Link to article here.

This is another example of how a so-called “public private partnership” (PPP) actually means PUBLIC money for PRIVATE profits rather than the “partnership” taxpayers were promised, one where the private entities put up the money and take all the risk. A legal ruling deemed that the private contractor, Ferrovial (parent company to Cintra, the Spain-based company involved in several PPPs in Texas), does not have to upgrade the system, taxpayers do. Even worse, this also demonstrates that once the government gives away control of our infrastructure to private corporations, it has little recourse to protect the public interest. The private entities write these iron clad contracts to protect their interests, leaving taxpayers holding the bag. We have yet to see one PPP deal that worked out well for the taxpayers in any country. PPPs are just one more scam to give private corporations free access to taxpayers’ wallets using government-sanctioned monopolies in the name of “free market.”

Boris Johnson told he must plug £460m tube funding gap
Arbiter of public-private partnership rules that London Underground contractor Tube Lines should not have to make up shortfall in budget
By Dan Milmo
guardian.co.uk
Wednesday 10, March 2010Boris Johnson must make cuts to London‘s public transport network or postpone improvements to one of the capital’s busiest underground lines after he was told to plug a £460m funding gap in a controversial public-private partnership.

The London mayor said taxpayers were being asked to “write a blank cheque” to fund Tube Lines, the last surviving PPP contractor responsible for maintenance and upgrades on three tube routes: the Jubilee, Northern and Piccadilly lines.

In a final ruling today, the arbiter of the PPP contracts, Chris Bolt, said Tube Lines’s work programme over the next seven and a half years should cost £4.46bn. The publicly owned London Underground, which still runs the tube network on a day-to-day basis, must fund the work and has budgeted only £4bn for it – leaving a shortfall of £460m on its already stretched balance sheet.

Johnson, who ultimately controls LU and its parent Transport for London, said he would consider taking legal action against Bolt, who rejected demands that Tube Lines fund the difference by raising debt privately. Instead, Bolt said TfL should either cut back on an upgrade to the Piccadilly line – the only tube link to Heathrow airport – or find cost cuts elsewhere in its £9bn annual budget.

“Londoners will also be outraged that the tube upgrades promised to them are now threatened,” said Johnson. The mayor claimed that Tube Lines’s co-owners, Ferrovial, the Spanish owner of Heathrow airport, and Bechtel, the US project management specialist, would be paid £400m in management secondment fees by 2017.

“In other countries this would be called looting, here it is called the PPP,” he said.

But Bolt rejected the management fees argument, saying that Ferrovial and Bechtel managers were helping to keep down overall costs and, without them, the maintenance and upgrade work could cost more than £4.46bn.

Andrew Cleaves, Tube Lines’s acting chief executive, said delaying an upgrade to the Piccadilly line was one option for closing the funding gap. Bolt has already asked the Department for Transport whether funding set aside for purchasing new Piccadilly line trains, believed to be about £500m, could be used to plug the gap.

“There are many different variations around timing that we can work through with London Underground, including the timing of the fleet and the upgrade. That’s the sort of thing I want to sit down with London Underground about and discuss,” said Cleaves.

The Piccadilly upgrade is due to deliver faster and more frequent trains on the route by 2014 and failure to deliver it on time raises the threat of overcrowding on an already busy line.

The Tube Lines boss also denied that the ruling would threaten the company’s viability. Tube Lines had originally argued that the work should cost £5.75bn and faced an even greater funding shortfall than LU, which prompted Tube Lines directors to discuss whether the company is a going concern at a recent board meeting.

Johnson’s funding options are becoming increasingly limited after the DfT said it would not reopen a 2007 funding settlement that awarded TfL £40bn until 2017. Lord Adonis, the transport secretary, is adamant that TfL cannot increase its borrowing to fund the £460m gap.

Link to article here.

The good news is, the section of I-35 where there is a 391 local government commission (TURF co-sponsored events to help spread this method to fight the Trans Texas Corridor for TTC-69), I-35 will be expanded and kept toll-free.

However, right after the election, Perry’s TxDOT announced its intention to extend the SH 130 toll road north of the 391 commission’s jurisdiction. SH 130 from Georgetown around Austin extending south to San Antonio has been referred to as the first leg of the Trans Texas Corridor TTC-35. So as we predicted, if Rick Perry were re-elected, he would continue his plans to push the TTC piece by piece all the way up to Red River. This new TTC segment from Waco to Hillsboro, filling the gaps of “free” lane I-35 expansion, is also likely to become some form  of foreign-owned toll road.

Relieving traffic on Interstate 35 through Waco remains priority for state officials
By Michael W. Shapiro, Waco Tribune-Herald staff writer
Wednesday March 10, 2010
Plans to relieve traffic on Interstate 35 with the Trans-Texas Corridor were put to bed last year in the face of a chorus of public criticism that centered around the use of eminent domain to make way for the ill-fated project.

But if the population in Texas continues to grow, state officials think congestion will only get worse on I-35 if nothing is done.

The Texas Department of Transportation is studying a series of potential traffic solutions.

Drivers navigate through traffic on Interstate 35.
Jerry Larson/Waco Tribune-Herald

TxDOT held a meeting Tuesday in Waco to discuss the situation with local officials representing the Central Texas stretch of the highway.

The department will present ideas next month to four advisory committees trying to come up with plans to ease I-35 traffic.

Finding solutions

State transportation staffers said they will present traffic data on several proposed solutions in April.

Ideas under consideration include:

*  Extending State Highway 130, a toll road that runs parallel to I-35 in the Greater Austin area.

Transportation officials said they would look at the traffic relief that would result from extending the road to Temple, and possibly through the Waco area to Hillsboro.

The committee recommended that the extension run on the east side of I-35 within five miles of the highway.

* Building the so-called Texas T-Bone — a high-speed passenger rail system that would connect Dallas-Fort Worth, San Antonio and Houston.

The proposal envisions using the Killeen-Temple area as a central hub.

The plan has been promoted heavily by Temple Mayor Bill Jones, who sits on the local I-35 committee and delivered a presentation at the meeting.

TxDOT is trying to implement a bottom-up approach — taking recommendations at the local level, then consolidating those ideas into a plan.

It was clear at the session that officials still were working out the kinks.

A few area residents showed up at the three-hour meeting but left early without a chance to address committee members or state officials.

Officials continue to search for ways to relieve current and future traffic congestion on I-35. Ideas proposed during a Tuesday meeting called by the Texas Department of Transportation include expanding toll roads and a high-speed rail system.
Rod Aydelotte/Waco Tribune-Herald

Members agreed later to change the rules to ensure that the public will be able to comment at future meetings.

There’s a “need to give everybody an opportunity to speak, to the point where we have to bend over backwards to display that there’s trust and transparency,” said Russell Devorsky, who represents the Waco Metropolitan Planning Organization on the committee.

A lack of transparency led to suspicions about the Trans-Texas Corridor, he said.

Other members complained they hadn’t received detailed traffic statistics for I-35 or guidelines showing the financial limitations for traffic-relief projects.

State officials said they wanted to start with how to tackle congestion, and detailed traffic modeling of several local projects were in the works.

The local committee consists of three members representing Bell County (all attended the Tuesday meeting in Waco); two members representing McLennan County (one of whom attended); members from Hill County and the Hillsboro Chamber of Commerce (both in attendance); as well as two members each from Dallas, Ellis and Tarrant counties; and one each from Falls, Hood, Johnson, Kaufman, Limestone, Navarro and Parker counties.

The Texas Farm Bureau also has a member on the local committee.

Link to article here.

Big Bend is the target for one of Rick Perry’s planned Trans Texas Corridor routes, called La Entrada de Pacifico. So it shouldn’t surprise us that the idea of turning one of Texas’ natural treasures over to international control is being floated anew. Connect the dots…

Should Big Bend Become an ‘International Park?’
US Interior Secretary proposed the idea today, proposal dates back to the 1930s

Link to article here.

Goldman Sachs has been playing both sides (consulting and giving financial advice to both the government and the private entities with whom the government is making deals) for quite some time now, especially with regards to public private partnership infrastructure deals. They’ve been operating with impunity despite the colossal conflicts of interest. Now it’s toxic wheeling and dealing has led to the financial collapse of Europe. The U.S. government beware – time to boot Goldman from the halls of Washington and Austin!

Wall St. Helped to Mask Debt Fueling Europe’s Crisis

New York Times

Wall Street tactics akin to the ones that fostered subprime mortgages in America have worsened the financial crisis shaking Greece and undermining the euro by enabling European governments to hide their mounting debts.

As worries over Greece rattle world markets, records and interviews show that with Wall Street’s help, the nation engaged in a decade-long effort to skirt European debt limits. One deal created by Goldman Sachs helped obscure billions in debt from the budget overseers in Brussels.

Even as the crisis was nearing the flashpoint, banks were searching for ways to help Greece forestall the day of reckoning. In early November — three months before Athens became the epicenter of global financial anxiety — a team from Goldman Sachs arrived in the ancient city with a very modern proposition for a government struggling to pay its bills, according to two people who were briefed on the meeting.

The bankers, led by Goldman’s president, Gary D. Cohn, held out a financing instrument that would have pushed debt from Greece’s health care system far into the future, much as when strapped homeowners take out second mortgages to pay off their credit cards.

It had worked before. In 2001, just after Greece was admitted to Europe’s monetary union, Goldman helped the government quietly borrow billions, people familiar with the transaction said. That deal, hidden from public view because it was treated as a currency trade rather than a loan, helped Athens to meet Europe’s deficit rules while continuing to spend beyond its means.

Athens did not pursue the latest Goldman proposal, but with Greece groaning under the weight of its debts and with its richer neighbors vowing to come to its aid, the deals over the last decade are raising questions about Wall Street’s role in the world’s latest financial drama.

As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.

In dozens of deals across the Continent, banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books. Greece, for example, traded away the rights to airport fees and lottery proceeds in years to come.

Critics say that such deals, because they are not recorded as loans, mislead investors and regulators about the depth of a country’s liabilities.

Some of the Greek deals were named after figures in Greek mythology. One of them, for instance, was called Aeolos, after the god of the winds.

The crisis in Greece poses the most significant challenge yet to Europe’s common currency, the euro, and the Continent’s goal of economic unity. The country is, in the argot of banking, too big to be allowed to fail. Greece owes the world $300 billion, and major banks are on the hook for much of that debt. A default would reverberate around the globe.

A spokeswoman for the Greek finance ministry said the government had met with many banks in recent months and had not committed to any bank’s offers. All debt financings “are conducted in an effort of transparency,” she said. Goldman and JPMorgan declined to comment.

While Wall Street’s handiwork in Europe has received little attention on this side of the Atlantic, it has been sharply criticized in Greece and in magazines like Der Spiegel in Germany.

“Politicians want to pass the ball forward, and if a banker can show them a way to pass a problem to the future, they will fall for it,” said Gikas A. Hardouvelis, an economist and former government official who helped write a recent report on Greece’s accounting policies.

Wall Street did not create Europe’s debt problem. But bankers enabled Greece and others to borrow beyond their means, in deals that were perfectly legal. Few rules govern how nations can borrow the money they need for expenses like the military and health care. The market for sovereign debt — the Wall Street term for loans to governments — is as unfettered as it is vast.

“If a government wants to cheat, it can cheat,” said Garry Schinasi, a veteran of the International Monetary Fund’s capital markets surveillance unit, which monitors vulnerability in global capital markets.

Banks eagerly exploited what was, for them, a highly lucrative symbiosis with free-spending governments. While Greece did not take advantage of Goldman’s proposal in November 2009, it had paid the bank about $300 million in fees for arranging the 2001 transaction, according to several bankers familiar with the deal.

Such derivatives, which are not openly documented or disclosed, add to the uncertainty over how deep the troubles go in Greece and which other governments might have used similar off-balance sheet accounting.

The tide of fear is now washing over other economically troubled countries on the periphery of Europe, making it more expensive for Italy, Spain and Portugal to borrow.

For all the benefits of uniting Europe with one currency, the birth of the euro came with an original sin: countries like Italy and Greece entered the monetary union with bigger deficits than the ones permitted under the treaty that created the currency. Rather than raise taxes or reduce spending, however, these governments artificially reduced their deficits with derivatives.

Derivatives do not have to be sinister. The 2001 transaction involved a type of derivative known as a swap. One such instrument, called an interest-rate swap, can help companies and countries cope with swings in their borrowing costs by exchanging fixed-rate payments for floating-rate ones, or vice versa. Another kind, a currency swap, can minimize the impact of volatile foreign exchange rates.

But with the help of JPMorgan, Italy was able to do more than that. Despite persistently high deficits, a 1996 derivative helped bring Italy’s budget into line by swapping currency with JPMorgan at a favorable exchange rate, effectively putting more money in the government’s hands. In return, Italy committed to future payments that were not booked as liabilities.

“Derivatives are a very useful instrument,” said Gustavo Piga, an economics professor who wrote a report for the Council on Foreign Relations on the Italian transaction. “They just become bad if they’re used to window-dress accounts.”

In Greece, the financial wizardry went even further. In what amounted to a garage sale on a national scale, Greek officials essentially mortgaged the country’s airports and highways to raise much-needed money.

Aeolos, a legal entity created in 2001, helped Greece reduce the debt on its balance sheet that year. As part of the deal, Greece got cash upfront in return for pledging future landing fees at the country’s airports. A similar deal in 2000 called Ariadne devoured the revenue that the government collected from its national lottery. Greece, however, classified those transactions as sales, not loans, despite doubts by many critics.

These kinds of deals have been controversial within government circles for years. As far back as 2000, European finance ministers fiercely debated whether derivative deals used for creative accounting should be disclosed.

The answer was no. But in 2002, accounting disclosure was required for many entities like Aeolos and Ariadne that did not appear on nations’ balance sheets, prompting governments to restate such deals as loans rather than sales.

Still, as recently as 2008, Eurostat, the European Union’s statistics agency, reported that “in a number of instances, the observed securitization operations seem to have been purportedly designed to achieve a given accounting result, irrespective of the economic merit of the operation.”

While such accounting gimmicks may be beneficial in the short run, over time they can prove disastrous.

George Alogoskoufis, who became Greece’s finance minister in a political party shift after the Goldman deal, criticized the transaction in the Parliament in 2005. The deal, Mr. Alogoskoufis argued, would saddle the government with big payments to Goldman until 2019.

Mr. Alogoskoufis, who stepped down a year ago, said in an e-mail message last week that Goldman later agreed to reconfigure the deal “to restore its good will with the republic.” He said the new design was better for Greece than the old one.

In 2005, Goldman sold the interest rate swap to the National Bank of Greece, the country’s largest bank, according to two people briefed on the transaction.

In 2008, Goldman helped the bank put the swap into a legal entity called Titlos. But the bank retained the bonds that Titlos issued, according to Dealogic, a financial research firm, for use as collateral to borrow even more from the European Central Bank.

Edward Manchester, a senior vice president at the Moody’s credit rating agency, said the deal would ultimately be a money-loser for Greece because of its long-term payment obligations.

Referring to the Titlos swap with the government of Greece, he said: “This swap is always going to be unprofitable for the Greek government.”