By Joan Gralla - Reuters - Thursday, June 28, 2007
NEW YORK, June 28 (Reuters) - Texas on Thursday conditionally approved a public agency to overhaul a busy Dallas-Fort Worth highway instead of Spanish toll-road firm Cintra (CCIT.MC: Quote, Profile, Research), a decision that analysts said could stall road privatization plans in other states.
The North Texas Tollway Authority outbid Cintra by $500 million, offering a $2.5 billion upfront payment and $833 million in annual lease payments.
Thursday's decision was made by the state transportation commission, which selected the North Texas Tollway Authority by a vote of four to one, said spokesman Mark Cross.
Cintra in February won the deal to overhaul State Highway 121, but critics said the terms overly favored the developer by including a non-compete clause and a 50-year lease.
Texas lawmakers responded by asking the local highway authority to submit a competing bid.
The legislature also enacted new curbs on such privatizations, which allow developers to lease state highways for long periods in return for the toll revenue.
New Jersey and other states weighing road privatizations have said they are closely following the twists and turns of Texas' saga because they want to avoid a similar backlash.
Cintra and the JPMorgan Fund, its partner, said in a statement on Thursday their bid was better because "contracts are in place, toll rates are capped, lending commitments are made, design work is complete and we are ready to roll up our sleeves and get to work."
The companies added their deal would invest $7.3 billion in the Dallas-Fort Worth area over the next 50 years.
Texas' Regional Transportation Council on June 19 picked the public authority instead of Cintra and state Commission Chair Ric Williamson has set a policy of deferring to local policy-makers, said his spokesman, Randall Dillard.
The regional council and the North Texas Tollway Authority now have about 60 days to draft more detailed plans, including the timing, annual payments, enforcement clauses, toll policy and the length of the pact, Dillard said.
The authority will then have about 45 days to secure the financing and sign a contract with the state commission.
"We've already authorized our staff to sign the Cintra proposal," the Commission chair noted during the meeting, broadcast on its Web site (http://www.txdot.gov).
"If they (the authority) can't get there, we'll sign the project with Cintra," he added.
Commissioner Ted Houghton dissented, stressing how inflamed the battle has been. "It's unfortunate that they (Cintra) have been vilified as foreigners," he said.
Cintra is one of the huge European companies that develops toll roads around the world. This approach is much more common in Europe, Asia and Latin American than in the United States.
The commissioners praised the private road developers for sparking the competition that produced Thursday's award.
Dillard said the State Highway 121 overhaul "was really just a long-range dream" until the private companies competed for the work. Asked if the commission would now return to using public agencies instead of developers, he replied that this project was "a good example of empowering local officials."
State Highway 121 is prized by developers because Dallas and Fort Worth are some of the fastest growing U.S. suburbs. For example, Collin County, which lies just north of Dallas, is expected to draw 514,000 new residents from 2005 to 2030.
Chicago sparked U.S. interest in this way of funding new highways without hiking taxes two years ago when it got $1.83 billion for leasing its main commuter link to Indiana, the Skyway toll bridge, to Cintra, part of Ferrovial (FER.MC: Quote, Profile, Research), and MIG, run by Australian bank Macquarie Bank Ltd. (MBL.AX: Quote, Profile, Research)
Fiscal monitors, however, have bashed Chicago's strategy, saying its 99-year pact is much too long and fails to give taxpayers the extra toll revenue the companies can get.
The North Texas Tollway Authority has said private firms may be better suited to developing roads in undeveloped areas because the bigger risk may justify their bigger profits.
Report in Reuters
