Friday, June 29, 2007

Minute Order of Texas Transportation Commission on SH 121


DALLAS District
Transportation Code, §223.210(h) provides that the moratorium on certain comprehensive development agreements imposed by that section does not apply to a comprehensive development agreement entered into in connection with the SH 121 project if before the Texas Transportation Commission (commission) or the Texas Department of Transportation (department) enters into a contract for the financing, construction, or operation of the project with a private participant, an authority under Chapter 366 was granted the ability to finance, construct, or operate, as applicable, the portion of the toll project located within the boundaries of the North Texas Tollway Authority (NITA), and the authority was granted a period of 60 days from March 26, 2007, to submit a commitment to the metropolitan planning organization which is determined to be equal to or greater than any other commitment submitted prior to March 26, 2007.

Transportation Code, §223.21O(h) also provides that ifthe financial value ofthe commitment submitted by the authority is determined to be equal to or greater value than any other commitment submitted prior to March 26, 2007, the commission shall allow the NITA to develop the project.

On March 26, 2007, the Chair of the Regional Transportation Council (RTC), the metropolitan planning organization for the Dallas-Fort Worth region, sent a letter to the chairmen of the commission and the NITA that in part asked the NITA to determine if the NITA Board wished to submit a binding commitment for the SH 121 toll project. If so, the submission would be due to the RTC no later than May 25, 2007.

In the March 26, 2007 letter, the Chair of the RTC indicated that any binding commitment submitted by the NITA would need to: (1) clearly state what is "guaranteed" in its proposal; (2) specify and communicate the risk that will be borne by users of the NITA System due to (a) a change in bond rating, (b) possible toll rate increases on other NITA facilities, and (c) the delayed development of committed projects; and (3) describe any other toll projects which cannot be built by NITA in a timely fashion.

On May 18,2007, the NITA submitted a public sector proposal to finance, design, construct, operate, and maintain the SH 121 toll project to the RTC. As requested in the RTC's March 26,2007 letter, the department reviewed the NITA submission and compared that submission with the proposal submitted by Cintra Concesiones de Infraestructuras de Transporte, S.A. (Cintra) in response to the department's request for proposals. The RTC also contracted with PricewaterhouseCoopers to act as independent financial advisor to the RTC for the purpose of assessing the financial value of the Cintra proposal and the NITA submission using the criteria in Transportation Code, §223.21O(h).

On June 18,2007, the RTC passed a motion that the NITA undertake the development, design, construction, financing, operation, and maintenance of the SH 121 toll project, and requested that the commission approve the selection of the NITA for the SH 121 toll project.

The NITA submission did not include a formal commitment to execute a pre-determined project agreement, as was required under the department's request for proposals, or firm lending commitments. The NITA has indicated that their ability to achieve financial close within 60 days from the date of the NITA's selection is certain. However, under the NITA submission, commitments to finance the SH 121 toll project are conditioned on the execution of a project agreement between the department and the NITA in a form acceptable to the underwriters and lenders. Moreover, the summary of the review of the NITA submission prepared by RTC staff letter.
The NITA proposes to finance the SH 121 toll project as part ofthe NITA System, with some project costs paid from revenue derived from other parts ofthe system. The NITA system is exposed ifproject costs are higher, traffic and revenue is lower or service commencement is delayed, or the rate of inflation by which toll rates may be escalated is lower than current estimates. The negative impact ofthese risks could be borne by users in the form of higher system tolls and by local communities if previously committed projects are delayed or cannot be constructed.

IT IS THEREFORE ORDERED by the commission that the RTC recommendation that the NITA undertake the development, design, construction, financing, operation, and maintenance of the SH 121 toll project is approved.

IT IS FURTHER ORDERED that the department is authorized to enter into a project agreement with the NITA if: (I) within 60 days from the date of this order, RTC staff has negotiated withthe NITAthemajorterms oftheprojectagreement andhassubmittedthosetermstothe department, and a quantification ofpublic benefits anticipated to be derived from the NITA's development, design, construction, financing, operation, and maintenance of the SH 121 toll project has been agreed to by the RTC; and (2) the NITA is able to achieve financial close, including payment ofthe agreed upfront payment amount, concurrently with or no later than 45 days after the execution and delivery of the project agreement. In the event financial close occurs after the execution and delivery of the project agreement, the agreement shall include a provision requiring termination ofthe agreement if financial close, including payment ofthe agreed upfront payment amount, is not achieved by the end ofthe 45 days allowed under this order.

IT IS FURTHER ORDERED that the major terms to be negotiated by the RTC staff shall include: (I) the timing and amount of the annual payments; (2) adherence by the NITA with the RTC's toll rate policy; (3) enforcement provisions and remedies for the NITA's failure to comply with the toll rate policy, project schedule, payment obligations, and other commitments; and (4) the term of the agreement.

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