Friday, June 22, 2007

“The question is whether we want the money to stay in North Texas..."

Feelings Mixed on NTTA Pick
by Richard Williamson -The Bond Buyer - 6/20/07
Copyright 2007

DALLAS — In awarding the $5 billion State Highway 121 toll road project to the North Texas Tollway Authority, many local government representatives on the North Texas Regional Transportation Council cited the importance of keeping toll revenue in the region.

But others fear that stripping the project from the private development team of Cintra/JPMorgan four months after it was awarded will keep badly needed capital out of the region.

“I believe we have enormous risk to the region if we go with the NTTA bid,” said Wendy Davis, a Fort Worth City Council member who serves on the RTC. “I don’t think it is going to keep money in the region. And I think it is the least — not the most — responsible decision we can make.”

Citing a list of Dallas-Fort Worth-area toll projects on the NTTA’s agenda, she said: “If we want to be able to finance all those projects, we’ve got to keep the private sector at the table.”

Davis ended up on the losing side of a 27-to-10 vote Monday as the RTC reversed its February decision to award SH 121 to Cintra/JPMorgan, the winner among three private development finalists. On Monday, the RTC chose the NTTA despite analysis from the Texas Department of Transportation and Price Waterhouse Coopers showing Cintra’s proposal had a higher net value to the region.

The RTC’s decision must be ratified by the Texas Transportation Commission on June 28, but NTTA chairman Paul Wageman noted that the TTC had vowed to support the RTC’s decision. The RTC, a coalition representing regional governments, works under the TTC to manage transportation projects in the Dallas-Fort Worth area.

“We look forward to the swift approval by the Texas Transportation Commission at their next scheduled meeting later this month,” Wageman said.

Jose Lopez, Cintra’s Austin-based U.S. director, later issued a written statement.

“As independent analyses have shown, the joint venture of Cintra and institutional investors advised by JPMorgan Asset Management is the superior proposal for SH 121,” Lopez said. “The RTC’s own independent financial advisers found that our proposal offered the best value to the region.”

In voting for the NTTA, some council members cited SB 792, recently signed by Gov. Rick Perry. It gives toll authorities first rights to toll projects. That translates to a virtual monopoly for government toll authorities, one council member said.

Many of those voting for the NTTA looked askance at Cintra’s projected profit of $763 million over 50 years.

“The question is whether we want the money to stay in North Texas, or go to New Jersey or Delaware or wherever it might go into the international market,” said Dallas City Council member Bill Blaydes.

Some RTC members, such as Tarrant County Judge Glen Whitley, switched positions in favor of NTTA. “I think this is the toughest decision I’ve had to make in the 10 years I’ve been on the board,” Whitley said. “This is supposed to be the crown jewel in the region and maybe the state. So woe be to us if this project fails.”

When completed in 2010, State Highway 121 will be a 23-mile tollway in Denton and Collin counties north of Dallas.

While Cintra claimed that awarding the project to the NTTA would reduce the authority’s bonding capacity by $1.5 billion, the authority claimed that winning SH 121 — more than doubling its bond debt — would actually increase its bonding capacity by $4 billion or more.

Price Waterhouse Coopers analyst Arthur Baines landed somewhere in the middle, saying NTTA debt capacity would drop by about $1 billion immediately. It would gradually recover over the initial 23 years of the 50-year financing. For the remaining 27 years, the project would have a positive impact on the NTTA’s debt capacity, Baines indicated.

The authority plans to issue commercial paper and take that out with bonds within 60 days. The proposal calls for up-front payment of $2.5 billion and $833 million over 50 years to the RTC. The NTTA has already recognized that its A-plus credit rating will fall. But officials expect it to remain in the “A category.” All three credit rating agencies have examined the proposal and announced plans to reevaluate the ratings once the project is finally awarded. Indeed, Standard & Poor’s yesterday placed its A-plus rating for the NTTA’s roughly $1.4 billion of revenue bonds issued for the Dallas North Tollway System on CreditWatch with negative implications.

© 2007 The Bond Buyer

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