Category: General

Nadar: Purloining the People's Property

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Published on Monday, August 3, 2009 by CommonDreams.org
Purloining the People’s Property

by Ralph Nader

Every week, Marcia Carroll collects examples of privatization (that is, corporatization of the peoples’ assets). Looking at her website, privatizationwatch.org [1], will either make you laugh helplessly or make your blood boil.

The “off the wall” giveaways at bargain-basement prices of what you and other Americans own eclipses imagination. The latest escapes from responsible government are called “public-private partnerships” and are designed to enable the likes of Morgan Stanley and Goldman Sachs to take over highways, meter-collecting, and public buildings in deals that are loaded with complex tax advantages for the investors.

Here are two of her latest entries. Arizona lawmakers and Governor Jan Brewer are moving to fill a $3.4 billion budget shortfall by selling state-owned buildings. These include not only prisons, but also the House and Senate buildings. That’s the state legislature, fellow Americans! Metaphor becomes reality!

The proposed sale has bipartisan support and will require a leaseback by the buying corporation to the lawmakers with the right to repurchase the premises within twenty years.

The Arizona Republic reports that the deal, which includes 32 state properties, would bring in $735 million in upfront money and entail state lease payments totaling $60-70 million a year.

“We need the money,” State Minority Whip Linda Lopez, a Tuscon Democrat said, adding, “You’ve got to find it somewhere.” Well, why not rent out the backs of the state legislators to their favorite corporate funders? At least the public would get full disclosure of ownership.

“I look at it as taking out a mortgage,” practical Arizona House Majority Leader John McCormish, a Republican, told the Wall Street Journal.

The second item comes from the Denver Post, which reports that the foreign consortium, auto-estradas de Portugal (Brisa), operating the toll road Northwest Parkway under a 99-year lease, objected to improvements on a nearby public road. Under the complex leasing contract, the company could cite the improvements as an “adverse action” reducing toll revenue and the number of vehicles using the parkway. This action would presumably entitle this foreign company to compensation from Colorado taxpayers.

Last year, Pennsylvania Governor Ed Rendell tried to push through the legislature a complex, 75-year lease of the storied Pennsylvania Turnpike in exchange for $12.8 billion up front. All kinds of tax breaks and trap-door evasions filled the 686 page lease. The Governor was prepared, for example, to agree to pay the consortium of foreign investors if new safety measures or emergency vehicles entered the toll road and affected the flow of traffic. Fortunately, the legislature rebelled and blocked the deal.

The Indiana Toll Road was turned over to private companies in 2006. The 75-year lease was for $3.8 billion, which is a little more than the cost to repair the Woodrow Wilson bridge over the Potomac River between Virginia and Washington, DC.

Tolls on the Indiana Toll Road have already doubled and are expected to double again within ten years, according to the Dallas Morning News.

Last year, Mayor Richard Daley of Chicago privatized the city’s parking meters. Chicago’s inspector general concluded that the meters were worth nearly twice as much to the city as the $1.15 billion that the city received under an agreement rushed through the City Council with no civic input. A fourfold increase in meter rates this year has driven many motorists to residential neighborhoods in search of free parking spaces.

Indiana, a leader in outsourcing governmental functions to private corporations, gave the servicing of the state’s welfare program to IBM. According to the Indianapolis Star, error rates since corporatization have risen 17.5 percent last November and 21.4 percent in December.

The myth that corporatization is “better, faster, and cheaper” is falling apart. This year, the IRS announced that it will end the use of private tax collectors after consumer groups argued that taxpayers were subjected to immediate payment demands by private collectors while IRS employees would offer citizens an array of options to help pay their tax debt.

Then there are the corporatized water systems where the companies deliver poorer service at higher cost.

Since the 19th century, privatizing public functions has opened the doors to kickbacks, price fixing, and collusive bidding.

New depths of corruption were reached in Pennsylvania recently when two state judges pleaded guilty to taking bribes in return for sending youths to privately-owned jails.

After reading report after report about the vast, relentless waste, fraud, and abuse arising out of corporate contractors to the Pentagon in Iraq, why should readers be surprised at this domestic scene whereby taxpayers pay through the nose for corporations to govern them?

So, you’re not surprised. But are you indignant? Are you ready to make sure the politicians hear from you in no uncertain terms, hear from you to stop this recklessness and restore public control of the public infrastructure under accountable government?

If the state politicos try to pull a fast one, demand public hearings with thorough reviews of the proposed contracts or leasebacks. Better yet, in states like Arizona or Colorado, require any such proposals go through the open, state-wide referendum voting process.

Corporatizations such as the above just pass on to our children the burdens that our generation should have assumed itself to run government within its means funded by fair taxation.

Ralph Nader [2] is a consumer advocate, lawyer, and author. His most recent book is The Seventeen Traditions [3].
Article printed from www.CommonDreams.org

URL to article: http://www.commondreams.org/view/2009/08/03-9

Outsourcing Sovereignty: Why Privatization of Government Functions Threatens Democracy

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Link to article here.

Ex-W&M chief sets IT framework
Richmond Times-Dispatch by Jeff Shapiro
Sunday, August 2, 2009

As Virginia deals with the headaches — financial, political and administrative — of turning over its info-tech system to deep-pocketed defense giant Northrop Grumman, a voice from the past may offer guidance for the future of privatization in a state that seems more corporate subsidiary than commonwealth.

Paul R. Verkuil, former president of the College of William and Mary, is a free-market advocate who worries that relinquishing government responsibilities to the private sector only drives up profits at the expense of public capital.

In his book “Outsourcing Sovereignty: Why Privatization of Government Functions Threatens Democracy and What We Can Do About It,” Verkuil warns that taxpayers are surrendering power by letting big business do the people’s business.

Verkuil, now a professor at the Benjamin N. Cardoza School of Law at Yeshiva University in New York, made it clear the other day he’s not familiar with the continuing food fight over Northrop Grumman.

But, says Verkuil, if there are constants in these big-money deals — Northrop Grumman is pocketing $2.3 billion over 10 years in the state’s richest-ever outsourcing contract — they are: Is it appropriate to privatize a particular service? Is the public assured oversight and accountability?

On the face of it, farming out IT might a no-brainer.

But when one considers that Northrop Grumman is now custodian of data that make every man, woman and child in Virginia more than a number — remember the recent hacking of the state’s prescription-drug file? — it could be argued this exercise is fraught with risk. At a minimum, this would include your privacy as well as the state’s and the company’s liability.

“Not every public solution is wrong and not every private solution is better,” says Verkuil, president of William and Mary from 1985 until 1992.

Verkuil, who has examined such controversial privatization contracts as guns-for-hire in Iraq and housing in post-Katrina New Orleans, suggests that one measure of the effectiveness of the Northrop Grumman deal may be how it stacks up against IT programs still under state control.

The General Assembly and Virginia’s courts are not covered by Northrop Grumman’s contract with the Virginia Information Technologies Agency. Nor are colleges and universities. More than 80 departments, all in the executive branch, are on the Northrop Grumman hook for computer services.

The legislature, judiciary and higher education have contractual relationships with high-tech firms but, for the most part, retain authority over hardware, software, networks and staff. In other words, they determine their own destiny.

“Are these other branches prospering better in some ways — and why?” says Verkuil. “Is it because they retain power and capacity that Northrop Grumman didn’t allow [the state]?”

Perhaps these questions could be put to the watchdogs of this monster deal: the Joint Legislative Audit and Review Commission, which is the General Assembly’s investigative arm, and the Auditor of Public Accounts, the legislature’s bean counter.

One element of Virginia’s adventure in outsourcing-land that neither JLARC nor the auditor can fully measure: $833,374 in political contributions from Northrop Grumman since 2001. That year, voters chose as governor the techie who led us down this rabbit hole: Mark Warner.

_________________________________________________

Link to article here.Sunday, August 02, 2009
Richmond Times-Dispatch – McClatchy-Tribune

EDITORIAL: Keep Digging

On July 2 we said: “A definitive judgment regarding the state’s information technology program must await the completion of a thorough report. We have confidence in the Joint Legislative Audit and Review Commission.” A determined probe remains an imperative.
The story broke with Lem Stewart’s ouster as head of the Virginia Information Technologies Agency.  Stewart had questioned the public-private partnership with Northrop Grumman. The questions have multiplied. Stewart’s reputation has been enhanced.

Situations such as this often have political implications. Governors take heat when controversies strike state agencies. The Northrop Grumman contract presents political complications, however. The public-private partnership was the brainchild of Mark Warner’s administration. The stories have surfaced during Gov. Tim Kaine’s watch. Yet if Republicans in the General Assembly attempt to score partisan points, they might run into some difficulties. Warner originally proposed that VITA report to the governor, but in a compromise with Republicans in the legislature he agreed to create VITA as a free-standing agency, led by a board independent of the governor’s office. Now add this: Although VITA does not fall under direct executive oversight, Stewart’s interim replacement — Len Pomata — also serves as Virginia’s secretary of technology, which makes him a member of Kaine’s Cabinet, which exposes the administration to second-guessing.

The questions bother Virginians. We do not have all the answers. Mergers in the public sector do not always proceed as smoothly as predicted. Business relationships such as these typically experience imperfections. They also require great scrutiny. Northrop Grumman concedes some of the delays but argues that the transformation process has proved more complicated than anticipated. The company points to considerable progress. Critics still wonder whether the commonwealth is seeing the expected efficiencies — and whether it ever will.

The program may be undergoing pains associated with birth, although this seems a protracted delivery indeed. VITA may suffer from organizational flaws. The private side of the partnership may be falling short.

The Times-Dispatch will continue to press the story. We hope the commonwealth will be spared unhappy choices.

Indiana toll road value tanks under private operator

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Link to article here.

The Indiana toll road value went from $3.8 Billion down to a pathetic $445 million. The foreign investors get to jack up the rates to cover their costs and milk taxpayers for profits, while Hoosier motorists have to pay increasingly aggressive tolls for 75 years. Who’s getting the sweetheart deal? Certainly not Indiana taxpayers. Truckers pay nearly $70 to use the road. Think our cost of goods isn’t going up to cover that kinda financial damage? Think again!
Toll-road lease tumbles in value
Ailing operator denies talk that it might sell its stake
Sat. August 01 – 2009 Peter Schnitzler –  pschnitzler@ibj.com Indiana Business Journal staff

Gov. Mitch Daniels expected his unprecedented $3.8 billion Indiana Toll Road lease to last 75 years. It may be tested after just three. The foreign companies that privatized the property haven’t escaped the global economic downturn. As a result, the value of their investments has plummeted.
Now, as they labor to shed enormous debt loads, analysts and the financial media are abuzz that the Indiana Toll Road lease could change hands. In June 2006, Indiana struck a deal with Australia-based Macquarie Group Ltd. and Spain-based Cintra Concesiones de Infraestructuras de Transporte SA. Indiana got $3.8 billion upfront, money it’s used across the state to fund the Major Moves highway improvement initiative. In exchange, the investors bought the right to collect tolls, with the obligation they manage, maintain and upgrade the road.
If the companies sell the lease, the new owners would take over that duty. Or if Macquarie and Cintra retain the lease but fail to live up to its terms, Indiana gets its toll road back. The outlook for the state of Indiana might be least favorable under the status quo. That’s because the companies could try to dig themselves out of their financial hole by continuing to aggressively raise tolls.
Getting the road back, on the other hand, wouldn’t necessarily be an unfavorable turn of events for the state. Indiana would be on the hook for future improvements, but also would receive the toll revenue—which totaled $155 million last year. Retaining ownership might be the most appealing option for Macquarie and Cintra, since any sale likely would reap a fraction of what they paid. Recent write-downs by Macquarie suggest the same lease deal today could fetch as little as $445 million.
Both companies have been exiting investments across the globe to reduce debt, and some Australian stock analysts say Macquarie is likely to do the same with its stake in the Indiana Toll Road, since vehicle traffic hasn’t met expectations. Macquarie flatly denies that possibility.
“[Macquarie] is not in the market pursuing a sales process for any of its U.S. assets, including the Indiana Toll Road,” wrote Macquarie spokesman Alex Doughty in an e-mail. “Speculation suggesting otherwise is simply incorrect.”
The private operators, who thought they bought a cash cow, have already proven aggressive in hiking tolls. With so much invested, the companies have an incentive to milk the lease, taking advantage of language in the agreement that could permit annual toll increases of 5 percent or higher.
That’s exactly what House Speaker Pat Bauer, D-South Bend, an outspoken critic of the Indiana Toll Road lease, feared from the start. “It was never meant to be a profit center or to make money,” he said of the highway, which opened in the mid-1950s. “It was meant to be low tolls for maintenance and, eventually, a free road.”
Unbreakable lease?

The Indiana Toll Road lease is hundreds of pages long, all legal screed. It details the operators’ duties and every other obligation a legal team led by locally based Ice Miller LLP and Chicago-based Mayer Brown LLP could negotiate. State officials consider it unbreakable. And they say it anticipates every conceivable risk, including operator bankruptcy.
“No question there are financial challenges out there for both [Macquarie and Cintra]. But that’s the nature of the economy,” said Leigh Morris, the Indiana Department of Transportation’s deputy commissioner for toll road oversight. “I have every confidence this is not going to turn out to be a problem for the state of Indiana.”
The lease mandates $4.5 billion in improvements over its seven-and-a-half decades. The companies already have made good on $191 million worth of upgrades, mainly by adding electronic tolling and widening congested stretches of the road. Another $157 million in projects are scheduled by the end of 2010.
The partnership is funding improvements through a $660 million bank loan, which Cintra spokesman Patrick Rhode said is scheduled to remain in place until 2014. “The Indiana Toll Road is a long-term lease and during that term there will be peaks and valleys,” Rhode wrote via e-mail in response to IBJ’s questions. “This is a valley, but the economy will recover and in the future we will be talking about the ITR and its performance peaks, not the valleys.”
Analysts’ main concern today is that weak tolling traffic could drain cash reserves used for debt service on the bank loan before 2014.

In a June 2009 report on the state of U.S. toll roads, Moody’s Investors Service gave the industry a negative outlook for the next year to 18 months, noting weak economic conditions have flattened traffic growth. On July 17, Macquarie reported revenue fell 5.1 percent on three of its four U.S. toll roads last year. The company also holds stakes in Chicago’s Skyway and Virginia’s Dulles Greenway. The exception was the South Bay Expressway in San Diego. Its traffic fell just 2.3 percent.

“For the most part, toll roads have demonstrated pricing power and financial stability through aggressive toll increases, or the reduction or elimination of discounts,” according to Moody’s report. “Careful budgetary management, the deferral of some capital projects, and lower construction costs have allowed most toll roads to maintain solid cash flows and credit metrics.”

The report adds: “We are concerned that accelerated traffic declines and toll increases (needed to support increased debt issuance) could soften financial ratios and cause more ratings downgrades.”
But Ian Myles, an equity analyst for Macquarie Securities—a unit of the Australian financial giant—downplayed the possibility of an Indiana Toll Road cash crunch. “ITR has significant cash reserves. The purpose of those reserves is to ensure they meet their debt obligations during periods of weak traffic,” he said in an e-mail from Australia. “Whilst they may never have forecast the extent of the weakness, there is significant cash on the balance sheet to meet the interest obligations. We estimate reserves of $110 [million]. … We do not believe the road is at risk of default.”
Unwinding portfolios
The Indiana Toll Road is just one of many infrastructure properties Macquarie and Cintra hold stakes in around the world, acquired in deals mostly funded with debt. In the recession, both companies became over-leveraged and now are unwinding their portfolios. One of the Macquarie properties on the block is downtown’s Chase Tower, the state’s tallest building. The company listed it in January, with an asking price of $180 million.
“No matter how you look at it, Macquarie Group is in the process of unraveling itself from the tangled web of funds that once catapulted its executives into the salary stratosphere but now shackle every attempt to resurrect its tarnished image,” Ian Verrender, a columnist for the Sydney Morning Herald, wrote in June. “Everything—including the flagship Macquarie Infrastructure Group—is now up for grabs.”
On July 17, Macquarie subsidiary Macquarie CountryWide Trust agreed to sell its 75-percent interest in 86 U.S. grocery-anchored shopping malls for $1.3 billion. Macquarie Communications Infrastructure Group is nearing completion of a $1.3 billion takeover by the Canada Pension Plan Investment Board. Cintra has had its own problems.
A March 24 analyst’s report by Credit Suisse called the Indiana Toll Road “Cintra’s most risky major asset,” pointing out disappointing traffic has led the company to curtail dividends. It also says refinancing Indiana Toll Road’s debt will be tough. On July 27, Cintra sold its parking lot division for $634 million. The next day, Bloomberg News reported that Macquarie may sell its leases on the Chicago Skyway and Indiana Toll Road to raise cash.
But if either Cintra or Macquarie sold now, they would be locking in huge losses. Macquarie subsidiary Macquarie Infrastructure Group has written down its stake repeatedly in the past year, most recently in July. The valuation for its stake is 61-percent less than it was a year ago and suggests the entire lease may be worth just $445 million on the open market. If either Macquarie or Cintra decided to sell their stakes, they’d need the state’s approval, said Ryan Kitchell, director of Indiana’s Office of Management and Budget.
Enforcing the lease
Before the deal, Indiana had been spending about $35 million annually on maintenance, INDOT’s Morris said. If the state got the road back, it would be on the hook for the billions of dollars in improvements the private partnership promised to make over the life of the lease. But Indiana already has its $3.8 billion, noted University of Indianapolis finance professor Matt Will.
If it repossessed the toll road, it might even be able to enter a fresh lease with somebody else, creating another payday.
“This is why it was such a genius deal, because of the upfront payment,” Will said. “It’s a no-lose situation for the state.”
For the state, the biggest challenge could be ensuring the current leaseholders live up to all aspects of their agreement despite their financial problems. There’s a lot of middle ground between failure to meet the standards of one of the lease’s sub-clauses and complete default.
INDOT’s Morris said the contract lays out a series of steps on the way to repossessing the road if the partnership fails to keep it up properly, each requiring 90 days’ notice. So far, he said, the companies have been in complete compliance.
“They have met every obligation they assumed under the lease,” Morris said. “They have been very good business partners.”
But Hoosiers, long used to low tolls, still are getting used to having the Indiana Toll Road run with a business mindset. In 2005, the year before the lease, state records show the Indiana Toll Road generated $96 million in revenue, almost entirely from tolls.
By 2008, the private partnership had boosted the road’s revenue 62 percent, to $155 million. From 1985 to 2006, the state kept the price for driving a car with two axles across the Indiana Toll Road’s 157 miles constant at $4.65. Today, the toll is $8 for the trip. And the price is far higher for larger vehicles. A truck with seven axles pays $69.75.
Those prices will rise. The lease allows operators, starting in 2011, to hike tolls every year by the percentage increase in the U.S. gross domestic product or by 2 percent, whichever is greater. Over the last 25 years, U.S. Department of Commerce records show that U.S. GDP has risen an average of 5.7 percent a year. In 1984, when the United States came out of its last deep recession, GDP grew 11.2 percent.
“It is impossible to pinpoint future rates,” wrote Cintra’s Rhode. “But rest assured any adjustment will be within the provided parameters.”

Hutchison gets federal money for I-69

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Link to story here.

A contract has been awarded to ACS of Spain to develop the entire Trans Texas Corridor TTC-69 trade corridor, but it has yet to be signed. TxDOT has now re-named the project back to I-69 to make the public think it’ll be a free interstate. Hutchison is seeking federal funding to ensure the project remains a FREE federal interstate not to continue Rick Perry’s foreign-owned toll road, land-grabbing Trans Texas Corridor debacle.

Hutchison secures half-million dollars to finance I-69 project

By ASHLEY COOK
The Lufkin Daily News

Sunday, August 02, 2009

U.S. Sen. Kay Bailey Hutchison announced half a million dollars in funding Friday toward building a massive highway project Lufkin’s mayor said could be the city’s single largest economic development factor.

Hutchison (R-TX), a member of the Senate Appropriations Committee, announced approval of the funding through the Fiscal Year 2010 Transportation, Housing and Urban Development and Related Agencies Appropriations bill, according to a press release. The bill’s next step is consideration by the full Senate.

The I-69 Corridor is a nationwide transportation plan for a route running from Mexico through Texas and up to Canada.

The Texas portion of the I-69 project — formerly the Trans-Texas Corridor, Gov. Rick Perry’s mammoth plan to link the state in freeways, rail and utility routes — was pronounced dead in January after heavy public backlash against the proposed plan which would have required new infrastructure trails cutting across the state. That plan has been separated into smaller corridor and local infrastructure development plans.

“It really upset a large number of people. The map of possibilities looked like it was going through everybody’s backyard,” said Lufkin’s Mayor Jack Gorden. “Now it’s back on track, for the most part sticking to the existing right-of-way for U.S. 59.”

Gorden is on the I-69 state level committee and on the executive board of the I-69 Alliance, representing cities, counties and other interested parties from Laredo to Texarkana.

Access to the interstate is one of the top priorities for businesses, and Gorden’s preference is for the route to stay right on U.S. Highway 59 — through that highway’s current path. Other ideas over the years have included an S-shaped curve skirting Lufkin’s south side by a few miles, turning north at Diboll or as far south as Corrigan.

Gorden said an interstate just south of Lufkin would be fine as well, likening it to the benefits Tyler sees in its proximity to I-20.

“If it can be built, it can be the single largest economic development factor for Lufkin in all of Deep East Texas,” Gorden said.

Gorden said Hutchison’s continuing efforts ensures more steps will be taken to move the project forward.

“If they can get the environmentals finished, it will be in a position to actually seriously get laid down and hopefully built,” Gorden said.

A town hall meeting in Nacogdoches last week allowed local residents to voice their questions to a panel of state and regional officials, the (Nacogdoches) Daily Sentinel reported. The discussion centered around the I-69 Corridor and whether the Trans-Texas Corridor was gone for good.

Amadeo Saenz, TxDOT executive director, said then that the state was “in essence” not working on looking at the entire TTC, but was going to look at building I-69, to “build what needs to be built.”

The state would be relying on segment committees to work with locals on identifying regional needs in order to determine where construction would take place, he said.

Critic Larry Shelton said in July he was concerned the project would leave other important local projects on the back burner, including the congested south loop in Nacogdoches that is one of the high-priority projects within the Lufkin TxDOT District.

TxDOT on Friday announced an upcoming regional citizen advisory group meeting to discuss I-69 development. The meeting is set for 9:30 a.m. until noon Wednesday at the Polk County Economic Development/Chamber of Commerce Center, 1001 U.S. Highway 59 Loop north, Livingston. Angelina County will be represented by Jerry Huffman. Lufkin/Angelina Economic Development Corp. will be represented by Jim Wehmeier. Diboll will be represented by Mayor Bill Brown.

Gorden on Friday said the meeting and others like it were an improvement for citizens to have input, something he said TTC never offered.

“I hope they can make some serious progress for us. It had gone away, and now it’s got a little life again,” he said.

Hutchison renews call to prohibit tolling existing interstates

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Link to article here.

KBH pushes for continuing federal highway toll ban
By Andy Hogue
Lone Star Report
July 31, 2009

U.S. Senator Kay Bailey Hutchison, likely Republican candidate for Governor of Texas and (for the meantime) a member of the Transportation, Housing and Urban Development Appropriations subcommittee, secured language in a transportation bill that would continue the current ban on placing tolls on existing interstate highways in Texas through September 2010.

According to a press release from the Hutchison’s senate office, In 2007 and 2008 legislation was approved that prohibits the tolling of existing federal highways in Texas built with taxpayer dollars — which was likely a counter-move against Gov. Rick Perry’s and the Texas Department of Transportation’s plan to expand the implementation of toll collection on roadways as a means of transportation funding.

A spokesman for Perry, who is running for re-election, was not reached for comment at the time of posting.

“Again this year, I have worked to ensure that Texas motorists aren’t charged to drive on roads they have already paid for through their taxes,” Hutchison said. “My provision extends this taxpayer protection for another year, but we must still pursue a permanent prohibition of tolling existing federal highways so we can prevent this form of double taxation on drivers, once and for all.”

In another press release, Hutchison announced the securing of $2 million for Capital Metro funding from the federal government’s Transportation, Housing and Urban Development, and Related Agencies Appropriations bill, to help operate and develop the city of Austin’s bus and rail system.

TxDOT rolling in the dough, record spending coming…

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Link to article here.

Here’s a sobering reality…we’re supposed to be excited about record levels of deficit spending because of our elected officials failure to properly fund roads with cash. Reporter Ben Wear’s “articles” read like a TxDOT press release, but we can usually glean moderately useful information from them anyway, like the sky is falling and we’re so broke every road has to be a toll road, never mind a record $5.9 billion in projects that are going to be let this next fiscal year. Ignore fiscal reality and just be excited with Ben and TxDOT…okay?

Borrowing, stimulus boost TxDOT road plans
Agency expects a record $5.9 billion in construction and maintenance spending in coming fiscal year.
By Ben Wear
AMERICAN-STATESMAN STAFF
Thursday, July 30, 2009 The rags-to-riches-to-rags trajectory of state highway spending is about to zag upward again, officials said Wednesday, thanks to a cobbling together of federal stimulus funds, massive new borrowing and some help from the Legislature this spring.

But the surge from the federal stimulus plan and the borrowing will be mostly exhausted over the next two years, leaving the Texas Department of Transportation debt-ridden, once again dependent on flat-to-ebbing gas tax revenue and in need of more help from the Legislature in 2011.

In the 2003-06 period, TxDOT spent $4 billion to $5 billion annually building and maintaining roads. That dropped to $3 billion last year.

But the agency now estimates it will spend a record $5.9 billion on projects in the fiscal year beginning Sept. 1 and $5 billion in the 2010-11 fiscal year, TxDOT Chief Financial Officer James Bass said Wednesday.

Central Texas will benefit along with the rest of the state from TxDOT’s financial recovery, temporary though it could be, including:

TxDOT has reaffirmed its commitment to spend about $200 million to complete the Interstate 35/Ben White Boulevard interchange by adding four flyover bridges and also to widen Texas 195 from north of Georgetown to the Bell County line. A contract for the I-35 project should be awarded in October, said Carlos Lopez, TxDOT’s Austin district engineer, and the Texas 195 work is expected to occur in 2010 and 2011.

“We all breathed a sigh of relief” when the commission in June decided to borrow another $3 billion of gas-tax-backed bonds, Lopez said, allowing the two projects to proceed.

The Central Texas Regional Mobility Authority is expecting to receive $90 million in stimulus funds and expects an additional $31 million today when the Texas Transportation Commission acts on a state infrastructure bank loan, The authority would use the money to begin the U.S. 290 East tollway project in the coming months.

The area also has been promised another $95 million in stimulus funds for various road and rail projects.

The commission, taking advantage of what have been lower-than-expected contract bids, probably will approve seven more maintenance projects at its meeting today. The additional $6 million in stimulus-funded projects will be used to resurface highways from Llano to Austin to Caldwell County

TxDOT finances have been on a roller coaster this decade.

When Gov. Rick Perry took office in early 2001, the agency was using the pay-as-you-go financial model it had employed since its 1917 founding, using a combination of gas tax and vehicle fees to pay for projects as money became available.

But Perry, aided by the late Ric Williamson as chairman of the Transportation Commission, pushed through changes in state law that will allow the state to borrow about $17 billion for roads.

In addition, Perry and Williamson enlisted private companies to build, operate and profit from building state-owned toll roads, bringing in a handful of large upfront payments.

That private toll road initiative, however, ran into public and legislative resistance in 2007 and has mostly stalled out as public policy. But the financial vestiges — principally a $3.2 billion payment from the North Texas Tollway Authority when it outbid a private group on the Texas 121 toll road — will allow TxDOT to build a number of large projects over the next two years.

The Legislature this spring also authorized TxDOT to borrow $2 billion and pay it back with the state’s general tax revenue, rather than with gas taxes.

And it stopped the “diversion” to nontransportation purposes of about $365 million of gas tax revenue every two years, added money for TxDOT that will allow it to borrow an additional $3 billion — it already has sold about $2.9 billion in gas tax bonds earlier this decade — and pay it back over 20 or so years.

All that money, along with $2.25 billion of federal stimulus funds that the agency has already begun spending, will underwrite the gusher of road spending the next two years.

But the agency would need an additional $120 million in the 2012-13 biennium and years to come to make the debt payments on that new $3 billion of gas tax-backed borrowing. And agency officials say they hope that the Legislature in 2011 will authorize another $2 billion of borrowing against the general fund that voters authorized in 2007.

If not, Bass, the agency’s chief financial officer, said the squeeze will resume by 2012.

“We’re thankful we’ll be able to deliver all these projects sooner,” Bass said. “But we’re also looking at years three, four, five and six and wondering how we’ll be able to pay for projects.”

Kay vs Rick – Transportation sure to be hot topic in primary battle

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Link to Dallas Morning News article here. Link to Express-News/Houston Chronicle article here.

Criticism for Senator Kay Bailey Hutchison abounds, but if Rick Perry is so “set,” then why waste the ink? Few Texans are paying attention to anything other than scraping to make ends meet in hopes they can keep their jobs as unemployment rises. Politicians, as a lot, are considered public enemy number one these days as corporate America gets bailout after bailout while the debt and tax burden reaches unsustainable levels for the average Joe citizen and his great grandchildren who have to pay it all back. Pocketbook issues will likely carry the day, and Perry’s extremely disliked transportation policies that seek to sell Texas highways to foreign entities and that explode Texans’ cost of living will definitely come into play in the battle over who will become the next Governor of the great state of Texas.

Are Texans better off today than just a few years ago? They’re paying higher tuition, higher property taxes, DOUBLE tax tolls to get to work (if they still have a job), and new business taxes (curtailing job growth – Perry claims he cut business taxes, when in reality he raised taxes on businesses, some had 400% increases, only to reduce it slightly when businesses owed taxes even when they didn’t make a profit! Wow, thanks Guv.). Many are struggling and are tired of being taxed to death, despite Perry’s claims of being a tax cutter. Any politician with a pulse will demonstrate that Perry’s walk doesn’t match his talk.

Memo to Perry, Hutchison: Let’s hear a real debate about transportation
Michael Lindenberger/Reporter
Dallas Morning News, July 23, 2009

The Senate commerce committee voted this week to advance a plan pushed by the Obama Administration to provide emergency funds for federal highway trust fund, a move that in turn delays much bigger — and vastly more expensive — efforts to completely overhaul federal transportation policy.The latter is the preferred method of House transportation chairman James Oberstar, D-Minn., but it’s going nowhere.

perry.JPGAgainst that backdrop, Gordon Dickson, the Star-Telegram’s transportation reporter, has a piece this morning that highlights the committee’s ranking Republican, Sen. Kay Bailey Hutchison’s “reluctant” support for the extension bill. He quotes her and Gov. Rick Perry’s spokeswoman as saying they’d prefer a more comprehensive reform than a band-aid approach.

But saying you’re for reform and saying what that means, exactly, isn’t always the same thing.

For instance, Hutchison’s preference is a bill she filed that would allow states like Texas, who pay more in gas taxes than they receive in regular transportation funding, to opt out of the federal highway system altogether. Call it, if you’re smiling, a proposal for a mini-secession, if you will.

We wrote about this in April, and Dickson quotes Hutchison:

“Donor states like Texas should not be required to continue funding other states’ transportation needs for an additional 18 months at the expense of our own priorities,” she said.

She explained her views herself in an op-ed earlier this year. Trouble is, none of the ideas that are in serious contention for Congress’ time this summer include a plan to allow big states to withdraw from the federal highway program.Perry’s spokesman seized on that reality immediately, as reported by Dickson.On the other hand, Perry hasn’t done much to add his own weight to the debate over how Washington should go about funding and building highways in the future. He launched something of a revolution earlier this decade when he pushed Texas into the private toll road hunt — a lurch, now quieted, that drew national attention, and plenty of followers in other states — but since then he’s mainly kept quiet.

His surrogates haven’t been so quiet. Ned Holmes of Houston, a transportation commissioner appointed to the job by Perry, has led a national campaign aimed at shaping the debate over our transportation future, and that group’s approach has evolved over time to include a broad range of suggestions, not just toll roads. (Holmes now supports Hutchison for the governor in 2010.)

It’s probably fair for folks to start asking Perry what his ideas for transportation in the second decade of the 21st century are. Hutchison’s pull-out proposal may not have a lick of a chance at becoming law. But it is an idea, anyway.

These two politicians are going to be going at each other hard for the next several months. I’m hoping they each lay out some specific proposals for how to move people and goods around in Texas, how to pay for it, and how Texas should use its big clout to influence the same decisions in Washington.

There is a lot at stake in the 2010 race for governor, and one of biggest things is the multi-billion-dollar business of building roads and rail.

Let the policy debate begin.

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08/03/2009

Path to victory for Hutchison now a challenge

By R.G. Ratcliffe– San Antonio Express News
AUSTIN — U.S. Sen. Kay Bailey Hutchison began this year as “Kay the Invincible.” But as she prepares to officially launch her bid for governor later this month, that aura is gone.Hutchison entered the year with the ability to make other politicians quake. She had two re-election victories under her belt with more than 60 percent of the vote in each. Her popularity ratings in polls put her at the top among Texas politicians. And polls showed her leading Gov. Rick Perry by anywhere from 6 to 27 percentage points.Then Hutchison went silent — leaving the field of Texas politics to Perry for more than four months.

The senator “squandered her opportunity,” Republican political consultant Mark Sanders said. “She ceded the Republican base to Gov. Perry.”

Perry focused a message on conservative Republican primary voters. He railed against the federal government, against stimulus funding, against federal health care plans and for states’ rights.

Hutchison’s advantage in the polls was eliminated, and Perry took a lead of more than 10 percentage points in three polls in June.

Even as she prepares for her expected Aug. 17 announcement that she’s running for governor, Hutchison’s message continues to lack focus.

Over the past week, Hutchison has been critical of Perry for not accepting $550 million in federal stimulus money for unemployment insurance, but even that criticism contrasts with the fact that she said nothing publicly on the issue when the Legislature was in session and she could have made a difference in whether the issue passed.

Perhaps nothing so clearly showed Hutchison’s stumble than the fumbling series of interviews she gave last week about resigning from the Senate in October or November to run for governor. She gave mixed messages about having to resign only because it is a contested election, and she ended up urging Perry to drop out. He said no.

University of Texas political scientist James Henson said it looks like Hutchison’s advisers underestimated Perry and thought she could sit on her advantage until the campaign began.

“Kay was going to have the equivalent of a Rose Garden campaign,” Henson said, referring to the presidential election strategy of not leaving the White House except on official business.

Henson said momentum in the race “has clearly swung in Perry’s favor” but that the best news for Hutchison is that the vast majority of Texans are not paying attention to the race.

Last December, state Sen. Leticia Van de Putte, D-San Antonio, said Democrats were avoiding the governor’s race because “Hutchison is such an intense brand, it’s hard to get market share on that one.”

Van de Putte now says Hutchison “has got her challenges.” She said the GOP primary may be so “bloody” that the Democrats have a shot at defeating either Hutchison or Perry in the general election.

“It’s going to be the clash of titans,” Van de Putte said.

Tom Schieffer of Fort Worth is the only Democrat officially in the race so far.

Hutchison supporter Gary Polland, a former Harris County GOP chairman, said too much emphasis is placed on where Hutchison stood early in the race, as opposed to now.

“It was an aura of invincibility. I never thought it was reality,” Polland said. “The governor is an outstanding politician.”

Polland said that when Hutchison officially launches her campaign she will be able to make the case that Perry is not the conservative leader he says he is and that the Texas economy is not as good as Perry claims. He said Hutchison spent the spring concentrating on her work in Washington, D.C.

“She’s not even really campaigning. Perry is always in campaign mode,” Polland said. “Once Sen. Hutchison engages, the race will get close.”

TxDOT grants "toll amnesty"

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Link to article here. More on the toll collection nightmare here.

TxDOT approves toll amnesty
Scofflaws would get a break on paying 90 percent of non-payment fees.
By Ben Wear
American-Statesman Staff
Thursday, July 30, 2009

SAN ANGELO — Toll violators on Texas Department of Transportation turnpikes will be forgiven up to 90 percent of nonpayment fees if they pay the overdue tolls and sign up for electronic toll tags, under an amnesty program approved today by the Texas Transportation Commission.

By offering to forego payment of the lion’s share of $58.4 million owed in late fees, TxDOT hopes to collect much of the $3.2 million in unpaid tolls. But officials said today that there hasn’t been a comparable program on other Texas toll roads, so they couldn’t predict what percentage of scofflaws might be enticed to pay up by the offer.

The amnesty applies to four toll roads in Central Texas and one in Tyler.

“What we’ve been able to piece together is if you approach something like 90 percent, you’re liable to get more participation,” said Phil Russell, TxDOT’s assistant executive director of innovative project development.

Details of how the amnesty will work will be released in a few weeks, TxDOT said.

To date, about 140,000 cars have run up more than 2.9 million unpaid tolls, according to TxDOT. The amnesty of 60 to 90 days — TxDOT is officially calling it a “toll recovery” period — will likely begin Sept. 1 or shortly thereafter, TxDOT officials said.

Rental car companies will not be eligible for the amnesty.

And it will not apply to tolls rung up and unpaid on the 183-A toll road, which is run by the Central Texas Regional Mobility Authority, not TxDOT.

The first Austin-area toll roads opened in late October 2006 and began charging tolls in January 2007. But TxDOT, though it has billed for tolls and aggressively pursued collection from non-payers, to date has not taken anyone to court.

That will change after the amnesty period, Russell said.

“We didn’t want to be perceived to be a heavy-handed government coming in,” Russell told commission members before the vote. “We’ve had patience. But we are at the point now where we must move forward. And we will be initiating court proceedings.”

An unpaid toll can generate $25 in fees within four months. If it is referred to court, the possible tab rises to $450 for each toll.

Commissioner Ted Houghton suggested that perhaps the agency could encourage payment by the worst offenders by publishing their names in the newspaper. The American-Statesman in fact earlier this month asked TxDOT for the names of the 10 people owing the most money.

However, the portion of state law allowing TxDOT to operate toll roads explicitly prohibits it from releasing personal information about people who incur tolls. A request from the American-Statesman earlier this month to release the amounts owed by the 10 worst offenders, without their names, was referred by TxDOT to the Texas attorney general for an opinion and remains unresolved.

At today’s meeting, Russell said that the No. 1 scofflaw owes the agency $40,000 in tolls and late fees.

In other action today, the commission:

\• Approved a $31 million loan to the Central Texas Regional Mobility Authority for the first phase of the U.S. 290 East tollway. The authority plans to begin a $265 million project this fall to build four flyover bridges at the U.S. 183/U.S 290 intersection along with six toll lanes and free frontage roads to east of Springdale Road, executive director Mike Heiligenstein said.

The loan will be used to buy right of way and to move utility lines for that project. The rest of the money for the project will come from a $90 million grant under the federal stimulus program, from agency funds and from bonds to be sold next year.

The agency will eventually extend the U.S. 290 tollway to near Manor.

\• Authorized spending about $6 million in federal stimulus funds for road resurfacing projects on seven Central Texas roads, including U.S. 183 between MoPac Boulevard and Burnet Road.

\• Approved a $457 million list of projects that included $83 million for buy right of way and move utilities for expansion of Interstate 35 from four lanes to six lanes in parts of Bell and McLennan counties.

Trucker Association: Gas tax fairest way to fund roads

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Link to article here.

ATA to Congress: Fuel Tax is Most Effective Way to Fund Infrastructure ARLINGTON, Va., July 23 /PRNewswire-USNewswire/ —

The American Trucking Associations (ATA) today told the House Subcommittee on Select Revenue Measures, House Committee on Ways and Means, that the federal fuel tax remains the most cost-effective way to fund essential highway infrastructure projects.

In her statement on behalf of ATA, 2nd Vice Chair Barbara Windsor said that an increase in the fuel tax — with the additional revenue invested in projects and programs that address national highway infrastructure needs — is by far the best way to ensure sufficient funding for highway projects over the near term.

“With collection costs at just 0.2 percent of revenue, no alternative funding schemes can match the efficiency or equitability of the federal fuel tax,” said Windsor, who is President and CEO of Hahn Transportation, based in New Market, Maryland.

ATA maintains support for the federal fuel tax because it:

  • Offers minimal opportunity for evasion;
  • Can be collected and enforced without imposing excessive administrative and recordkeeping burdens on highway members;
  • Is based currently on readily verifiable measure of highway and vehicle use;
  • Remains uniform in application among classes of highway users; and
  • Does not create impediments to interstate commerce.

Windsor explained that highway funding schemes like tolling, vehicle miles traveled taxes or public-private partnerships do not stand up to the criteria for viable highway funding and provide a minimal return on the highway user’s investment.

A strong transportation system is the backbone of our nation. Trucking pays 33 percent of state and federal highway user fees, but logs just 14.4 percent of annual vehicle miles traveled on our highways. In addition to the federal fuel tax, trucks contribute to the system through a Heavy Vehicle Use Tax paid on all trucks above 55,000 pounds, a sales tax on all trucks and trailers, and a tire tax paid on all tires sold by manufacturers, producers or importers.

Windsor also said that the climate and energy legislation recently passed in the House is likely to significantly increase the cost of fuel. This increase would impose significant costs on American consumers and jeopardize the ability of the trucking industry to fund both the highway infrastructure that is greatly needed and also absorb the added costs to fuel brought by climate and energy legislation. It is important to note that improving highway infrastructure will decrease fuel consumption and carbon output by both cars and trucks.

Click here to read the entire testimony from Barbara Windsor.

The American Trucking Associations is the largest national trade association for the trucking industry. Through a federation of other trucking groups, industry-related conferences, and its 50 affiliated state trucking associations, ATA represents more than 37,000 members covering every type of motor carrier in the United States.
SOURCE American Trucking Associations