NEW UPDATE:
Texas DOT Gets $3 Billion Nod,Gears Up for Market
Financial Times
January 29, 2010; Updated: February 5th, 2010
In separate meetings yesterday, the Texas Transportation Commission and the State Bond Review Board authorized TxDOT to develop a preliminary official statement and take other steps needed to issue the debt.
TxDOT has not hired underwriters for the deal, which is expected to come in March or April, according to spokeswoman Kelli Petras.
Known as Proposition 12 bonds for the proposal authorized by Texas voters in 2007, the debt is designed to help the state catch up with its growing transportation infrastructure needs.
TxDOT executive director Amadeo Saenz said the TTC has already estimated that the state will need $332 billion more than is envisioned over the next 20 years to keep up with transportation needs.
As those needs grow, fuel tax revenues are falling and are currently 2% below projections made in 2009. Despite the need for more revenue, neither Gov. Rick Perry nor his Republican primary challenger Sen. Kay Bailey Hutchison are likely to call for a tax increase in an election year.
Without additional tax revenue, the state’s transportation planners have turned increasingly to toll roads, particularly in the North Texas area, where at least four major projects are underway or in the planning stages.
The North Texas Tollway Authority is preparing to take over construction and management of State Highway 161 in western Dallas County if it can do so without endangering its credit ratings of A-minus from Standard & Poor’s and A2 from Moody’s Investors Service.
At yesterday’s TTC meeting, commissioners voted to continue negotiating a deal with the NTTA over plans to guarantee its debt for the $1 billion tollway, which is already nearly three-fourths complete. To acquire the project, the toll authority would pay the Regional Transportation Council of North Texas $458 million for the completed sections, while investing $610 million for the completion of Phase 4. The NTTA would then operate the tollway and apply revenues to its bond debt.
To avoid straining revenues on its existing toll system, the authority would finance SH 161 separately.
Under the proposed plan, TxDOT would guarantee debt service on the SH 161 bonds so that if revenues fell short, the state would step in to make the debt payments.
With yesterday’s agreement to continue negotiations, the NTTA gains more time to work out a deal that would reduce its risks.
Link to original source, Bond Buyer, here. __________________________________________________________________
Link to article here.
Link to Toll Party Founder Terri Hall’s article about this risky gas tax heist here.
Southwest Parkway and Texas 161 toll road projects clear big hurdle
Posted Thursday, Jan. 28, 2010
AUSTIN — A deal approved Thursday all but assures that the proposed Southwest Parkway toll road in Fort Worth will be under construction later this year.
The Texas Transportation Commission agreed to use the state’s gas taxes as collateral on two projects being developed jointly — Southwest Parkway and Texas 161 in Grand Prairie — even though those projects are toll roads.
The move, approved Thursday morning by a voice vote, could tie up highway funds normally used on nontoll projects for years. Nonetheless, it strongly improves the chances that the first eight miles of Southwest Parkway, from Interstate 30 near downtown Fort Worth to Dirks Road on the city’s southwest side, will be under construction by the end of the year and open by mid-2013.
Officials from the Texas Department of Transportation and the North Texas Tollway Authority agreed that the two roads would be developed together and would share revenue until each was paid for.
“I believe there is less risk doing the projects together than doing the projects separately,” said state Rep. Rob Orr, R-Burleson, who spoke to the commission along with state Sen. Wendy Davis, D-Fort Worth.
Still, Thursday’s action was a preliminary step. Over the next 30 days, both sides must hammer out specific legal language to make the agreement stick.
Key question
A crucial question is whether the agreement can be structured to pass muster with bondholders, who may not approve of combining finances for the two projects and may insist that their investments be restricted to one road or the other.
The Transportation Department also wants an assurance in the contract that the tollway authority will release the state’s gas tax fund — Fund 6 — as collateral as early as possible.
Commissioner Ned Holmes of Houston expressed doubt that the two sides could agree on language that satisfies that concern by Feb. 28, the tollway authority’s deadline for deciding once and for all whether to take over the Texas 161 project.
Texas 161 runs parallel to Texas 360 in Arlington and is expected to be a main path to Cowboys Stadium, especially for fans coming from north Dallas.
“I don’t know how you’ll be able to do that in the next 30 days,” Holmes said. “It’s been going on for some time now.”
Still, with the state’s highway fund as a backstop, the North Texas Tollway Authority expects to get a much higher credit rating on the bond market. As a result, it will enjoy a better interest rate — and will raise about $400 million more for the project through bond sales than would have otherwise been possible.
Despite that infusion of $400 million, there is still a $300 million funding gap between the estimated cost of the projects and the amount of revenue the tollway authority can raise.
Funding gap
The long-term risk for Texas taxpayers is that if either toll road project struggles financially at any time during the next four decades, the state may have to dip into its gas tax reserves to help the tollway authority pay its debts.
The arrangement — a toll equity loan — could tie up millions of dollars a year in highway funds that otherwise would be spent on nontoll projects.
Transportation commissioners originally opposed taking that risk but ultimately decided to go along with it. The alternative, they noted, was to not build Southwest Parkway.
In recent years, lawmakers have severely restricted the Transportation Department’s ability to build its own toll projects — especially if private developers were involved. In Dallas-Fort Worth, the tollway authority, which is a public agency, has first dibs on any project, according to state law.
“The tools that have been taken away from this agency need to be returned so we can be creative in our delivery,” said Deirdre Delisi of Austin, the Transportation Commission chairwoman. “There’s only so much capacity we have. It ties our hands for future projects.”
Meanwhile, the North Central Texas Council of Governments, the Dallas-Fort Worth area’s official planning body, is searching for other funding sources to close the $300 million gap, transportation director Michael Morris said.
One option is securing a federal transportation infrastructure loan, although that’s considered a long shot. Another could be a state infrastructural bank loan, although that source likely wouldn’t be available until September at the earliest.
“We’ve got 30 days to close a $300 million gap,” Morris said.
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Link to article here.
Highway chiefs poised to give NTTA line of credit to ease financing of SH 161, Southwest Parkway
By Michael Lindenbarger
Dallas Morning News
Thu, Jan 28, 2010
It looks likely that the North Texas Tollway Authority will get the credit help it has asked for.
The Texas Transportation Commission will decide this morning whether to give NTTA a line of credit that the toll authority would be able to use in the unlikely event that toll revenues fail to provide enough revenue to cover the billions of dollars in debt it will have to take on to build both SH 161 in Dallas County and Southwest Parkway in Tarrant County.
The line of credit, even if never used by NTTA, will save it hundreds of millions of dollars in financing costs over time, both sides agreed.
In return for extending the credit, TxDOT wil be relieved of obligations to build about $500 million in interchanges and other work related to the Southwest Parkway/Chisholm Trail project.
It’s not a done deal yet, but yesterday even the commissions’ most hard-core proponent of toll road privatization said he was satisfied that the loan deal is a calculated risk that will bring sufficient value to Texas.
Reached last night in Austin, NTTA board chairman praised TxDOT for what looks like its willingness to move forward with the loans, which he said NTTA is unlikely to ever have to use.
Some commissioners seemed uneasy with the loan arrangement, given that if NTTA should face a disastrous downturn in revenue, the extent of the liability Texas could face is enormous — however unlikely it might be. The total cost of the two roads will be more than $8 billion.
Michael Morris, transportation director of North Central Texas Council of Governments, which helped negotiate the agreement, said before Texas would be asked to make payments to cover NTTA’s loans, the authority would first raise its rates. It could, he and NTTA’s executive director said, likely double its rates without losing significant number of customers.
NTTA’s board of directors will vote Feb. 26 on whether to finally commit itself to SH 161, triggering an obligation to pay back the state $258 million in construction costs, plus make a $200 million concession payment.
That money will be used on Dallas County projects, Morris has said.