Saturday, June 30, 2007

In Texas, even losing bidders on toll road projects get paid

By GORDON DICKSON - Fort Worth Star Telegram - Mon, Jun. 25, 2007

Unsuccessful bidders have received $4.1 million since 2002 for intellectual property, Texas Department of Transportation records show. The state began making payments several years ago so that private companies would compete more vigorously for toll projects.

"It's not a consolation prize," agency spokeswoman Gabriela Garcia said. "We're not just paying for paper. We take their proposals and, even though they're an unsuccessful proposer, we use pieces of it and incorporate those ideas into the final product."

The Texas Transportation Commission could pay as much as $2.25 million to three companies that bid on the Texas 121 toll road project in Denton and Collin counties.
Three companies that submitted Texas 121 bids would then be eligible for up to $750,000 each -- although a final decision on the amount may take several months.

Australia-based Macquerie and Sweden-based Skanska were eliminated in February. Spain-based Cintra is still in the running for Texas 121.

A stipend won't come close to covering costs, said Jose Maria Lopez, Cintra director of U.S. projects. He estimated that the company and its adviser, JPMorgan Asset Management, spent $5 million in the past year trying to win the Texas 121 deal.

"It's 20-some people in our office working on that," Lopez said in a phone interview from New York, where he met with investors to talk about, among other things, the Texas 121 project. "If you add up the auditors, consultants, it could be well north of 100 people."

What if Cintra wins?

State transportation commissioners have said they would abide by the region's decision on Texas 121, despite worries that selecting the tollway authority could scare off private bidders for future projects.

If the state commission were to select Cintra, Macquerie and Skanska would still be eligible for stipends -- but the North Texas Tollway Authority probably would not, officials said. The tollway authority was not part of the yearlong bidding process won by Cintra in February. Instead, it was allowed to submit an 11th-hour proposal in March at the insistence of Dallas-area lawmakers who opposed a private toll project.

Whether it was fair to allow the tollway authority to enter the competition late is a key issue before the state commissioners, who on Thursday may discuss the state's vulnerability to lawsuits in the matter.

Violation of federal law

Allowing the tollway authority to bid after the process had ended violates federal rules and effectively killed any further federal money for the Texas 121 project.

It's unclear whether Texas will be asked to repay $237 million in federal funds already spent on the Lewisville-Carrollton portion of the toll road that was completed last year.

In May, the Federal Highway Administration sent a letter to the Transportation Department warning that awarding the project to the tollway authority would violate federal procurement rules, making the project ineligible for federal funds.

But the letter didn't address funds already spent. State transportation officials are trying to get a clarification from federal officials before Thursday's meeting.

Tollway authority officials say federal procurement laws aren't an issue, because they don't need federal funds to finish the road.

"It's a public roadway right now. We're a public agency. The project is never out of the public's hands," said Jerry Hiebert, tollway authority executive director.

Time to move dirt

Regional Transportation Council members will attend Thursday's meeting and request commission approval of the tollway authority's proposal, said Michael Morris, transportation director for the North Central Texas Council of Governments.

RTC members were split on the matter, with the tollway authority beating Cintra by a 27-10 vote, but they are now eager to build the remaining section of the road between Carrollton and McKinney.

"At some point," Morris said, "we've got to move on."

Losing bids

Losing bidders who have been paid for their intellectual property since 2002:

-- Texas 130, Georgetown to Austin, 49 miles: Two unsuccessful bidders were paid $1.3 million each. Winner: Lone Star Infrastructure.

-- Trans-Texas Corridor, master plan for the TTC-35 Oklahoma-to-Mexico route (including Dallas-Fort Worth), 600 miles: Two unsuccessful bidders were paid $750,000 each. Winner: Cintra Zachry.

-- Texas 121, Denton and Collin counties, 26 miles: As many as three private companies could be eligible for $750,000 each if the contract is awarded to the North Texas Tollway Authority. The tollway authority, which is a public body, likely would not be eligible for funding.

Source: Texas Department of Transportation

See full article in Fort Worth Star-Telegram

Parker County audit comes back clean

Galen Scott - Weatherford Democrat - June 27, 2007
A private auditing service reported mostly good news for Parker County Commissioners Tuesday, noting marked improvements in the county’s financial record keeping.

Kathy Williams, a partner with the Weatherford-based accounting firm Snow, Garrett and Company, confirmed the county’s expenditures and revenue figures from last fiscal year did conform to government auditing standards — considered to be among the report’s most significant findings.

The audit failed to find any material weaknesses in county government’s internal control system for the fiscal year ending in September 2006.

Material weaknesses are exposed when an auditor finds certain internal record keeping practices that allow too much risk for misstatement or fraud.

In an audit of fiscal year 2005, material adjusting entries were necessary to correct balances reported that year for the county’s pooled cash and investment accounts. Also, annual audit data was not reported on time and quarterly internal audits were not being performed.

“It’s a major improvement from previous years, that we don’t have any material weaknesses to report in this letter,” Williams said Tuesday.

However, Williams pointed out quarterly internal audits are still not being performed. The audit’s findings suggest turnover in the County Auditor’s Office are probably at the root of the problem, and a plan of corrective action was attached in the report.

“Overall, this was a much, much better year,” Williams said.

County Judge Mark Riley, chief executive of Parker County, praised the efforts of County Auditor Mike Rhoten, his staff and new County Purchasing Agent Deena Nichols for helping to turn things around.

“This is obviously the result of Mr. Rhoten and his staff,” Riley said. “He has made a lot of positive changes in that office and it shows.”

Last April, Parker County district court judges hired Rhoten, formerly a real estate broker in Willow Park, to replace outgoing County Auditor Shelley Saunders. Rhoten became the fifth auditor to serve Parker County in the last 10 years.
See Weatherford Democrat

Friday, June 29, 2007

Trinity toll road opponents force a vote

By BRUCE TOMASO - The Dallas Morning News - Friday, June 29, 2007
Supporters of a referendum in Dallas to scuttle the Trinity River toll road said Friday that they have enough signatures to force a November vote.

They turned in what they said are more than 48,000 signatures of registered Dallas voters by Friday’s deadline. If enough of those signatures are verified as valid by the city secretary’s office, a measure to remove the proposed toll road from the Trinity River corridor will go before voters in the fall.

City Council member Angela Hunt headed the effort to put the matter before Dallas voters. She and her group, TrinityVote, contend that the toll road should be scrapped because it will detract from a proposed downtown river park. They say that when Dallas voters approved $246 million in bonds for the Trinity River Corridor Project in 1998, many thought they were voting for a low-speed parkway, not a high-speed, multi-lane toll road.

See more Trinity Toll Road/ Trinity Parkway stories on WFAA

Supporters of the road say it's needed to alleviate downtown congestion, and that removing it now from the plans could delay work on other aspects of the Trinity project, including the park and flood-control improvements.

NTTA's Standard and Poor Rating A+

Standard and Poor reports that with announcement that NTTA will issue roughly $1.4 billion in SH 121 bonds, S&P is putting NTTA on Credit Watch. It is anticipated that NTTA's bond rating will drop from A+ to A when these bonds are issued.

Senator Carona's letter endorsing NTTA

To enlarge image click on headline

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.

Fort Worth Star-Telegram coverage of Texas Transportation Commission SH 121 decision

Public agency gets toll road
By GORDON DICKSON - Fort Worth Star-Telegram - Thu, Jun. 28, 2007
The Texas Transportation Commission has agreed to let the North Texas Tollway Authority build the Texas 121 toll road in Denton and Collin counties, rejecting a bid from the private Spanish firm Cintra.

The Plano-based tollway authority has committed to pay the North Texas region $3.3 billion for use on other transportation projects.

Now that the state commission has decided the tollway authority's plan is the best value, the next step is for the tollway authority to negotiate a project contract with the Metroplex's Regional Transportation Council, a process expected to take a month or two. The authority would have another 45 days to close its financial arrangements.

The commission voted 4-1 Thursday afternoon to approve the plan during a meeting in Austin. The dissenter was Ted Houghton of El Paso, who wanted the negotiations to include a member of the Texas Department of Transportation. "I'm against us being on the sidelines," he said.

But commission chairman Ric Williamson of Weatherford preferred that TxDot employees take a step back and let North Texans work out the deal themselves. "Right now, RTC and NTTA are all getting along and they've all agreed as to how they want to do this." Williamson is a longtime champion of decentralizing TxDot's powers so that metro areas may decide road-building priorities on their own.

Williamson also said he would prefer that his agency's employees stand at arm's length from the process, to avoid being unfairly criticized for trying to manipulate the results. In recent months, TxDot officials have been accused of forcing the tollway authority out of the Texas 121 bidding so that private companies such as Cintra could have the project.

"I've had it with toll operators, and House and Senate members, and former commissioners accusing good state employees," he said.

In addition to paying $3.3 billion to the region, most of it up front, the tollway authority has agreed to add five new toll road projects to its existing Dallas-area toll road system within five years. Three of those five projects are in the western Metroplex: The Texas 121T (aka Southwest Parkway) extension to Cleburne, Texas 360 in Mansfield and Texas 170 in the Alliance area. Texas 161 in Grand Prairie, a reliever route for overused Texas 360 in Arlington, is also under consideration.

But still unknown is whether the commission's decision may expose the state to lawsuits from either Cintra or two other companies that originally competed for the project. Cintra originally won the bid, with a promise to pay $2.9 billion, but lawmakers intervened and demanded that the tollway authority get another chance.

The Federal Highway Administration later determined that intervention violated federal procurement rules, making Texas 121 toll road ineligible for future federal funds. The tollway authority doesn't intend to use federal funds going forward, but $236 million in federal funds has already been spent on the road and it's unclear if Texas will be asked to refund part or all of that amount.

If such a refund were necessary, it would reduce the overall amount of highway funding available for the Metroplex.

Check out the Honkin' Mad traffic blog for more details about the decision.

UPDATE 3-Texas agency again tops Cintra for road project

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 (

"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

Texas Department of Transportation: State approves local recommendation on SH 121

Texas Department of Transportation - June 28, 2007
AUSTIN — The Texas Transportation Commission today approved a recommendation from
North Texas leaders to accelerate improvements to SH 121 and 30 other congestion-relieving
projects throughout North Texas by pursuing a proposal from the North Texas Tollway Authority
The Transportation Commission authorized the Texas Department of Transportation staff to
enter into a project agreement with NTTA once:
• the Regional Transportation Council (RTC) negotiates with the NTTA on major terms of
the project agreement and submits those terms to TxDOT,
• quantification of public benefits anticipated to be derived from the NTTA’s proposal is
agreed to by the RTC; and
• NTTA is able to close on all financial transactions necessary to meet its obligations
concurrently with or no later than 45 days after the execution and delivery of the project
Major terms remaining to be negotiated between the RTC and NTTA include:
• the timing and amount of the annual payments;
• enforcement provisions regarding compliance with the toll rate policy, project schedule,
payment obligations and other commitments; and
• the length of the agreement.
Prior to approving the RTC recommendation, the commission concluded it helps the state
meet its transportation goals to reduce congestion, enhance safety, expand economic
opportunity, improve air quality and increase the value of transportation assets.
The action also supports commission strategies to empower local leaders to solve local
transportation problems and increase competition to drive down costs.


Sen. Robert Nichols concerning TxDOT's decision to give NTTA 60 days to finalize a contract for the State Highway 121 project:

"The commissioners did the right thing by honoring their commitment to local control. By giving the local tolling authority a fair chance to pursue this project, the transportation commission secured the best deal for Texas drivers."

Sen. Robert Nichols (R-Jacksonville) is a former commissioner for the Texas Department of Transportation and sits on the Senate Committee on Transportation & Homeland Security.

Senator John Carona, Chair of the Senate Committee on Transportation and Homeland Security:
The Texas Transportation Commission today authorized the North Texas Tollway Authority to enter into an agreement to construct and operate State Highway 121.
Senator John Carona (R-Dallas), Chairman of the Texas Senate Committee on Transportation and Homeland Security, expressed his support for the decision.
"Local leaders spoke decisively in recommending NTTA's proposal, and the Commission's acceptance is a great step forward for mobility in North Texas. It bodes well for participation by local entities in future projects around the state and for the
Commission's ability to implement newly passed legislation. I am confident that NTTA and RTC can work out a project agreement in a timely fashion and we can get this much- needed project under way."
The Commission also announced that funding shortages require transferring certain funds from construction to maintenance and targeting those funds to the roads in the worst condition. "This is good news/bad news for North Texas," said Carona. "We will be seeing more funding because of the bad condition of our roads as compared to the rest of the state. It is another reminder of the poor state of transportation finance in Texas and the need to have revenue alternatives."
Finally, Senator Carona added "I want to thank TxDOT and the many other state agenc ies and responders who are working to save lives in the floods. These dedicated employees are working around the clock, and we all appreciate their efforts."

Thursday, June 28, 2007

Lt. Gov. Dewhurst and the Texas Transportation Commission affirms RTCs recommendation of NTTA for SH 121 Project

By Faith Chatham - June 28, 2007
Shortly before noon, the Texas Transportation Commission voted and approved NTTA for the SH121 toll project. Of the five commissioners, 4 voted for NTTA. The motion stipulates that TxDOT and NTTA are to negotiate a firm contract within 60 days. NTTA will take that contract to their bonding agents and submit it to the Attorney General for approval. Within 45 days of the signing of that contract, NTTA is to pay the unfront payment or the agreement is null and void.

The RTC and NTTA will negotiate and come to agreements on what other projects NTTA is going to deliver in the region.

Michael Morris, Transportation Director for the North Central Texas Council of Government stated the region's case for NTTA. Morris said: "Members of the RTC decided to have faith in ourselves. In our own region we have a public toll authority with a sound system which has twice the value of outstanding debt, and SH 121 is located in the fastest growing sector of the region. In selecting NTTA we have decided to have faith in ourselves."

Commissioners carefully weighed the differences between the Cintra contract and the NTTA proposal. Cintra's contract is ready to sign. NTTA's proposal must be negotiated into a contract.

Despite modeling by Price Waterhouse Cooper, TxDOT staff and JP Morgan (equity partners of Cintra), which applied discount rates to the value of the NTTA bid, some of the Commissioners questioned how accurate the discount rates applied in the models could be since they are based on projections instead of history or known factual data. Price Waterhouse Cooper had discounted NTTA's upfront payment. Most of the Commission seemed to believe that upfront money paid at financial close should not be discounted. NTTA agreed that the upfront money would be paid at financial close, which is set 45 days after the signing of the contract.

One Commissioner mentioned risk, and referred to the Orange County, CA tollroad which the taxpayers bought back from the private partners at a high cost to the taxpayers. Several citizens addressed the commission, stating that they'd prefer that this not be a toll road. One very articulate citizen pointed a number of funding sources available to the State other than toll revenue and private investments in toll roads to finance the state's needed infrastructure. All private citizens who spoke said of the two choices (Cintra or NTTA), their preference was that NTTA be allowed to build SH 121.

Lt. Governor David Dewhurst wrote the Texas Transportation Commission stating his support for NTTA receiving the SH121 bid.
On numerous occasions during the 80th Legislative Session, Commission members publicly stated they will look to locl officials for guidance on transportation projects. I am hopeful this will be the case for the SH 121 project. Local control was the legislative directive embedded in SB 792, and I feel this is the proper way to proceed with current and future transportation projects.

I thnk the Legislature and TxDOT can work together to solve the state's transportation problems, but local control must be at the heart of these important decisions. I support the RTC's vote to award the SH 121 project to NTTA and hope the Commission will honor the region's decision.

Thursday, June 28th Texas Transportation Commission Meeting

By Faith Chatham - June 28, 2007

The Texas Transportation Commission will convene at 9:00 a.m. Thursday, June 28 in the Dewitt C. Greer Building, 125 East 11th Street, Austin, Texas.

(Requires Quick Time Player to view video.
Download Quicktime (free) player)|

Agenda Item 6. Toll Projects
a. Collin and Denton Counties – Consider the recommendation of the Regional
Transportation Council concerning the financing, construction, and operation of
the SH 121 project from Business SH 121 to US 75 in Denton and Collin
counties (MO)

Item 10: d. Right of Way Dispositions and Donations
(1) Denton County – FM 3040 at Valley Parkway in Lewisville –
Consider the exchange of right of way (2 MOs) MO1

Texas Transportation Commission

The Texas Transportation Commission is a five-member board appointed by the Governor to oversee TxDOT. The Commission:

- plans and makes policies for the location, construction and maintenance of state highways,
- oversees the design, construction, maintenance and operation of the state highway system,
- develops a statewide transportation plan that contains all modes of transportation, including highways and turnpikes, aviation, mass transportation, railroads, high-speed railroads and water traffic,
- awards contracts for the improvement of the state highway system,
encourages, fosters and assists in the development of public and mass transportation in the state, and
- adopts rules for the operation of the department.

[Source: TxDOT website]

DFW Regional Concerned Citizens: The Texas Transportation Commisson will rule on accepting or rejecting the RTC's choice of NTTA for SH121

DFW Regional Concerned Citizens: The Texas Transportation Commisson will rule on accepting or rejecting the RTC's choice of NTTA for SH121

History-maker focuses on future

Garland's first black mayor says Dallas pioneer's advice inspired him
Denton Record-Chronicle - Wednesday, June 27, 2007
On the eve of his historic inauguration as mayor of the 10th most populous city in Texas, Ronald Jones was relaxed and reflective.

It's to his credit – ever cool, calm and collected – that his election as the first black mayor of Garland didn't become the main focus of his campaign.

That's not the longtime city administrator and ordained minister's style. He's more circumspect.

"I ran to be mayor of all of Garland, not just parts of Garland," said Mr. Jones, 63, who was sworn in yesterday. "At the end of the day, it's all about performance."

That's a lesson he gleaned from Ron Kirk, a downtown Dallas lawyer who became Big D's first black mayor in 1995.

That fraternity (and sorority) remains small, with only a handful of North Texas cities – Dallas, Arlington, Lewisville and The Colony come to mind – ever electing a black mayor.

But the number of black elected officials nationwide has grown steadily over the past three decades, from 1,469 in 1970 to 9,101 in 2001, the last year for which the Joint Center for Political and Economic Studies has statistics.

Texas had 460 black elected officials in 2001. Only eight other states had more. So when another black mayor is elected virtually anywhere in the United States these days, it's ho-hum.

"It's noteworthy now, and may even be [bigger news] in a local context," said David Bositis, a senior research associate at the Washington, D.C.-based Joint Center, a think tank on issues affecting black Americans. "But in a national context, largely no."

These days, Mr. Bositis added, it takes something like Deval Patrick's getting elected governor of Massachusetts (2006) or Barack Obama's being elected a U.S. senator in Illinois (2004) to crack national headlines.

"I think it takes a person of courage" to defy the odds and break down old barriers, Mr. Jones said. Even in Garland.

Mr. Jones, a former Garland assistant city manager, called Mr. Kirk before jumping into the race. It was a smart move.

"He asked me why I was running," Mr. Jones recalled. "He said, 'Understand this one thing: You have to run because you want to be mayor, not because someone else wants you to run or thinks you should be mayor.'

"He made that real clear," Mr. Jones said. "And I remembered."

Mr. Kirk wasn't surprised to see Mr. Jones break down another barrier.

"It is relevant and it ought to be mentioned," Mr. Kirk said. "But if you don't have the credentials and experience that people are looking for, it doesn't matter what color you are."

Mr. Jones has that. "His background and accomplishments attracted people," Mr. Kirk said.

There was a misguided and downright sneaky attempt by one former Garland council member to make sure that the largely white electorate was fully aware that Mr. Jones didn't look like them. Mr. Jones deftly dodged that poisonous arrow.

"I thought it was just an opponent trying to dismiss me," he said of the racial allusions found on the ex-council member's blog.

But Mr. Jones was not about to fall into that trap. He stuck to issues that resonated with all voters, not just a few.

"There may have been a strong core group that didn't want a black mayor," he said. "But that didn't mean that Garland didn't want a black mayor."

Like Dallas, Garland certainly has had its share of racial and geographic friction. Notice how much time Dallas Mayor Tom Leppert spent talking about the need to unify the city during his inauguration Monday.

"You're going to have the same issue here," Mr. Jones said. "At the public forums, the question was, 'What are you going to do about South Garland development?' The question wasn't about ethnicity; it was about geography."

But in some respects, he said, the two go hand in hand, just as they do in Dallas. The key, he said, is to push for balanced growth and equal opportunities. "We will be focusing on that," he said.

I'm not sure if Garland could have elected a better mayor, but it would have been hard-pressed to find a better man than Mr. Jones, a Dallas native, devoted husband (his wife, Peggy, ran his campaign) and father of two fine young men.

"Personally, it means a lot," Mr. Jones said of his historic achievement. "But this event is bigger than Ronald Jones.

"We are just stewards," he said of his role as mayor. "We are here for a particular time, and then we are gone. All I want to do is to leave things better than I found them. That's what it means to me. And I think it means a lot for the Garland community."

Let's hope he's right.
See photos and article in Denton Record-Chronicle

Retired UNT professor pleads guilty to embezzling

By Donna Fielder and Matthew Zabel - Denton Record-Chronicle Staff Writers - Tuesday, June 26, 2007
SHERMAN — A retired University of North Texas professor pleaded guilty Monday to federal public corruption charges, after prosecutors said he funneled more than $463,000 in cash and services from the university to his private business.

Dr. James Jarrett Glass, director of the UNT Sur­vey Research Center from 1993 to 2006, could face up to 10 years in federal prison and a fine of up to $250,000 as well as restitution to the university.

“He used our facilities; he used our supplies, our equipment, our professional staff and our student employees to conduct research for his business,”
said Deborah Leliaert, a university spokeswoman.

Glass, 63, declined to comment.
See Denton Record-Chronicle report
Glass was released on his own recognizance until a sentencing hearing takes place. No date has been set for that.

Denton lawyer Jerry Cobb is Glass’s attorney.

According to court documents, from 1993 to Feb. 2, 2006, Glass used the university’s computer and telephone systems to profit his own company. He arranged his own business interests on the systems, according to the documents.

Glass retired from UNT in December during the investigation.

UNT paid him $99,374 from September 2005 to August 2006, Leliaert said. He was put on paid leave on Oct. 26, 2006, as result of the investigation.

UNT Detective Sgt. West Gilbreath said the investigation was long and complicated. When investigators realized Glass was doing business both in Texas and in California, they asked for help from the FBI, because it became a multi-jurisdictional case.

“We’re hoping to get restitution,” Gilbreath said. “This is nearly half a million dollars we’re talking about.”

This is the fourth court case of embezzlement by staff or professors at UNT in the past two years. UNT police have worked hard to bring all four to justice, Gilbreath said, and they will continue to investigate any evidence of fraud on campus.

“This is another case that shows that embezzlement is just not going to be tolerated,” he said.

Patti Dale was sentenced to four years in March 2005 in state court for theft by a public servant. She recruited 14 people she placed on the payroll of the School of Library and Information Sciences who never worked there. Those involved gave most of the money they received to her, and she took more than $155,000 in the scheme.

Paul Schlieve was sentenced to 160 months in federal prison in July 2005. He put his boyfriend on a student work grant payroll and collected paychecks for him, even while the boyfriend was in jail. The man neither worked at nor attended UNT.

Andrea Szaboky was placed on 10 years probation in state court for felony theft in July 2006. She reimbursed herself nearly $30,000 for trips she didn’t take, bought expensive gifts on the university purchase card and paid herself for work she didn’t do.

Glass’ case mostly centered on his use of UNT employees to do work for his private companies, and his use of his position at UNT to obtain contracts for those companies.
The Survey Research Center, an arm of the UNT College of Public Affairs and Community Service, conducts surveys via telephone, mail, Internet and focus groups for state and local governments, nonprofit agencies and private businesses.

The center’s staff consists of both professional researchers and student employees.

Leliaert said that during the 2005-06 fiscal year, that center fulfilled 28 research contracts worth $821,000.

A faculty member first reported Glass to the university auditor in 2004, Leliaert said.

UNT’s internal auditor began an investigation, but put it on hold when Glass suffered a personal tragedy, Leliaert said.

That auditor, Tim Edwards, retired in 2005, and he could not be reached for comment.

Edwards’ replacement, Don Holdegraver, found the incomplete audit in April 2006 and resumed the investigation.

He found evidence that a crime had been committed, Leliaert said, and referred the case to the UNT Police Department, which also notified the FBI.

In his report, dated June 14, Holdegraver wrote that Glass founded Public Management Associates, a private company with no employees, an address of a local mailbox rental business and the same office telephone as the Survey Research Center.

Glass also acted as a principal in another company, Benavides and Associates, which was established in 2003.

Both businesses did work that was similar to the university center, and his clients were the same.

Holdegraver’s report lists several contracts between one of Glass’s companies and an outside client. In those contracts, Glass used the UNT research center to do the work.

For example, Public Manage­ment Associates charged the city of Lewisville $17,000 for a needs assessment in 2002.

In that agreement, Glass said he would contract with the UNT Survey Research Center and use its computer-assisted telephone system to do the work, auditors reported, but Glass never paid UNT for the work.

The FBI found 25 other contracts like that one, dating back to 1993, in which Glass used the UNT Survey Research Center to win a contract and then either paid back none or only part of the cost to UNT, according to court documents.

Wednesday, June 27, 2007

State may defy local leaders on 121 toll plan

Money, politics could push panel to override choice of NTTA
By JAKE BATSELL - The Dallas Morning News - Wednesday, June 27, 2007
The Texas Transportation Commission has made a habit of honoring local leaders' decisions.

But when commissioners meet Thursday to consider North Texas leaders' plans for the politically charged State Highway 121 toll road, nobody expects a rubber stamp.

The Regional Transportation Council voted 27-10 last week to endorse the North Texas Tollway Authority for the multibillion-dollar project. If ratified by the commission, the local vote would torpedo an earlier deal the state reached with the Spanish company Cintra.

Commissioners have never overruled a decision by the regional council, but with so much money and politics at stake, Highway 121 could set a precedent.

"As far as saying, 'Thank you all very much for your comments, and now we're going to vote the other way,' they haven't done that in the past," said RTC chairman Oscar Trevino. "But all we are is a recommending body. I can see them not agreeing with us."

Gov. Rick Perry has appointed all five commission members. They have the ultimate say on state road contracts. Transportation officials in Austin, El Paso, Houston and San Antonio say the panel has yet to contradict a local recommendation on a specific road project.

"This commission, more than any prior one, has acted to strengthen decision making at the regional and local level," said Alan Clark, director of transportation planning for the Houston-Galveston Area Council.

Still, Highway 121 is a special case. The state originally picked Cintra for the project four months ago. When that deal prompted a backlash from state lawmakers, regional leaders invited the NTTA to re-enter the bidding process. Members of the RTC – mostly local elected officials – spent more than eight hours combing through the dueling bids before siding with the tollway authority.

Members said they chose the NTTA for several reasons, including the idea of keeping profits in North Texas rather than sending money to Spain.

The tollway authority's cash offer of $3.3 billion was higher than Cintra's. And RTC members said they believe better-than-expected traffic on Highway 121 could generate more revenue for the NTTA to build other roads in North Texas.
The Texas Department of Transportation, which is governed by the state transportation commission, has consistently favored Cintra's proposal.

Since Mr. Perry appoints the five commissioners, the department is under pressure to carry out his initiative to privatize highways. A winning bid for Cintra would signal that Texas' roads are open for business.

Local power

Reversing the RTC's endorsement of the NTTA for Highway 121 would be a hairpin turn from the commission's philosophy of local control, a mantra it has repeated over the past four years.

Regional planning councils used to present the state with a wish list of road projects, then wait for commissioners to pick which ones to fund. Now, the state gives each council a pot of money and asks regional leaders to select projects and prioritize them.

Inflation is chipping away at the state gas tax, the chief funding source to build and maintain roads. Commissioners have encouraged regional councils to generate more public money by seeking toll-road contracts with upfront payments. Highway 121 is Texas' richest such deal yet, with the NTTA and Cintra both offering around $3 billion in cash in return for the right to collect tolls for the next 50 years.

The commission's chairman, Ric Williamson, declined to comment last week on the upcoming vote on Highway 121. But in late March, days after the RTC invited the tollway authority back into the bidding process for Highway 121, Mr. Williamson all but guaranteed that commissioners would defer to regional leaders.

"We want to administer the award of that construction contract according to the regional leadership," he said. "We just believe that if you have a strategy that says empower local and regional government, that's what that means and you stay out of it, other than making sure the law is followed and making sure good engineering practices are used. If you're going to let go and let people assume a regional perspective, that's what you have to do."
Other commissioners, however, have raised concerns that the volatile and unorthodox bidding process for Highway 121 may prompt Cintra to sue the state.

And Transportation Department officials have circulated letters suggesting that yanking the project from Cintra could cost the state federal funds. A state engineer even wrote a memo suggesting that the NTTA could go bankrupt if it's awarded the project. James Bass, the department's chief financial officer, has since called the memo "moot."

The department's two representatives on the regional council voted for Cintra's proposal. And Mr. Bass said earlier this month that if commissioners ask for a staff recommendation on Thursday, the department's review team will recommend Cintra.

How much weight the commission would give a staff assessment is unclear. While commissioners emphasize local control, they also have embraced private companies – Cintra, for example – as a key solution to the state's transportation problems.

"You had a monopoly called TxDOT. We're trying desperately to dismantle that monopoly," Mr. Williamson said during a meeting with reporters last month.

"We try to move wherever we can to insert competition and competitive pressure into the decision-making process, in the broader context of letting regional leaders judge who has the best proposal in that competitive process," he said.

New territory

Should commissioners reject the NTTA proposal, local officials say, it will be the first time the panel has reversed an RTC decision.

Mr. Trevino, the mayor of North Richland Hills and the RTC's new chairman, said members of the regional council tangled with commissioners last year about a proposed Trans-Texas Corridor route that local leaders felt ran too far east of Dallas to benefit the region economically.

Commissioners ultimately agreed to study another route that would include the future Loop 9 project near the Ellis-Dallas county line, bringing the corridor closer to North Texas' urban areas.

Still, Mr. Trevino said, it's possible the commission will overturn the RTC vote on Highway 121.

"I don't think it'd be the best thing for them to do," he said. "But then again, they march to a different drummer than we do."

State lawmakers warn that rejecting the RTC vote would snub the Legislature, which passed a law requiring that NTTA be awarded Highway 121 if its proposal were financially superior.
Transportation officials across Texas will be watching Thursday's meeting for clues on how the commission will handle local recommendations on future toll deals.

"It'll set the tone," said Sid Martinez, director of San Antonio's transportation planning agency. "If they go with the RTC's recommendation, then we know in the future that more than likely they will honor the vote of the local and regional players. If they don't, then we know that it might be a tougher landscape."

The commission overruled El Paso's regional council last year during a debate over whether the city could establish its own transportation authority. But none of the state's five largest planning organizations could recall being reversed on a specific road project.

Michael Aulick, executive director of the Capital Area Metropolitan Planning Organization in Austin, said he couldn't think of any similar battles between his group and the commission.

But Mr. Aulick said the Highway 121 debate is different because of the billions at stake and the unprecedented choice between hefty public and private toll bids. "We're not in y'all's league," he said. "Dallas-Fort Worth plays a much bigger game. They play the NFL compared to what we do down here."
See map in Dallas Morning News
DMN Survey: Tell Us: Should NTTA get the 121 contract over Cintra?

King of roads known for giving little ground - Transportation chief's sway shapes Texas highways,

Critics see arrogance, deaf ear
By CHRISTY HOPPE - The Dallas Morning News - Tuesday, June 26, 2007

AUSTIN – State Transportation Commission Chairman Ric Williamson is proud that he can still work a bulldozer, a skill he learned early on the ranch and in the gas fields. Others would say he still drives it at meetings, committee hearings and town hall gatherings.

Mr. Williamson, 55, is one of the most influential men in Texas. He has the ear of the governor, with whom he speaks almost daily. He is the architect behind the state's road plan for the next 25 years. He is smart, studious, self-made. And critics, who seem as endless as a West Texas highway, say he is arrogant and unswerving.

"He's an amazing guy," said House Transportation Committee chairman Mike Krusee, R-Round Rock.

Is he a Democrat; is he a Republican? Is he a strategist; is he extremely pragmatic? Is he Nitro or is he the nicest guy you'd ever want to meet? Is he rigid and unthinking or is he absolutely pliable to any situation that comes before him? Is he visionary or a policy wonk who knows every detail?

"He's both. He's all those things," said Mr. Krusee, who oftentimes was Mr. Williamson's sole defender in the House last session.

On Thursday, Mr. Williamson will lead the five-member commission as the final arbiters of who will build the State Highway 121 toll-road project, either the Spanish company Cintra or the North Texas Tollway Authority. It is an issue worth billions of dollars and will help determine the private vs. public ownership of Texas roadways for the next five decades.

For the past six years, at the behest of Gov. Rick Perry, Mr. Williamson has championed highway development to meet mushrooming population growth.

He said he studied the issue for almost two years before helping to devise the Trans-Texas Corridor – a mammoth, possibly visionary roadway to parallel Interstate 35 and relieve congestion from virtually every interstate. But it also would sever ranches and farms and gobble a huge swath of private land – all without legislative oversight.

Add the palpable road rage of the urban commuter, who will bear the brunt of dozens of toll roads that are part of a separate plan, and what Mr. Williamson and the Texas Department of Transportation have unearthed is a bold policy initiative and the vitriolic passions of millions of drivers and landowners.

In the past six years, he has suffered two heart attacks. And yet, he said he bears no regrets and will continue pushing until Mr. Perry tells him to stop.

"It had to be me and my peculiar personality saying these things. Someone had to do it to advance Rick's agenda," Mr. Williamson said in an interview Monday.

It's the way he's always done it.

Coming of age

In 1985, at age 33, he came to the Legislature as a Democrat from Weatherford. By his second term, he found himself on the powerful Appropriations Committee that writes the state budget.

The committee dais was split into two levels, and Mr. Williamson sat on the lower level with other young, brash lawmakers, including Mr. Perry. There were eight altogether, and they became known as the "pit bulls," for questioning expenditures and demanding outcomes for state dollars.

"We were fiscal conservatives, and we were going to change the world," said Ron Lewis, now a successful lobbyist.

Mr. Williamson tackled accounting reforms and forcing state agencies to build computers that could talk to each other. "He brought us into the 21st century," Mr. Lewis said.

Mr. Williamson studied state issues constantly, dissecting them and challenging the status quo. But it wasn't just policy he would place under a microscope.

When Mr. Williamson's eldest daughter became interested in softball, he immediately pored over everything he could find on the subject of fast-pitch, Mr. Lewis recalled.

"He learned every kind of pitch" and helped her excel in the budding sport, Mr. Lewis said. "I don't know if Ric Williamson has ever winged anything in his entire life."

Mr. Lewis described his friend as "the greatest guy you could hope to meet," but like many who know Mr. Williamson, said his cockiness "can also rub you wrong."

Take the time on the Appropriations Committee when Mr. Williamson took exception to an expensive, backdoor contract that the Department of Human Services gave to a contractor for Medicaid processing.

"There's something real greasy in the way your agency does business," Mr. Williamson told acting director Charles Stevenson. "I hope – no, I pray – that I find something to hang you with."

A man called 'Nitro'

For exchanges like this, legislative colleagues nicknamed him "Nitro."

He is also the man who, to help kids with a classroom project, shepherded a bill that made the Guadalupe bass the state fish of Texas.

In 1993, when there was an opening for speaker of the House, Mr. Williamson campaigned hard among his colleagues for Appropriations chairman Jim Rudd to be elevated. Instead, when Pete Laney won the election, the pit bull found himself in the doghouse and lost his Appropriations seat.

After the session, like his friend Mr. Perry, he switched to the Republican Party. He served through 1998, and afterward spent time running Mr. Perry's political office.

When Mr. Perry became governor in December 2000, he tapped his friend to tackle one of the biggest problems he saw facing the state.

"It was his idea. He told me, 'This is what you're going to do,' " Mr. Williamson said.

The corridor is born

So he set about studying transportation. He laid out the dimensions of problems in financing roads and placed them against projected needs. He defined short-, mid- and long-term solutions and calculated the costs under a half-dozen scenarios, including taxes, bonds, private equity, private borrowing or public debt.

He and Mr. Perry laid down some goals, including competition for roadway construction, regional decision-making and consumer choices.

"Thus was born our strategic plan. That was actually the basis of the Trans-Texas Corridor," Mr. Williamson said.

David Stall, who along with his wife, Diane, runs Corridor Watch – a grassroots group that has sprung up to oppose the corridor, said the problem is that the idea was created based on population, without consideration from regional planners, engineers, private property rights or alternatives, such as expansion of existing roadways.

Mr. Williamson turns a deaf ear to those who disagree, and he has created the same intolerance at the Transportation Department,
Mr. Stall said.

"They have become a road bully. And as my wife said, they have developed a culture of arrogance that permeates everything,"
he said.

Sen. John Carona, R-Dallas, chairman of the Senate committee that deals with state transportation, also feels that Mr. Williamson's weakness is his impatience with the concerns of others.

During the last session, Mr. Carona had called for putting toll roads in balance with other methods of financing. Thereafter, he said he could not get Mr. Williamson to return his phone call.
Mr. Carona ultimately was able to pin Mr. Williamson down only by showing up unannounced and bushwhacking him as he appeared before a friendly House committee.

"He's a strong believer in himself, no question. Most successful people are. But the characteristic he's sometimes lacking is the willingness to listen,"
Mr. Carona said.

He said they left the session last month with open channels of communication, and he hopes the obstinacy of the Transportation Department does not return now that the Legislature is out of session. He said he finds much to admire in Mr. Williamson.

"He brings to the table intellect and a passion for change," Mr. Caronas said. "However, his greatest hindrance is his own personality."

Is that because he forgot the many considerations of being a legislator?

"No, he was equally obnoxious when he was a lawmaker. I served with him. What you see with Ric is what you get,"
Mr. Carona said.

Confrontation, tenacity

Mr. Williamson said he worked with legislators and will try to be more responsive. He also said he knows he is challenging the inherent nature of government to leave tough problems until they become a crisis for some future Legislature, and that requires someone to stand up and fight.

"I have had friends, even closet supporters, say to me that, 'You should have explained in more detail what you were doing and not gotten so ahead of everyone, and people wouldn't be nearly as mad at you,' "
Mr. Williamson said.

"In the last six years, had consensus been the goal, I'm not sure we could have gotten far enough, fast enough to make the progress I think we've made."

Most difficult things are achieved through confrontation and tenacity, he said.

The day Mr. Perry is tired of hearing complaints about toll roads and sends him home to Weatherford, he will go happily,
Mr. Williamson said.

As it is, when he and the governor talk, Mr. Perry doesn't comfort him or offer him that kind of relief.

"He doesn't console me and he doesn't apologize and he doesn't curse the darkness. He understood what he was getting into. And I certainly understood what I was getting into,"
Mr. Williamson said.

"And if it results in a long-term solution to what we think is one of the most pressing problems the state faces, then history will judge us as having made some good decisions,"
he said.
Read story in DMN

Tuesday, June 26, 2007

Retired UNT prof admits to public corruption

© 2007 The Associated Press - June 26, 2007

SHERMAN, Texas — An embezzlement investigation could land a retired University of North Texas professor in federal prison for a decade.

James Jarrett Glass pleaded guilty yesterday in Sherman to public corruption charges.

No sentencing date was immediately set.

Prosecutors say the 63-year-old educator used more than $463,000 worth of public funds and services -- in his private business.

Glass was director of the U-N-T Survey Research Center from 1993 until 2006, when he retired.

He faces a fine of up to $250,000, plus could have to pay restitution to the school in Denton.

A U-N-T spokeswoman says Glass used school facilities, supplies, equipment and staff to do research for his business.

Glass had no immediate comment. He's free on his own recognizance, pending sentencing.

Information from Denton Record-Chronicle

HCC Trustee Aiyer charged with felony - accused of tampering with campaign finance report

By KRISTEN MACK - Copyright 2007 Houston Chronicle - June 26, 2007

Federal bribery probe grips El Paso

Investigation links several city leaders to corruption, multiple plots
By GARY SCHARRER - Copyright 2007 Houston Chronicle Austin Bureau - June 24, 2007

Monday, June 25, 2007

Agenda for June 28 Texas Transportation Committee Meeting

Many of the players in this saga from the DFW area will be in Austin tomorrow at the Texas Transportation Commission Meeting: Thursday, June 28, 2007 - convene 9:00 a.m. - 125 East 11th Street, Austin, Texas 78701-2483

Texas Transportation Commission Members: (will meet June 28th to rule on whether the NCTCOG's RTC's recommendation that the Public Toll authority NTTA is awarded the contract for SH121 over Cintra.

Ric Williamson, Chair of Weatherford
Hope Andrade, Commissioner from San Antonio:
--Governor’s appointee to the Texas Turnpike Authority,
--Board member and vice chair of VIA Metropolitan Transit (San Antonio)
--Board member, Free Trade Alliance of San Antonio

Ted Houghton, Commissioner of El Paso

Ned S. Holmes, Commissioner of Houston:
--chairman and CEO of Parkway Investments, a company that develops and manages real estate nationwide.
--formerly with Texas Parks and Wildlife (and we know what a great job they did with Parks and Wildlife under Perry's administration)

Fred Underwood, Commissioner, of Lubbock
-- president and CEO of the Trinity Company, a cotton bale storage facility.(Warehousing)

Agenda item 6:
6. Toll Projects

a. Collin and Denton Counties – Consider the recommendation of the Regional
Transportation Council concerning the financing, construction, and operation of
the SH 121 project from Business SH 121 to US 75 in Denton and Collin counties (MO)

Media Video feed of the meeting will be available on Thursday at this link:
Video Feed

TXU sale may mean higher bills

Sunday, June 24, 2007
Editor's note: This story is the first in a three-part series examining the possible impact of the proposed TXU buyout.Electricity customers won't gain if TXU Corp. sells itself to private equity investors, and they could eventually see higher bills, according to an independent study commissioned by The Dallas Morning News.

All those promises that investors Kohlberg Kravis Roberts & Co. and TPG touted as benefits to customers – cutting prices until 2008, shelving plans to build polluting coal plants – would have been offered by the old TXU anyhow, the report concludes.

The lead author of the report, energy strategist Roger W. Gale, says unless the Public Utility Commission requires more long-term customer protections as part of the $45 billion buyout deal, the electricity supply could become tight, prices could eventually rise, and employee benefits may shrink.
TXU disputes the idea that the PUC could, or even should, require concessions for a company to change hands in a deregulated industry.

Mike McCall, head of TXU Wholesale, said in an e-mail to Mr. Gale that such action would "undermine the fundamental competitive market design."

But Mr. Gale, long a proponent of competition, counters that deregulation of the wholesale and retail electricity markets doesn't necessarily breed competition. An electric utility is a "vital public asset," necessary for healthy, prosperous human life.

"Customers have expectations and rights which include reasonable and explicable prices, reliability and sufficient control of the regulatory process, especially for the delivery business, which remains a monopoly," states the report prepared by Mr. Gale's company, GF Energy LLC of Washington, D.C.

The report highlights a fundamental debate in utility circles these days: How can regulators ensure benefits to customers in a deregulated market, which relies on competition to improve customers' lot?

And can private equity investors ever convince consumers that they'll benefit if out-of-state investors take on massive debt to buy a utility, and then sell it at a profit?

No net benefit

"Our conclusion is that the buyout of TXU provides no inherent benefits to the customer. All of the commitments being made by the buyers could be offered by TXU today – if it had the incentive to do so."

Mr. Gale concluded that the PUC should require investors to make bigger commitments to consumer welfare and create a "net benefit" for customers before allowing the buyout to proceed. "Net benefit" is the standard that regulators in some other states use to decide whether to allow a utility to change hands. Showing that customers aren't harmed isn't enough, according to the report.

Mr. McCall wrote in the e-mail to Mr. Gale – whose consulting firm has over 20 years of experience in the energy industry, working for six of the 10 biggest global electricity companies – that the old-fashioned standard no longer works in Texas.

"The assertion that customers will not benefit from the transaction seems to be based on a regulated market paradigm and a narrow definition of 'benefit,' " Mr. McCall wrote after reading the report.

On Monday, The News gave a copy of the report to TXU and the buyers, as well as the PUC, Jim Marston of Environmental Defense, and two state legislators who have worked on electricity issues, Sen. Troy Fraser, R-Horseshoe Bay, and Rep. Phil King, R-Weatherford. Reporters asked each to comment on the conclusions.

The buyers, who created a holding company called Texas Energy Future Holdings, responded in an e-mail that no one can doubt customers benefit from the promises the buyers have made.

"The report commissioned by the publisher of the Dallas Morning News, when read in its entirety, endorses our planned changes and the benefits customers can expect from the New TXU," the e-mail states.

Still, analysts have said for some time that adding billions of dollars in debt to a utility could, eventually, lead to higher prices.

And the buyers' promise to stop plans to build eight of the 11 traditional coal-fired power plants, without replacing them with newer, cleaner technology, could throttle Texas' power supply and cause prices to rise.

"It wasn't pure altruism" to shelve the plants, said Phil Adams, an analyst with independent bond research firm Gimme Credit.

Little difference

"The buyers are offering the customer what TXU may have been forced to offer by regulators due to concerns over market manipulation and global warming or compelled to offer by the business imperative of stemming customer attrition and repairing reputation. Therefore, there is no net gain for the customer as the deal is currently described."

When the buyers announced in February their offer for TXU, they made a slew of promises meant to please the public and gain regulatory approval of the deal. Since that time, the buyout group has represented itself as a beneficent investor ready to shield the public from the old, dirty, greedy TXU.
"We have listened to the various TXU constituencies, including customers, ... members of the Texas Legislature and those expressing environmental concerns. As a result, we have developed a new vision with management of how we can turn TXU into a more innovative, customer-centric, environmentally friendly company,"
Henry Kravis said in a prepared statement on the day TXU announced the deal.

The buyers promised to eliminate eight out of 11 proposed coal-fired power plants and to cut electricity rates by 15 percent for about 1 million North Texas customers.

With the proposed rate-cut, TXU's standard rate would drop to 12.75 cents per kilowatt hour, from 15 cents.

But TXU was already lowering rates before the buyers came along, just to keep customers. In the first quarter, the company lost 6.4 percent of its retail customers compared with the year-earlier quarter.

And 12.75 cents still isn't the lowest rate going.

Then, there's the wholesale market. TXU owns nine coal and two nuclear plants that produce cheap power. TXU can sell that power on the wholesale market, which tends to follow higher natural gas prices, and enjoy a fat margin while Texans pay more for electricity than the average American.

All told, TXU Corp.'s profit margin last year hit 24 percent, up from 16 percent in 2005.
Ehud Ronn, a finance professor at the University of Texas at Austin, said he worries that the buyout could boost electricity bills because of market forces.

Texas doesn't have enough power plants to handle growth, and there aren't enough companies vying to build plants here, he said.

"My concern is that prices will be pushed higher because of the twin effects of lack of competition and lack of sufficient generation capacity," said Dr. Ronn, who's also the director for the university's Center for Energy Finance Education and Research.

Utility experts have long debated whether Texas' deregulated wholesale and retail markets are competitive enough. Some say the fact that so many consumers have switched to new electricity companies proves competition is working. As of March, 38 percent of Texans in deregulated areas had switched to competitive providers, according to PUC data.

But some observers give the wholesale market lower marks. In some regions of the state, the former monopolies still dominate. TXU generates about 45 percent of the power used in North Texas. And TXU stands accused by PUC staff of manipulating the market, though the company denies any wrongdoing. The commission hasn't decided the case yet.

Mr. McCall pointed out in his e-mail that regulators aren't technically supposed to intervene in the deregulated wholesale market.

And, he said, "no single generator is responsible for ensuring reliability of supply," a turnaround from his position last year that TXU should build 11 coal-fired plants to keep the lights on in Texas.

Environmental spin

"The buyer commitment to terminate eight of the 11 planned TXU coal-fired plants was the public relations angle used to launch the buyout."

A couple of days before TXU even announced the buyout, the investors began touting to the news media an unusual agreement they'd made with some national environmental groups. In exchange for endorsing the buyout, the investors would shelve plans to build eight new coal-fired power plants.
TXU had wanted to build 11 coal plants but ran into fierce opposition from environmental groups, politicians and business leaders, all worried about the toll pollution would take on Texans' health and the state's ability to meet federal clean air standards.

By the time the buyers came along, it was becoming increasingly clear that TXU wouldn't build all those plants. The prospect of more relatively dirty coal plants had begun to tarnish the company's image. Regulators had slowed down the permitting process for the plants.

Plus there were financial considerations.

According to the preliminary proxy TXU filed this month with the Securities Exchange Commission, one of TXU's financial advisers told the board that building only five plants would result in a higher value for the company than building either all of the plants or none of the plants.

TXU couldn't explain how the adviser came to those conclusions.

The proxy doesn't include an assessment for building only three plants, and the buyers declined to say whether they assessed the financial impact of shrinking the coal plan before making the three-plant promise.

Moot benefits

"There is reason to believe that TXU's high retail customer electricity prices, alleged price manipulation, poor handling of its proposed coal projects, negative environmental positions, flagging reputation, retail customer attrition and apparent CEO excesses would have forced the company to offer most of the same 'concessions' as the buyers are touting."

On the day of the buyout announcement, Feb. 26, TXU chief executive John Wilder told analysts on a conference call that he was already considering doing a number of things the buyers had committed to, such as slashing his plan to build 11 coal-fired plants.
When a Wall Street analyst asked Mr. Wilder whether he would have split the company into three companies – generation, retail and power line – without the buyout, Mr. Wilder said yes.
"We were certainly heading in the direction operationally to separate these businesses because we think they are very different. They have different customer needs, and they have different strategies that they need to win over the long term," Mr. Wilder said, explaining that private investors can act more aggressively to split operations.


"Eight of the eleven coal plants were ultimately scrapped as part of the buyout package, although the public, the regulators, and several environmental groups had practically assured their suspension."

The private equity investors' environmental deal threw some local advocacy groups into a conundrum: optimistically support the buyout and settle for little gain, or complain about the deal and risk getting stuck with the old TXU if the buyers walk.

Founders of Texas Business for Clean Air, a group that formed late last year to oppose TXU coal-plant pollution, say they're neutral on who owns TXU. They just want cleaner air. And on that point, they say, customers benefit from the buyout.

"We can be optimistic about some of the things they promised. We are, because those will be better things than, frankly, doing nothing," said Garrett Boone, a founder of the group and of the Container Store.

Other environmental and consumer advocates have said they're very suspicious of the buyers' intentions, and called on regulators and lawmakers to block the deal.

Other states

"On the whole, it appears that the acquirers have done their homework in establishing commitments upfront that were similar to those ultimately demanded in other private buyouts of utilities. The remaining challenge will be for the PUCT to monitor and enforce those commitments."

Some other proposed private equity takeovers of electric companies have crashed because of public reactions. Two of those involved the same main actors in the TXU buyout.

In 2003, TPG tried to buy Portland General Electric, a big power company that serves 750,000 retail customers in Oregon. PGE was a leftover from the Enron debacle.

The Oregon Public Utility Commission killed the $2.35 billion deal. For a utility to change hands in that state, the transaction must be shown to yield an actual benefit to the public, not just do it no harm. The Oregon commission said the public would be better off with a utility "as a separate, stand-alone company" than as part of a private equity company not committed to long-term ownership.

A deal announced just six days after the TPG-Enron proposal also went aground on similar shoals. Kohlberg Kravis Roberts said it planned to acquire UniSource, with about 550,000 electric customers in Arizona, for $3 billion.

Again, state regulators said no, contending that the public risks, including high debt loads, outweighed any benefits. Mostly, the Arizona Corporation Commission said, the benefits would accrue to the investors.

There have been some successful utility deals in which state regulators found clear public benefits. One was the takeover in 2006 of PacificCorp by MidAmerican, a holding company that is part of Berkshire Hathaway, Warren Buffett's firm. That deal, worth $9.4 billion, involved 1.6 million customers in six Western states.

Despite its complexity and the myriad state agencies, interveners and other parties, the deal went through, in large part because MidAmerican emphasized its dedication to long-term investment and because the states secured scores of special commitments from the investors.

Texas regulation

"The public interest test applicable to this transaction based on Texas precedent is that there needs to be net benefit to the customer. In short, if the buyers are winners, customers need to be winners, too."

In Texas, utility law says a major merger or buyout has to be reported to the PUC, which then decides whether the deal is "consistent with the public interest." The law specifies a few things the PUC must check, but it doesn't define what "the public interest" means.
Even if the agency decides a deal isn't in the public interest, it has no explicit power to block the transaction. Regulators technically have authority only over the regulated power-line industry.

All the PUC can do is forbid the company to pass along certain costs to customers in the regulated rates for the use of power lines – a small portion of customers' bills. Such action by the PUC limits the profit a company makes from delivering electricity, a key factor in utility economics.

The PUC set the stage for such an action in March, when it initiated a rate case based on "excess revenues" earned by TXU's power line company, Oncor. Last year, the same allegedly excess revenues weren't enough to make the PUC move against TXU. This year was different: The proposed buyout made it "advantageous" for the state to open a review of delivery rates, the agency staff wrote.

The buyers have pledged not to include costs associated with the buyout transaction in the rate cases. They also promised that if the cost of Oncor's capital increases, through higher interest rates, the buyers won't include such costs in rate cases this year or next.

A half-dozen other parties, from big industrial power customers to the electric workers union, have intervened so they can protect their interests in the rate case. Oncor, formerly known as TXU Electric Delivery, is under a PUC order to file papers related to its delivery rates by Aug. 28.

One group is on TXU's side when it comes to regulators blocking the buyout. Texas Business for Clean Air won't take sides on whether the buyout is a good idea or not, but "because we're in a deregulated environment, we felt the PUC shouldn't have the power to kill a deal," said Mr. Boone, one of the group's founders.

Legislative inaction

"With a legislature that seems to have stalled in creating the laws that would have tuned-up deregulation and provided further protection against global warming, against high rates and against market power abuses, Texas customers must now rely upon the good faith of the buyers, a belief in market forces, and the ability of the PUCT to monitor and enforce existing laws."

With the public reaction to the TXU buyout in mind, Texas legislators talked a lot during the recent session about boosting state oversight of power company deals. They also considered restricting the way companies may operate in deregulated markets. Months of careful lobbying by TXU and the buyers resulted in no big changes. Mr. Fraser filed bills designed to give the PUC greater authority to review utility takeovers, along with other bills designed to promote competition in the deregulated markets.

"The issues addressed in the GF Energy report on the proposed buyout are the same as those raised by the Senate. This legislation would have given the state the essential tools to ensure this transaction is in the public interest," Mr. Fraser said in an e-mail.

That legislation passed the Senate but died in conference committee, leaving the PUC, which regulates the state's electric and telecommunications industries, in the same spot it was before the session: with broad responsibility but fuzzy authority for protecting the public interest in utility mergers.
Untested authority

"Based on what has happened in other states when a commission opposes a merger, even without explicit merger approve-reject authority, the PUCT could kill the acquisition if it chose to do so by imposing unacceptable rate reductions, market power requirements, and through the power of delay. GF Energy's discussions with Commission staff suggest the staff believes that, lacking explicit authority to kill the acquisition, it has the power to impose tough public interest requirements and the ability to initiate a stakeholder engagement process."

The agency, headed by three full-time commissioners appointed by the governor, has indirect ways of putting its stamp on electric buyouts, but it lacks a firm mandate to do so. The PUC's ability to set conditions for the TXU deal, above those the buyers have offered, is untested.
Two modest rule-making proposals by the PUC staff to facilitate merger investigations haven't gone before the commissioners for action, PUC spokesman Terry Hadley said.

The PUC declined to comment on the consultant's report because topics that it addresses are also likely to come up in ongoing regulatory cases now before the commission, Mr. Hadley said.

If the energies expended by TXU and its buyers, customers and competitors are any sign, however, it seems that the PUC's existing powers might be greater than a first look would indicate. After the would-be buyers filed papers with the PUC in April making their voluntary commitments to consumer protection, nearly a dozen other entities intervened in the matter.

For the past 2 ½ months, the parties have aimed hundreds of pages of questions, answers and legal arguments at each other. Frequently the sparring has seen opponents trying to pry as much information out of the buyers as possible and the buyers resisting, sometimes even filing documents with large blocks of type blacked out by hand with markers.

The commissioners have agreed to hear the case themselves, rather than send it to the State Office of Administrative Hearings, which would slow down the process. Hearing dates are set for October.

More to be done

"The commitments made by Texas Energy Future Holdings, combined with pre-existing regulatory requirements, are a good start in ensuring that customers are not harmed. But in absence of specific legislation, more could be done to ensure that they benefit from the transaction."

The buyers failed to make certain promises that could benefit Texans, GF Energy concludes, and the last stop for negotiating those promises is the PUC. There's no commitment, for example, about building cleaner power plants or protecting employee benefits. The summer after TXU announced the coal plan, public concern about greenhouse gas emissions began to bubble over. It became increasingly evident that the U.S. would eventually limit such emissions.

TXU executives wouldn't explain how they might handle such limitations while operating carbon dioxide-intensive coal plants. The buyers haven't addressed that question either,
other than to promise to join the lobbying effort in Washington for a market-based approach to carbon dioxide credits. If the government doles out carbon dioxide credits based on how much greenhouse gas a company already emits, TXU could get a windfall because of its existing coal plants.

The investors more recently promised to consider building plants using cleaner technology that doesn't emit greenhouse gases: coal gasification and nuclear. But they haven't decided whether to actually build them.

The consultant praised one of the buyers' commitments: the promise to spend $400 million on programs to cut electricity demand. The buyout group has agreed not to calculate any of that amount in regulated rates of the power line business.

The buyers have also said they don't intend to cut jobs or benefits, but that promise only holds until the end of 2008, according to a filing with the PUC.

TXU's defined benefit pension fund was underfunded by $367 million at the end of last year. And the company's fund to pay for retiree benefits, such as health care, was underfunded by $697 million, according to filings with the SEC. Those holes could make it attractive to change or terminate the plans.

Rick Levy, a lawyer for the International Brotherhood of Electrical Workers union, said the buyout group sent its negotiators to strike a deal with union leaders, and there was no indication that pensions would be on the table. In fact, he said, the union leaders appreciated the respectful way the buyout group approached them.

"Not that they believe in unions, necessarily, but they believe in money, and they think this is a good model," he said. "I would say, in some ways, the old management had really declared war on the unions."

The buyout group agreed to halt TXU's plans to outsource power line maintenance, a top concern for the union that represents those workers. In exchange, Mr. Levy said, the union agreed to endorse the buyout deal. And that meant to stop lobbying in support of Mr. Fraser's legislation to give the PUC explicit authority to block the deal.

Effects of debt

"Ownership of regulated and unregulated businesses by a holding company raises questions over cross-subsidization – essentially the ability to use a regulated business' stability and permission to pass costs on to customers to fund competitive businesses. This can be done by sharing propriety information, by piling costs and debt onto the regulated side, by funneling cash from the regulated to unregulated businesses, or by using regulated assets to back loans to unregulated businesses."

The buyers have made some commitments to protect consumers from the massive debt the company will take on. The investors will ring-fence the regulated power-line business, to shield it in case things go badly for the retail and wholesale units.
The buyers agreed to keep the debt-to-equity ratio for the regulated power line business at 60-to-40. And the regulated rates, which make up a tiny portion of an average household bill, won't reflect any buyout costs.

Still, changing the balance sheet for the entire company could impact costs for the regulated entity. If ratings agencies think TXU is becoming a riskier investment, they may downgrade the debt. That would likely increase the interest rate TXU must pay for loans, including loans to the regulated power-line business.

Already news of the buyout has prompted some ratings agencies to downgrade TXU debt to junk status.

The buyers have promised not to include a higher cost of borrowing in regulated rates through 2008, but there's no assurance for the long term. By 2009, if the interest rates TXU must pay on the debt rise – which seems likely given the ratings downgrades – TXU could begin passing along that extra cost to consumers.

Some private equity experts say this concern is overblown. Colin Blaydon, director of the Center for Private Equity and Entrepreneurship at Dartmouth College, said it's typically cheaper to service debt than to pay dividends on shares.

He said the notion that private equity companies are only short-term investors is "wrong-headed." Investors such as KKR and TPG must invest for the long term and improve a business if they hope to get the best possible price when they sell the company.

The consultant's report acknowledges that debt can be less expensive than equity but still calls on the PUC to protect customers from debt costs, since private equity relies more heavily on debt than healthy utilities do.

"GF Energy sees no reason to generically oppose the sale. The bottom line, however, is that there are no material advantages to the customer if the transaction proceeds. Any net benefits or protections for the customer will have to be painstakingly negotiated and monitored by the Public Utility Commission of Texas," the report states.

Read this entire series in the Dallas Morning News
or on

An energy consultant hired by The Dallas Morning News was asked to assess the impact on consumers of the proposed $45 billion buyout of utility giant TXU Corp. The series explores aspects of the consultant's report.

June 24: Consumers won't benefit from the buyout and could actually see higher electricity rates.

June 25: TXU Corp. could become the first national electricity company Americans have ever seen.

June 26: Two summers from now, you may pay more for electricity.

Sunday, June 24, 2007

OPINION - from the Star-Telegram: The choice is easy, actually

Fort Worth Star-Telegram - Sun., June 24, 2007
It's not the least bit hard to describe the choice that Texas Transportation Commission members will face Thursday at their meeting in Austin: (1) Agree with the overwhelming preference of this region's elected officials and allow the North Texas Tollway Authority to build the Texas 121 toll road in Denton and Collin counties, or (2) award the lucrative project to the apparent favorite among state toll road devotees, the Spanish company Cintra.

From here, it's an easy decision: Pick NTTA.

But there is reason to worry that in the boiling pot of Austin politics, the commission may see things differently. Because of its ongoing efforts to build sections of Gov. Rick Perry's proposed Trans Texas Corridor, Cintra holds special status in state transportation circles.

Thirty-seven members of the Regional Transportation Council, representing cities and counties and transportation providers in the Dallas-Fort Worth area, studied the competing proposals from NTTA and Cintra for weeks. With input from transportation and financial experts and after much debate, they voted 27-10 on Monday that NTTA's proposal offered greater financial value for the region.
That's exactly the standard on which this decision must be made, and local officials are the best ones to judge it.

This is not a hard choice. The Transportation Commission should make short work of it on Thursday and award the Texas 121 tollway project to NTTA.

Anything else would be substituting state politics for local decision-making.

In the background

Three factors influenced Regional Transportation Council members in picking NTTA for the Texas 121 project:

NTTA offered more money up front ($2.5 billion) and more money over the 50-year life of the contract ($833 million in current dollars) for the right to build the project and collect the tolls. Those payments will be used for other transportation projects across Tarrant, Dallas, Denton and Collin counties. Cintra offered $2.1 billion up front and $700 million over the life of the contract.

Over time, the NTTA proposal has greater upside potential for the region. Inevitable growth in Denton and Collin counties reasonably can be expected to push the traffic count on Texas 121 above current forecasts. Cintra would hand the additional revenue from that growth over to its investors. NTTA would keep the money at home and use it on other local projects.

Despite disagreements that some of these officials have had with NTTA in the past, on a long-term project like this they'd still rather deal with a local public agency led by a locally appointed board than with a foreign company. NTTA has plans to start work on five other tollway projects in the next five years, four of them crucial to Tarrant County drivers: Texas 170 near Fort Worth Alliance Airport, the Southwest Parkway stretching into Johnson County, a southern extension of Texas 360 and (just over the line in Dallas County) construction of Texas 161 between Texas 183 and Interstate 20.

Four years ago, the Transportation Commission authorized planning organizations like the Regional Transportation Council to set priorities and guide spending on road and transit projects in the state's major metropolitan areas. That policy included -- even emphasized -- toll road projects.

Ric Williamson, then a commission member and now its chairman, called that local decision-making "clearly the thrust of the governor's instruction about the metros" and said the emphasis on local direction represented "monumental steps" beyond the prior procedure of centralized decision-making from Austin and piecemeal funding of projects across the state.

Local officials have made the big decision on Texas 121. Now Austin should back them up.

So what about Cintra?

The Transportation Commission clearly has the final authority to approve projects in the state highway system, including this one.

Two points could be used to try to spin the decision in Cintra's favor:

State officials picked Cintra's proposal in February as the best among three private company bids on the Texas 121 project. Local legislators were outraged that NTTA had been discouraged from bidding at the time, and they passed a law that reopened the bid process.

Some Cintra backers have said that the reopening violated federal procurement rules and that the Federal Highway Administration might require that the $237 million that it has invested in Texas 121 be returned to Washington. Texas Sen. Kay Bailey Hutchison objected to that interpretation in a May 1 letter to federal highway administrators.

Indeed, this one is a real stretch.

What the federal money paid for has already been delivered: the main lanes of the existing Texas 121 bypass around Lewisville. North Texans are driving on that road (also a tollway) and will continue driving on it. The fact that the new toll road would connect to it should make no difference to federal officials. NTTA plans to use no federal money on the new project.

Some hand-wringers among the Cintra backers say that the Spanish company, having invested a lot of money in its Texas 121 proposal since the state first invited interested parties to take a look at the project more than two years ago and having been selected once as the apparent best bidder, might sue if the contract is given to NTTA instead.

Anybody can file a lawsuit, but it's unlikely in this case. Cintra is aggressively pursuing other Texas toll road business, and taking the state to court would be shooting itself in the foot.

In addition, state law provides that even unsuccessful bidders in cases like this should be reimbursed for their expenses by the state or the region. That will cost a few million dollars, but it would make Cintra whole again -- and the money is only a drop in the bucket when compared with the $400 million in upfront money by which NTTA's bid
See Star-Telegram Opinions Page

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