the road as an asset on their taxes. They put very little of their own money at risk as the equity (a mere $800 million out of a total $3.8 billion), and allow the private bond investors and/or taxpayers to take on the risk for the vast majority of its debt. The companies get their own equity back with some profit in just a few short years of collecting tolls. This leaves the other investors to the take the actual losses just about when the road is going to go bankrupt, and often when the road is also in need of major maintenance or rehabilitation.

Is the Texas SH 130 next?
The Indiana Toll Road was already in trouble when Cintra’s Texas State Highway 130 opened in 2012. The tollway was a brand new road, as opposed to an existing tollway, and the only stretch of the controversial international trade corridor known as the Trans Texas Corridor TTC-35 to ever be built. It was intended to serve as an alternative to the perpetually congested NAFTA superhighway Interstate 35. But it, too, is not attracting the level of projected traffic to keep it financially solvent.

Moody’s downgraded Cintra’s debt to junk bond status last year. In June, Cintra failed to make its full debt service payment, placing its SH 130 Concession Company in ‘technical default.’ But this time, Cintra and its minority partner San Antonio-based Zachry American Infrastructure used a $430 million federal TIFIA loan as part of the $1.3 billion debt package, which is backed by the U.S. taxpayer. If the traffic fails to show up (only half of the projected traffic has materialized) and the tollway goes belly-up, the taxpayers go down with the ship.

On Cintra’s two other P3s in Texas, the debt-risk picture gets even more bleak for taxpayers. On the Interstate 635 contract in Dallas, the total project cost was $2.6 billion with $2 billion of that price tag coming from the taxpayers. Cintra landed an $850 million TIFIA loan, $615 million in Private Activity Bonds (also a federal program, special tax-exempt bonds just for these toll road deals), and $490 million in gas taxes from Texas taxpayers.

On the project called the North Tarrant Express in Ft. Worth, Cintra snagged 7 different stretches of highway in one bid. They snagged the development rights which gave Cintra the right of first refusal on all of them under two ‘best value’ bidding procurements (see here and here).

Out of a total cost of $3.7 billion for the projects, $2.8 billion came from the taxpayer: $1.2 billion in TIFIA loans, $673 million in PABs, and nearly $1 billion in other unspecified ‘public funds.’ Segment 3B was 100% funded by taxpayers. All told, $1 billion in just gasoline taxes alone went into the I-635 and North Tarrant Express projects, yet Texans will still be charged a hefty toll (up to 95 cents a mile) to use it.

Cronyism infects P3s
It’s no coincidence the first three Texas P3s went to Cintra. With direct ties to Governor Rick Perry’s office, Cintra’s lobbyist Dan Shelley worked for Cintra, became the chief legislative liaison for Perry in 2005 when he secured the development rights to the Trans Texas Corridor for his former employer, then went back to work for Cintra.

The rest, as they say, is history. Cintra had the rest of its P3s in the bag thanks to Rick Perry’s personal branch of cronyism. Perry gave a keynote address to the International Bridge Tunnel, and Turnpike Association’s annual conference last week in Austin, telling attendees from 18 different countries that, “You have come to what I would suggest is the mecca of innovation on transportation infrastructure.”

Cronyism and putting taxpayers on the hook for private corporations’ losses isn’t ‘innovative,’ it’s a rip-off as old as politics itself. So all eyes will be on Cintra’s SH 130 this December when its next debt service payment is due – both the December payment along with the remainder of its June payment. Perry’s highway department is already supplying the second round of subsidies for the failing tollway by offering another $32 million in public money to allow trucks to use the tollway for the same rate as autos. The first round of subsidies did net an increase in truck traffic, however, as soon as the subsidies stopped, the uptick in truck traffic did, too. The Texas Department of Transportation (TxDOT) is only too happy to keep the subsidies coming since they have a revenue sharing agreement with Cintra.

But absent a major uptick in traffic, even with TxDOT help, the tollway is headed for bankruptcy. TxDOT put it on life support likely long enough for Cintra to at least re-coup its own meager equity of $210 million. However, any further subsidies or bailouts are just putting off the inevitable. Failure to pay its next debt service payment will land Cintra-Zachry in bankruptcy just as Perry’s presidential hopes will kick into high gear. This time, the nation will be watching.

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Link to article here.

Indiana Toll Road Declares Bankruptcy
Spanish-Australian consortium behind the Indiana Toll Road cannot pay its $6 billion in debt obligations.
The Newspaper.com

Public-private transportation partnerships continue to fail around the world. The Spanish-Australian consortium that runs the Indiana Toll Road became the latest casualty seeking Chapter 11 protection in the US Bankruptcy Court for the Northern District of Illinois. On Tuesday, Judge Pamela S. Hollis began hearing the case.

This was supposed to be a model deal for other states to follow. In 2006, then-Governor Mitch Daniels (R) leased the 157-mile Indiana Toll Road to Cintra and Macquarie Bank, operating as the ITR Concession Company, in return for an up-front payment of $3.8 billion. Daniels promised to use that money to build new roads over ten years under a program he called “Major Moves,” while the consortium was allowed to charge motorists steadily rising tolls until the year 2081.

The consortium came up with the cash by borrowing $4.1 billion off the prospect of a “guaranteed” stream of future toll returns. Revenue projections proved to be unrealistic and the consortium was unable to turn a profit.

“The global economic recession and actions undertaken by the United States and various European governments in response thereto have driven interest rates down to historic lows, creating a substantial net obligation under the debtors’ interest rate hedging obligations,” consortium CEO Fernando Redondo told the court in a filing on Sunday. “As a result, absent a restructuring, the debtors will not have sufficient cash flows to service their funded debt obligations… and operate the toll road in a prudent manner.”

Motorists paid $196 million to use the road last year while the consortium owed $193 million in debt service payments. This left just $3 million to cover the cost of 244 employees, maintenance, capital upgrades and related expenses. Reserves were exhausted in December, and the consortium missed a $102 million interest payment in June. With interest, the consortium’s total debt obligation now stands at $6 billion.

The promise of the Major Moves Fund also failed to deliver. The $2.6 billion fund was supposed to have been set aside from the $3.8 billion payment to the state government. It was to grow by 5.25 percent annually from investments. That did not happen, and the money ran dry in 2013, though tolling will continue for at least another 69 years.

The toll road’s failure is not necessarily unexpected or unwanted for the companies involved. Australia’s Macquarie Bank, which indirectly owns half of the consortium, is known as the “millionaire’s factory” with a knack for turning profits from flipping assets and collecting management fees, according to a lawsuit filed in New York (view case).

Such failures are common. The 91 freeway high occupancy toll lanes in Orange County, California was one of the first modern toll projects to go belly up, with the county taxpayers in 2003 paying for more than the original cost of construction to buy out the project. San Diego’s South Bay Expressway went bankrupt in 2010 and was also bought out by county government. California’s Foothill-Eastern Transportation Corridor Agency, which runs the 241, 261 and 133 toll roads in Orange County, has been teetering on the edge of default despite $1.7 billion in subsidies from the taxpayer. The agency in charge of the road refinanced in December, extending the tolling period out to the year 2053.

In South Carolina, the Greenville Southern Connector went bankrupt in 2010. Transurban, the Australian company that runs the Pocahontas Parkway in Richmond, Virginia, wrote down the toll road as having a value of $0 in 2012.

In Australia, the operator of the Clem7 toll road went bankrupt last year, joining the Airportlink toll road, the Lane Cove Tunnel and the Cross City Tunnel. In Spain, ten toll concessions, including the Madrid-Toledo highway, became insolvent in 2012. The Spanish government provided more than a billion euros in bailout money to the tolling firms Abertis, Acciona, ACS, Bankia, Cintra, OHL and Sacyr Vallehermoso.