Texans working toward reforms through accountability and good public policy as well as promoting non-toll, affordable, and sensible transportation solutions.
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.”
On February 1, 2010, in a Joint Senate and House Transportation Committee hearing, Senator John Carona directly asked TxDOT Executive Director Amadeo Saenz if TxDOT decided tomorrow that it wants to build the Trans Texas Corridor after all, does it still have the statutory authority to do so? Saenz answered: “Yes.”
See for yourself below…
Public hearing turned lobbyist feeding frenzy
By Terri Hall
San Antonio Express-News/Houston Examiner
Feb 02, 2010
We’ve seen it before. But in an election year during an economic downturn, it’s breathtaking — a room stacked with lobbyists and elected officials lobbying for higher taxes. Yesterday’s Joint Public Hearing of both the House and Senate Transportation Committees (more news coverage below) to discuss the state of transportation finance was what San Antonio Rep. Ruth McClendon defined as insanity, doing the same thing over and over and expecting a different result. McClendon feels that unless the political aspect of why road funding has not been properly addressed, all the public hearings and testimony won’t change the outcome.
Ultimately, Governor Rick Perry has repeatedly threatened a veto of any increase in transportation funding other than his policy of privatized toll roads, and he’s managed to successfully starve or squander existing funding enough to accomplish his goal. Perry, David Dewhurst, Tom Craddick and Steve Ogden’s desire to raid teacher retirement and public employee pension funds to finance these risky toll road deals fell flat in the Legislature, a sentiment echoed in yesterday’s hearing.
Once again, lawmakers tried to make the case that TxDOT is plum out of money and that higher taxes are needed to build more roads, while conservative legislator Rep. Linda Harper-Brown and a handful of conservative watchdog groups pushed back saying there’s already tax collected that’s not getting to transportation, which needs to be fixed first.
Business interests like the Texas Association of Business and virtually all the urban Chamber of Commerce groups shamelessly advocated private toll roads, and every tax imaginable to go to roads. San Antonio Greater Chamber of Commerce President Richard Perez even asked for a “arterial collection” tax, which is code for tolling surface streets, not just highways. These hogs at the trough want no tax left “un-levied” to exploit the powers of government taxation and forcibly empty our pockets to fill theirs. They want it all — from a hike in vehicle registration fees and vehicle sales tax to property tax, sales tax, and basically taxes on anything that moves.
Lawmakers again had a hard time discerning the true funding “needs” due to TxDOT persistently including projects not on the state highway system in its “funding gap” figures that started at $86 billion in 2006 (then was revised downward by $30 BILLION after the State Auditor found TxDOT had bloated that figure) and is now up to $387 billion. TURF also obtained sworn testimony from a former employee of the State Auditor that Perry’s Transportation Commission directed the agency to gin-up its 2006 funding gap so that it appeared insurmountable under the gas tax system (so it could push private toll roads as the solution to funding shortfalls). Distrust of TxDOT is the elephant in the room few lawmakers seemed prepared to address.
Americans for Prosperity and Texans Uniting for Reform and Freedom, two of only three watchdog groups to testify (Eagle Forum didn’t show and Texas Public Policy Foundation was invited but declined) compared with 31 invited witnesses in favor of higher taxes without accountability, emphasized prioritizing existing funding first, like ending diversions of gas taxes revenues away from transportation, and cleaning up a broken TxDOT that continues to illegally use taxpayers money on lobbying for more privatized toll roads.
Defending the indefensible
Though the Texas Conservative Coalition echoed many of the same sentiments, its Director, John Colyandro, was taken to task by Chairman Senator John Carona for advocating the most expensive road tax while rejecting a more affordable gas tax increase. “How is that conservative?” asked Carona.
While Colyandro stopped short of endorsing Rick Perry’s position of having all new capacity being toll lanes handed over to foreign corporations that charge 75 cents PER MILE to use public roads, he did advocate that private toll roads have a legitimate role as part of a mix of both toll and non-toll roads.
Earlier in the hearing, Carona laid down the gauntlet asking, “I’m looking for someone to come and defend to me that a privately built toll road is less expensive than a free road ’cause it just ain’t so.” While Colyandro and many of the lobbyists and local politicians asked for the moratorium on private toll roads be lifted and remain “one of the tools in the tool box,” none could defend how that funding “option” was more affordable than a gas tax increase. Because it isn’t. It’s rather telling when even a so-called anti-tax advocate lobbies for the most expensive road funding option, but outright rejects the most affordable one.
TxDOT admits Trans Texas Corridor still alive & well
Considering all the campaign rhetoric from Perry claiming the Trans Texas Corridor (TTC) is “dead,” his highway department laid it to rest when it admitted on the record that it’s still alive and well in the transportation code. The Department still has the legal authority to move forward with it should Perry be re-elected. So once again, all the claims that the TTC is dead, are just plain inaccurate. In fact, one of Perry’s appointees to the Transportation Commission, Ned Holmes, asked at a Commission hearing last fall that the TTC-69 private toll contract be expedited. Two other pending TTC corridors, La Entrada de Pacifico and Ports to Plains are also actively being pursued.
Private toll roads cost more than public
As part of the discussion on private versus public toll roads, several lawmakers queried TxDOT staff and Commission Chairwoman as to why public agencies can’t go to the bond market and fund these toll roads the same as a private operator can and even more cheaply since they can access tax-exempt bonds and don’t need to make a profit. The answer is it can stay in the public’s hands more affordably.
Though Transportation Commission Chairwoman Deirdre Delisi tried to say the private operators can tap money the taxpayers can’t, it’s totally false. In fact, it’s the other way around. The private sector is exploiting the tax-exempt capital backed by taxpayers (like federally backed TIFIA loans and Private Activity Bonds, PABs, as well as other sources of taxpayer revenue like gas taxes to subsidize toll projects) in addition to its access to the private bond market, which charges higher interest rates resulting in higher toll rates.
If a potential road is toll viable, the public toll entity can go to Wall Street and get private investors to fund the project using toll revenue bonds based on traffic forecasts. The private investors, not the taxpayer, are on the hook if the traffic fails to show-up to cover the debt. No public money has to be tapped when building a toll viable road.
Delisi seemed clueless as to what a toll viable road even was or how one is funded, looking to TxDOT staff to bailout her out of answering the question. That’s because TxDOT hasn’t built any toll viable roads since she became Chair. Delisi also claimed there were no guarantees (where the taxpayers bailout the private entities) that the private operators would make a profit, yet an article in today’s Bond Buyer confirms there are.
Financial death spiral
Under Perry, rather than scrap toll projects that won’t pay for themselves, he’s buried the taxpayers in massive amounts of new debt to SUBSIDIZE losing toll projects, socializing the losses and privatizing the profits. Pre-Perry, there was ZERO debt for roads. On Perry’s watch, $12 billion in debt has been amassed, not counting the off-budget debt local toll entities have had to incur to pick-up the slack for the State’s failure to properly fund STATE highways (and millions the Governor’s office has spent on roads for Colonias).
Much of this money has been leveraged multiple times (using borrowed money as collateral to borrow more money, and often several times over), the same reckless financial methods that got us into the mortgage crisis and bailout era. If we continue down this road, debt service payments will likely eat-up our existing gas taxes at a faster pace than inflation, fuel efficiency, and diversions COMBINED!
Though there’s some room to borrow more money for roads, the Texas Bond Review Board Executive Director warned, there’s not much available. Many of the State’s bond ratings have already dropped from AAA to AA+. Perry has basically maxed out the State’s credit card in just 5 years!
Carona closed the hearing saying the committees planned to reach out to taxpayer groups next time around to try and reach consensus so that road funding issues get solved and not stonewalled for another session. From our perspective, more funding is a non-starter until they end gas tax diversions and audit and clean house at TxDOT, holding them accountable for the years of wrongdoing.
Be sure to read TURF’s oral testimony and written testimony.___________________________________________________________
Link to article here.
North Texans revive push for local-option transportation funding bill
Posted Monday, Feb. 01, 2010
Officials from Fort Worth, Dallas and Arlington signaled their intentions at a joint hearing before the state House and Senate transportation committees Monday, saying that congestion and pollution have only worsened since a similar bill died in the closing days of the 2009 Legislature.
“We in North Texas are facing nothing less than a mobility crisis,” said Fort Worth Mayor Mike Moncrief. “North Texas needs your help. The people of Fort Worth need your help.”
The legislative initiative being prepared for the 2011 Legislature would allow county or regional elections in which voters would choose from a menu of funding options, such as an increase in gasoline taxes or auto registration fees, Fort Worth Councilman Jungus Jordan said in outlining the plan after the hearing.
Jordan said proponents are tailoring the local-option feature for use in any region and plan to mount a statewide push on behalf of the bill.
In another key difference from the previous campaign, Jordan said, proponent cities will rely on help from business groups instead of tax-financed city funds to pay for lobbying efforts for the bill.
The measure is similar in concept to the 2009 bill, which Gov. Rick Perry and vocal conservative groups denounced as a tax increase. But Jordan said supporters will stress that urban residents are already paying millions of dollars in “hidden taxes,” such as lost productivity and increased business costs, because of traffic congestion.
Arlington Mayor Robert Cluck, a physician, told lawmakers that proponents will also cite the public-health benefits of reducing traffic. He pointed out that pollution in the Metroplex carries the same consequences as smoking and exacerbates pulmonary illnesses.
“As we get more and more cars off the street, the amount of asthma that we see will go down dramatically,” he said.
More than two dozen suburban communities joined with Dallas, Fort Worth and Arlington in the unsuccessful effort to pass the 2009 measure, called the Texas Local Option Transportation Act. The larger municipalities also hired one of Austin’s premier lobbying firms, HillCo Partners, to help push the bill.
“We didn’t stop after the last session,” Jordan said.
Planners are still working out details but hope to have a draft within 30 to 60 days. North Texas leaders will also hold discussions with their counterparts in San Antonio, Houston, Austin, Lubbock, Corpus Christi, El Paso and smaller urban areas to form a statewide coalition, Jordan said.
Metroplex leaders, he said, still have the same priorities as in 2009: finding money for up to 250 miles of commuter rail and expansion of the now overburdened road and highway network.
“The unparalleled quality of life that we’ve built is severely threatened by our congested highways and roadways,” Moncrief told the lawmakers, saying that “many if not most” of North Texas residents are “fed up” with being stuck in traffic.
“They deserve answers,” he said. “Not next month. Not next year. Now.”
The daylong hearing by the House Transportation Committee and the Senate Committee on Transportation and Homeland Security was called to explore funding options to help the state avert a looming transportation crisis.
Some lawmakers are touting an increase in the gasoline tax, which hasn’t been changed since 1991.
Deirdre Delisi, chairwoman of the Texas Transportation Commission, declined to take a position on the proposal but said the state needs financial stability to address “serious transportation challenges” over the next two decades.
The state will run out of money for new transportation projects by 2012. A panel of Texas business and civic leaders appointed by the commission says the state needs to invest at least $315 billion through 2030 to maintain roadways, combat urban traffic congestion, and increase mobility and safety.
_________________________________________________________________
Link to article here.
EL PASO — State legislators on Monday began what will be a long and difficult process to create new revenue streams for highway construction in Texas.
Money to relieve the congested freeways in the state has dried up and lawmakers have been left with the task of coming up with billions of dollars to relieve traffic tie-ups.
The members of the Texas House and Senate transportation committee had a joint meeting in Austin to discuss how the state will come up with additional revenue to help build new roads starting in 2012.
Both committees heard from mayors — including El Paso Mayor John Cook — transportation officials, lobbyists and business leaders during a meeting that began at 7 a.m. El Paso time and lasted until well past 4 p.m.
Although no official plan was discussed, most of the conversation revolved around a proposed hike in the state’s fuel tax, which has been stagnant at 20 cents per gallon since 1991.
“Yes, that’s on everyone’s mind, but the reality is that it won’t be easy to sell a gas tax increase to the public,” said state Rep. Joe Pickett, D-El Paso, the chairman of the House’s transportation committee. “Just think about the sound bite on television. As soon as you hear increase, your mind is going to be turned off by it.”
Pickett’s committee, along with its counterpart in the Senate, began pitching a hike — or at least a retooling — of the fuel tax since last fall.
According to figures from the Texas Department of Transportation, the state could be $250 billion behind in highway construction by 2050, when the population of the state will reach 50 million.
“By January 2012, TxDOT will be dead-flat broke and without new revenues to build new roads. That’s a big issue,” said state Sen. Eliot Shapleigh, D-El Paso, a member of the Senate’s transportation committee.
Shapleigh said the state should not only increase the fuel tax but also alter it to make sure fuel-efficient vehicles pay their fair share in taxes for new highways.
Gov. Rick Perry, though, has said he will veto any bill that asks for an increase in fuel tax.
“Both Perry and (Lt. Gov. David) Dewhurst have seceded from reality and they’re doing nothing to fix the problem,” Shapleigh said.
Members of both committees conceded Monday that fixing TxDOT’s budget shortfall would require innovative legislation and changes to long-standing fee structures.
Some of the proposed changes include increasing vehicle registration fees, pushing cities and counties to use the Transportation Increment Refinancing Zone funding mechanism, and forcing TxDOT to become more efficient.
Officials also discussed creating a local option that would allow municipalities and counties to create local fuel taxes to help build local roads.
Legislators said the state needs to be more in tune with the U.S. Department of Transportation to secure as much federal funding as possible.
“Whatever happens, I hope all these tools that have been discussed are kept on the toolshed for us to use,” said Cook. “El Paso has taken advantage of many of these tools and we are doing well because of it.”
Many El Paso commuters, though, said they wouldn’t like to see an increase in fuel taxes, especially because gas prices have skyrocketed in the last five years.
“Look at me. I’m almost paying $3 a gallon here. And now they want me to pay more? That’s awful,” said Susan Robert, who was fueling her car at a Central convenience store on Monday. “I think we have enough roads for right now. Don’t raise my taxes.”
Pickett said he is concerned that the recent boom in highway construction — about $1 billion worth has been approved — in El Paso could make people think TxDOT is in good shape and that a fuel tax increase is not needed.
“El Paso is in good shape for the next four or five years, and I say that with hesitation because I know that we have done things right here and things have played in our favor,” he said. “But we are talking about the future and our list of projects is long.”
Pickett added, “Finding a solution to the transportation funding problem is going to be one of the most difficult things to get through the Legislature in the next session … but I guess I already knew that.”
__________________________________________________________________
AUSTIN — Texas lawmakers on Monday hammered home that without a new funding method, the Texas Department of Transportation will be unable to build any new roads beyond 2012 and will not have enough money to properly maintain existing roads within two to three years.
They also demonstrated that finding a new funding solution they can agree on won’t be easy.
Legislators on the Senate Committee on Transportation and Homeland Security and the House Committee on Transportation grappled with the use of “public-private partnerships” and comprehensive development agreements, or CDAs, that in some cases privatize toll roads.
Senate Chairman John Carona, R-Dallas, chastised language often associated with toll roads, that drivers can “choose” to use them. Carona said it’s “disingenuous” to say drivers will have an option if the only way to fund new-road construction is by tolling them.
“If every new road going forward is a toll road, that’s no choice,” he said.
Looking into other potential sources of dollars, Sen. Eliot Shapleigh, D-El Paso, asked Texas Transportation Commission Chairwoman Deirdre Delisi whether her board, appointed by Gov. Rick Perry to oversee TxDOT, supported an increase in the gas tax, something Perry has said he opposes. Delisi said it’s not the commission’s role to determine how much the gas tax should be increased, that’s the Legislature’s job.
Increasing the gas tax has been a political hot potato, but it’s an issue that’s gaining traction among lawmakers. It’s unclear, however, what chance it will stand during the 2011 legislative session.
Read the rest of the story here.
We heard explicitly in testimony at yesterday’s Joint Public Hearing of the House and Senate Transportation Committees that with regards to private toll road contracts, TxDOT stated that the private operator was taking all the risk, not the taxpayers. Well, the Bond Buyer reports differently (below). How is this a transfer of risk when Cintra is guaranteed profits if toll traffic dips below a certain minimum?
The article states:
“The developer is guaranteed a set reimbursement, creating an element of risk for TxDOT if use of a tollway falls below projections.”
Also, how is their access to capital better than the public’s when they’re using federally-backed TIFIA loans and PABs that are tax-exempt just like public sector toll projects?
“They (Cintra) will borrow about $500 million from private lenders and seek an equal amount in government-backed loans from the Federal Highway Administration.”
We now know the answer to these questions. See why the public doesn’t trust a word out of the mouths of TxDOT?
Texas Officials Seek a New Path To Private Transportation Funding
Tuesday, February 2, 2010
By Richard Williamson
The Bond Buyer
DALLAS — With a statewide moratorium on new private toll projects still in place after more than two years, the Texas Transportation Commission is planning a bypass around that financial barrier to leverage existing funds.
While the financial constraints exist statewide, the Dallas-Fort Worth Metroplex serves as the incubator in terms of innovative public-private finance, say Texas Department of Transportation officials.
“This is, in my view, the premier national laboratory for transportation projects,” said TxDOT spokesman Chris Lippincott. “There’s a lot of interesting stuff going on.”
The latest scheme — one that will require rule changes and exhaustive risk analysis from department staff — would allow a private developer to design, finance and rebuild a 28-mile section of Interstate 35-East from Dallas northward to Denton in exchange for reimbursement from TxDOT.
The finance method, known as pass-through tolling, is relatively new but well established with local governments, particularly counties. The system has never been used with a private developer, according to TxDOT. Nevertheless, current law allows the use of pass-through tolling by private companies.
Read the rest of the story here.
Link to article here. Illinois voters are no different than Texans when it comes to economics. The voters surveyed inherently know that when a private company takes over a public toll road, the toll rates will go up if for no other reason than private companies have to make a profit. One man quoted below also noted how a private company is likely to cut corners to drive up profits thereby decreasing the level of maintenance. Texas politicians beware: Texans, too, don’t want their roads privatized, and Texans don’t want higher transportation costs/toll rates.
Chicago Tribune/WGN
By overwhelming numbers, Republican and Democratic voters alike oppose privatization of the tollway system and believe it would lead to higher tolls, according to a Tribune/WGN-TV poll.
Why? Among Democrats, 71 percent say tolls are certain to increase if the tollway is leased to a private company; 68 percent of Republicans feel the same way.
The idea of leasing the tollway has been floated — and shot down — before, in Illinois and elsewhere. Several states are considering similar plans.
GOP gubernatorial contender Jim Ryan recently became the most prominent candidate to suggest the plan. The former Illinois attorney general noted that a long-term lease of the 286-mile system could generate billions of dollars to fund public works improvements across the state.
Ryan pointed to Indiana’s lease of the Indiana Toll Road for $3.8 billion as a guide.
A consultant’s report commissioned by the General Assembly in 2006 estimated Illinois could receive up to $23.8 billion by leasing the tollway system under a 75-year contract. The estimate assumed increases in tolls by 50 percent every 20 years.
These days, however, experts say a tollway lease would command far less because of the poor economy. The global credit crunch killed Chicago‘s proposed deal to lease Midway Airport for $2.5 billion last year.
Tollway officials had no comment on such a plan.
Critics say privatizing public assets amounts to a temporary fix. Many point to how Mayor Richard Daley’s deal to lease the city’s parking meters provided a one-time windfall but led to steep rate hikes, broken machines and unhappy users.
Frequent tollway user Alex Sidorowych, 56, of Lake Zurich, called tollway privatization a “bad idea.”
“It’s a taxpayers’ asset, and I think it should stay with the state,” said Sidorowych, a property manager who drives the tollways for business.
Motorist David Cromley, 52, a salesman from Sugar Grove, agreed: “There’s no doubt private industry could run the system better … based on the mismanagement in the public sector. But the private sector has to show a profit. I think prices would go up more, and maintenance would go down to a worse level.”
Chicago leased the Chicago Skyway to a Euro-Australian consortium in 2004 for 99 years for $1.83 billion. Since then, the toll for cars on the 7.8-mile stretch has risen to $3 from $2.
The lease allows tolls to rise to $3.50 in 2011, $4 in 2013, $4.50 in 2015 and $5 in 2017.
A benefit of the skyway lease is it frees the city from having to maintain the toll bridge, while providing long-term funding, said Laurence Msall, president of the Civic Federation, a non-partisan fiscal watchdog group.
But the parking meter lease turned into a fiasco because the deal was struck with no public scrutiny, he said.
The worst thing the state could do is use the proceeds from a tollway lease to relieve pressure on the state’s operating budget, which faces a $12 billion deficit, Msall said.
State Sen. Jeffrey Schoenberg, D-Evanston, proposed leasing the tollway in 2006, but the idea was doused by suburban GOP legislators.
Schoenberg said he finds it “somewhat ironic if not amusing” that some Republican candidates for governor are now talking up the same idea.
“It’s quite different from the harsh criticism many of them were lobbing my way a couple of years ago,” he said. “Now they’re more interested, and I’m more skeptical.”
Schoenberg also disagrees with those like Ryan who would suggest using lease proceeds for roads or infrastructure. The most prudent path, Schoenberg said, is to use the funds to pay down the state’s massive unfunded pension liability, estimated at $80 billion.
This past fall, the tollway wrapped up its $6.1 billion rebuilding and widening program. But the five years of construction have saddled the Illinois State Toll Highway Authority with $4 billion in debt that won’t be paid off until 2034.
And state law requires toll revenues to be reinvested in the tollway, not channeled to other agencies or the state’s general fund.
Keeping the system the way it is works just fine for Tammy Clayton, 46, of Harvey, a postal worker who commutes 100 miles a day on the tollway.
“I like the way things are now,” Clayton said while on a dinner break at the Hinsdale Oasis on the Tri-State Tollway (I-294). “The tolls would probably go up extremely (with a lease). It would make things pretty difficult for me.”
Link to article here. The key buzz word for these taxpayer rip-offs is “innovative.” It’s important to note Rick Perry calls public private partnerships (PPPs) “innovative financing,” too. His new name for the Trans Texas Corridor is “Innovative Connectivity Plan.” The common theme is these things are being pushed by corporations who stand to profit handsomely off these deals (if the traffic materializes), so all the terminology is the same. Trust me, politicians aren’t smart enough to come up with stuff on their own…
South Carolina: Innovative Toll Road Goes Bust
Southern Connector toll road in Greenville County, South Carolina finds itself $169 million in the red.
The first public-private partnership toll road established as a not-for-profit corporation has gone bust. The Connector 2000 Association, which operates a sixteen-mile, four-lane toll road linking Interstates 85 and 385 in southern Greenville County, South Carolina, announced last week that it was in default on its financial obligations.
“Traffic on the Southern Connector was inadequate to permit the association to collect sufficient toll revenues to pay debt service on the bonds which came due January 1, 2010,” a Connector 2000 Association statement explained. “The association has been advised that the trustee has made no payment of any such debt service. An event of default currently exists… The association is actively negotiating the restructuring of its bonded indebtedness with the trustee, the South Carolina Department of Transportation (SCDOT), and certain owners of large blocks of the bonds.”
In 1998, the association floated $200,177,680 in tax-free bonds to fund construction of the toll road that opened in 2001. These bonds were to be repaid over thirty-five years with the proceeds from toll collections. Just a few years ago, SCDOT touted this project as a prime example of the department’s “innovative financing successes.”
“Without innovative financing, this southern loop around the city of Greenville would be nothing more than a dream,” a SCDOT brochure boasted.
Like other highly-leveraged tolling efforts, the Connector was hampered by unrealistic traffic projections and rosy financial scenarios for an area expected to experience an economic boom.
“The expected growth in the region has yet to materialize,” the toll road’s 2008 annual report admitted. “This factor, the recession and consumer resistance to the payment of tolls (the Southern Connector Toll Road is the only toll road in Upstate South Carolina) have all contributed to the lower-than-forecasted traffic demands.”
There is little hope for the road’s recovery. In 2009, the association collected $3.9 million in tolls from motorists. Because SCDOT decided not to make the Connector a freeway, the majority of that revenue was swallowed by $2.8 million in expenses for things such as consultant fees, marketing, toll collection employees and legal fees — most of which would not be required if operated as a free road. With such a constrained cash flow, the road could not come close to meeting its $13.1 million annual bond interest obligation. The toll road’s bond payments had been insufficient since 2004, and now the association’s net deficit stands at $169 million.
As a result, Standard and Poor’s downgraded the toll road’s bonds from C- to the lowest possible rating of D. A copy of the road’s latest financial statement is available in a 600k PDF file at the source link below.
Source: Briefing by the Connector 2000 Association (Connector 2000 Association, Inc., 1/11/2010)
Farouk Shami Proposes Overhaul in Transportation Policy
Texas Insider – January 20, 2010, On The Record
HOUSTON- Farouk Shami released his campaign’s policy on transportation issues Thursday. Transportation issues are one the greatest challenges facing the State of Texas. Every hour spent stuck in traffic is an hour of time robbed from Texans. Continue Reading →
Link to article here.
Elite’s Toll Road Scheme
The Big Picture/with Mark Anderson,American Free Press deputy editor, www.AmericanFreePress.net; and host of RBN’s When Worlds Collide, broadcast Saturdays from 7 to 9 p.m. Central; Call in, 800-313-9443.
Posted: January 15, 2010
Outraged Texans are coming out swinging in early 2010, continuing the brutal fight against the outright privatization of public highways — trying to avoid getting steamrolled by Wall Street “highwaymen” and their political allies who would deprive Texans and all Americans of the ownership and cost-effective use of highways already paid for with gasoline taxes.
Watching a state like Texas tells a great deal about what could happen anywhere. So, AMERICAN FREE PRESS has been monitoring the Texas situation for more than three years, as the drama plays out on whether the Trans-Texas Corridor – a pivotal piece of the proposed NAFTA Superhighway system for engineering the physical aspects of the North American Union scheme – will be built to any irreversible extent; and whether existing freeways will be converted to toll ways in a privatization scheme to cancel any competition that freeways would pose to aggressive plans to toll any highway with enough traffic for manipulators to make money.
These financial sharks tempt the cash-strapped states with quick money by acquiring freeways from them and transforming them into for-profit toll ways. Or sometimes state-controlled toll ways are privatized under long lease agreements, as happened with the Indiana Toll Road. Tolls of 75 cents a mile are a distinct possibility in places such as Dallas-Fort Worth, an area whose destiny appears to be the U.S. “toll” capital.
The usual suspects will leave no road un-tolled here — and abroad — if we let them get their way. Yes, Goldman-Sachs is creating a “highway market” to control. Meanwhile, the Rothschilds are reportedly among the major financial forces privatizing the roads in Britain.
The domestic scene’s latest developments included a Jan. 11 final public hearing in Texas on a plan to charge tolls on the northbound lanes in San Antonio’s large 281/1604 Interchange. San Antonio Toll Party (SATP) members turned out to protest the plan.
Their main concerns were noted in a news bulletin:
“They’re charging us the price of a whole interchange ($143 million), but we’re only getting half ….Each set of ramps costs roughly $59 million, yet the [Regional Mobility Authority] is putting this project out to bid with $84 million in ‘project enhancements’ in order to use-up all our stimulus money on anything but fixing 281 North or building the whole interchange toll-free.”
From there, the SATP meets Jan. 21 at the Big ’Z Burger Joint in San Antonio at 2303 North 1604 W — mainly to prepare for a major hearing of the Senate Transportation Committee on Feb. 1 in the capital of Austin. AFP plans to attend.
SATP’s news bulletin on the hearing notes: “Our attention turns to accountability at the ballot box, producing our Voter Guide, preparing for a big grassroots turnout at [the] hearing in Austin on Feb 1 …. Come be a part of preserving our freedom to travel.”
Those in AFP’s growing Texas readership take note: This Austin meeting, to take place at 8 a.m. at the Capitol Extension Auditorium, will focus on statewide road funding alternatives.
“If you want to end tolling as the primary means to fund new roads and for the most affordable method of funding roads to prevail [the common use of gas taxes for maintenance, repairs and needed expansions] you must come to Austin … to be heard,” the SATP also announced. “That means telling lawmakers ‘no’ to selling our roads to private, foreign corporations [Spanish firms under Comprehensive Development Agreements]; ‘no’ to raiding teacher retirement funds and public employee retirement funds to finance them; ‘no’ to any tax increases until they clean house at TxDOT; and stop raiding the gas tax for things that don’t relate to roads; and ‘yes’ to the most affordable way to fund roads (the statewide gas tax that hasn’t been raised since 1991).”
To give an idea of what these toll schemes mean to the average motorist no matter where they’re enacted, The Fort Worth Star-Telegram on Dec. 27 noted: “Tolls could go as high as 75 cents per mile when congestion is at its worst. That could be more than five times higher than the average 14.5 cents per mile that motorists currently pay on Dallas-area toll roads.”
It’s a concept called “value pricing” in which the “value” all goes one direction — into the fat cats’ pockets.
Building a toll road that you are forced to use has the same effect as paying a higher tax on gasoline. Whether a highway is free, or you are tolled, you still pay 38.4 cents in federal and state gasoline taxes. That is the baseline. Assuming that your vehicle averages 20 miles per gallon, if you drive 20 miles on a toll road charging the maximum 75 cents per mile, you pay your 38.4 cents in current gas taxes plus another $15 in tolls. Thus, the combined tolls and taxes to drive on that road total $15.38 per gallon of gasoline. And to think Americans griped when gas was $4 a gallon.
Yet, the ultimate problem is that more toll ways in any state will create a vast “highway market” [read: racket] by privatizing all major public roads so the NAFTA Superhighway, in Texas and beyond, can be waiting in the wings as a major blow against territorial sovereignty. It also is a surefire way to further impoverish the masses who already had what should be a publicly-controlled asset – the creation of money itself – taken away from them starting in 1913 when the Federal Reserve was born.
Now, roads – which, like money, are used by nearly everybody on a daily basis – may be the final frontier for the elite monopolists whose tentacles pull at the grassroots and span the globe.
Link to article here.
No further evidence is needed for former Transportation Secretary Mary Peters’ motivation for her statement below. She’s lobbying lawmakers to end the moratorium on private toll road contracts (called CDAs or PPPs) that sell our Texas roads to the highest bidder on Wall Street and grant monopolies to private corporations because she’s the hired hand of Zachry, a major beneficiary of these contracts!
Then, there are other articles below that report on the comments of other players at the Texas Transportation Forum held in DFW, primarily addressing transportation funding issues. Of course, it was stacked with politicians, like John Cornyn, who echo Peters and want to sell our TX roads to their friends on Wall Street. This is the MOST expensive way to fund roads (coming from so-called fiscal conservatives): it fleeces taxpayers (75 cents PER MILE in toll taxes), grants monopolies, and limits expansion of free roads surrounding toll roads, to name a few. Cornyn also wants to raise the gas tax. So he wants a double whammy…
By Michael Lindenbarger
January 7, 2010
Dallas Morning News
Texas lawmakers should reauthorize private toll roads in the Lone Star State when they return to Austin in 2011, former U.S. Transportation Secretary Mary Peters told Texans Thursday.
With little likelihood that Congress will pass meaningful transportation reform, or find long-term funding solutions, in 2010, Peters said states will do well to send strong messages that they are doing their part to solve their transportation challenges. Toll roads, and the ability to attract private investors to pay for them, are one way many states, including Texas, have used to do just that, she said.
Under Gov. Rick Perry, Texas emerged as the leader among states in pursuing private toll roads but that momentum was halted last year, when the Legislature allowed the legal authority for most private toll roads in Texas to lapse.
“That moratorium on public private partnerships should be removed,” she said. “The state of Texas should put that in abeyance. Restoring (private toll roads) here in Texas could show the federal government that you are really serious about tackling your own transportation problems.”
Zachry American Infrastructure, in partnership with ACS, was chosen by TxDOT as the Master Developer for Interstate 69 in Texas. Zachry American Infrastructure partnered with Cintra to form SH 130 Concession Company, which is developing SH 130 segments 5 and 6.
Peters is now a paid consultant — or “senior adviser” — to Zachry American Infrastructure, a private toll road (and other infrastructure) developer affiliated with Zachry Construction, a Texas construction company founded in 1924. TxDOT tapped the infrasture development firm to provide a master plan for Interstate 69 in Texas, and the company joined with Cintra to develop SH 130 in Austin. (Note: this paragraph was changed to remove an inaccurate reference to Zachry being a Spanish firm. It is headquartered in San Antonio. -ML)
Peters spoke at the annual Texas Transportation Forum, a talk fest sponsored by the Texas Department of Transportation involving hundreds of engineers, local officials, financiers and others.
“I do think the Jobs for Main Street bill will pass this year, in some form, but I think it will be passed at the expense of a long-term reauthorization bill,” she said. “I just don’t think the political will is there (to pass transportation reauthorization).
If the jobs act does become law — and it faces opposition in the Senate — it would mean nearly $40 billion more for American highways, perhaps as soon as later this year. That’s almost as much as the states received for roads and bridges in 2009 as part of the first — (and much larger) stimulus package.
Texas would receive about $2.5 billion, about the same it received in 2009.
________________________________________________________
Link to article here.
Cornyn, Pickett to speak this morning; Meanwhile: Is ‘transportation crisis’ real?
Fri, Jan 08, 2010 | By Michael Lindenberger/Reporter
Dallas Morning News
Probably the most interesting thing that former Transportation Secretary Mary Peters said yesterday was that the reason efforts to convince Congress and Texas lawmakers alike to get serious about providing long-term solutions to transportation is that lawmakers, like voters, have not yet accepted as true claims that we are in the midst of a transportation crisis.
Until they do, she said, no serious change — and that includes no serious discussion of new revenues or taxes — will take place. And lawmakers won’t believe it’s a crisis until voters do.
That we’re in the midst of a transportation — and other infrastructure — crisis is an article of faith among most of the folks at this annual Transportation Forum, as it is for leaders of the Texas Department of Transportation, local officials that lead the Regional Transportation Council in North Texas, and crusading lawmakers like Texas Sen. John Carona.
There is some room for debate about just how bad the crisis is, but the figures that tout our need versus our available funds usually reach in the scores of billions, if not hundreds of billions, over the next 20 years. (The Society of American Civil Engineers says when all our aging infrastructure is taken into account, the bill reaches into the trillions.)
The problem is, most folks get to where they want to go just fine: The roads are more or less smooth, the bridges don’t collapse (other than that one in Minneapolis) and the water comes on when you turn on your faucet. Where’s the crisis?
Truth is, most people experience the transportation crisis as a commuter irked by traffic jams — but most of us even get use to those over time, and as long as they are steadily worse, and not suddenly worse, we don’t get crazed about it.
Instead, the more immediate “crisis” for most Texas drivers is the one affecting their wallets — the higher tolls and sometimes higher gas prices.
None of this is to suggest that Carona and the other folks urging real solutions — and higher taxes — for transportation are wrong. They’ve certainly got the big picture down of how a city and state continues to grow and attract business and jobs, and clean its air — and all of that stuff is going to take money, or it will cost us money down the road if we don’t act.
I get that. But Peters, who believes that we do have a crisis, is right to say that the challenge the planners, politicians and engineers face when trying to make change is that so far, most folks simply don’t believe them. And even when in their heart of hearts they think something needs to change, they don’t trust the system to get it right.
I’ll write more this afternoon, after we hear from a series of federal lawmakers — most of whom we can expect will tell us we’re in a crisis. Texas House transportation chairman Joe Pickett will speak — he’s one of the guys pushing for a gas tax increase in 2011 — and so will Sen. Robert Nichols, who knows his way around transportation, too.
At noon, Sen. John Cornyn speaks and I’m interested to see if he takes on transportation seriously as he prepares for a likely future as the state’s senior U.S. Senator. He’s not been big on transportation on the past, but it’s interesting to see him on the line up with a keynote address.
More on that, and much else, later right here, on the transportation blog.
____________________________________________________________
Link to article here.
Cornyn: Private tolls should be part of the answer, but only part
Fri, January 8, 2010, By Michael Lindenberger
Dallas Morning News
AUSTIN — Sen. John Cornyn said today that private toll roads should be part of the solution as government leaders in Texas and in Washington struggle to pay for new roads, bridges and other transportation infrastructure.
They just shouldn’t be the only solution, he added in a speech the closed a half-week of transportation chit-chat among hundreds gathered for the fifth annual Texas Transportation Forum.
“The first solution many people point to is say, ‘We can solve this with more money.’ Certainly, money can solve a lot of the problems but it can’t solve all of them,” Cornyn said.
If government leaders did a better job of explaining the choices Texans face when it comes to paying for roads, they might be more supportive of not just new toll roads but even other expenses, like higher gas tax rates. But for now, he said, government has done too poor a job in discussing those realities — as evidenced, he said, by the voter pushback that led lawmakers in Austin to end the state’s authority to enter into new private toll road deals.
“To quote Milton Friedman, there is no free lunch,” he said. Voters know that, but they resent seeing “solutions” pushed on them from above. “I have always believed that leadership entails communication. You can’t just call in a room full of smart people and take the best ideas and impose them on people. Not in a democracy.”
He stopped short of explicitly calling on Texas lawmakers to restore the authority for private toll roads in 2011, as former Transportation Secretary Mary Peters did on Thursday.
When asked after his speech if he would flatly rule out a higher federal gas tax, he declined to do so. Instead, he said that he’d leave it up to voters to decide what they are willing to support after their leaders have done a better job of explaining the trade offs involved. If drivers felt they could get a quicker ride to work for a reasonable increase in tolls or other fees, they might sign on, he said.
“Politically, this is the time when the zealots in both parties come out and fight for every little bit of ground, and will make people like Sen. Nichols and Rep. Pickett not speak to each other.”
In that climate, he said, even something as widely supported in principle as ending the gas tax diversions — the practice of diverting gas taxes to pay for non-transportation related items — gets complicated. “The first thing that happens when you say, ‘let’s end these diversions,’ which everyone rushes to say they support, is you go to the budget-writers and say let’s find $1.2 billion in general revenue. That’s when I go to Sen. Nichols, and ask for help, he tells me ‘No, and I hate you.'”
He got a laughs for the I hate you line, but his point is that real compromise across party lines will be tough in 2011. And in a year when budget writers will be worrying about every penny, he said support for ending the diversions will be hard to find.