Wednesday, October 8, 2008

Major Players in TTC and SH 121 Toll Financing Scenario hit with Financial Crisis

DRWRCC Editor's note: This article is being posted here because Goldman Sacks has a cozy relationship with key players in the Dallas District TxDOT office. Last year a memo surfaced which appeared to have been authored by Goldman Sacks evaluating NTTA's financial ability to build and manage SH!21. Investigations showed that the memo was actually authored by an engineer in the TxDOT Dallas District Office and circulated under the Goldman Sacks name just as the NTCOG RTC's was deciding between Cintra or NTTA for awarding the lucrative toll contract for SH121. Investment banks are heavily involved in financing (and profiting from) Texas road contracts. Washington and Wall Street impact the cost of public services and infrastructure in Texas cities, counties and the state. This behind-the-scenes article sheds light on some of the players and decisions which are impacting the pocketbooks of DFW regional citizens and Texans in every county of this state.

Agency’s ’04 Rule Let Banks Pile Up New Debt
By STEPHEN LABATON - The New York Times - October 2, 2008

“We have a good deal of comfort about the capital cushions at these firms at the moment.” — Christopher Cox, chairman of the Securities and Exchange Commission, March 11, 2008.

As rumors swirled that Bear Stearns faced imminent collapse in early March, Christopher Cox was told by his staff that Bear Stearns had $17 billion in cash and other assets — more than enough to weather the storm.

Drained of most of its cash three days later, Bear Stearns was forced into a hastily arranged marriage with JPMorgan Chase — backed by a $29 billion taxpayer dowry.

Within six months, other lions of Wall Street would also either disappear or transform themselves to survive the financial maelstrom — Merrill Lynch sold itself to Bank of America, Lehman Brothers filed for bankruptcy protection, and Goldman Sachs and Morgan Stanley converted to commercial banks.

How could Mr. Cox have been so wrong?

Many events in Washington, on Wall Street and elsewhere around the country have led to what has been called the most serious financial crisis since the 1930s. But decisions made at a brief meeting on April 28, 2004, explain why the problems could spin out of control. The agency’s failure to follow through on those decisions also explains why Washington regulators did not see what was coming.

On that bright spring afternoon, the five members of the Securities and Exchange Commission met in a basement hearing room to consider an urgent plea by the big investment banks.

They wanted an exemption for their brokerage units from an old regulation that limited the amount of debt they could take on. The exemption would unshackle billions of dollars held in reserve as a cushion against losses on their investments. Those funds could then flow up to the parent company, enabling it to invest in the fast-growing but opaque world of mortgage-backed securities; credit derivatives, a form of insurance for bond holders; and other exotic instruments.

The five investment banks led the charge, including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary.

A lone dissenter — a software consultant and expert on risk management — weighed in from Indiana with a two-page letter to warn the commission that the move was a grave mistake. He never heard back from Washington.

One commissioner, Harvey J. Goldschmid, questioned the staff about the consequences of the proposed exemption. It would only be available for the largest firms, he was reassuringly told — those with assets greater than $5 billion.

“We’ve said these are the big guys,” Mr. Goldschmid said, provoking nervous laughter, “but that means if anything goes wrong, it’s going to be an awfully big mess.”

Mr. Goldschmid, an authority on securities law from Columbia, was a behind-the-scenes adviser in 2002 to Senator Paul S. Sarbanes when he rewrote the nation’s corporate laws after a wave of accounting scandals. “Do we feel secure if there are these drops in capital we really will have investor protection?” Mr. Goldschmid asked. A senior staff member said the commission would hire the best minds, including people with strong quantitative skills to parse the banks’ balance sheets.

Annette L. Nazareth, the head of market regulation, reassured the commission that under the new rules, the companies for the first time could be restricted by the commission from excessively risky activity. She was later appointed a commissioner and served until January 2008.

“I’m very happy to support it,” said Commissioner Roel C. Campos, a former federal prosecutor and owner of a small radio broadcasting company from Houston, who then deadpanned: “And I keep my fingers crossed for the future.”

The proceeding was sparsely attended. None of the major media outlets, including The New York Times, covered it.

After 55 minutes of discussion, which can now be heard on the Web sites of the agency and The Times, the chairman, William H. Donaldson, a veteran Wall Street executive, called for a vote. It was unanimous. The decision, changing what was known as the net capital rule, was completed and published in The Federal Register a few months later.

With that, the five big independent investment firms were unleashed.

In loosening the capital rules, which are supposed to provide a buffer in turbulent times, the agency also decided to rely on the firms’ own computer models for determining the riskiness of investments, essentially outsourcing the job of monitoring risk to the banks themselves.

Over the following months and years, each of the firms would take advantage of the looser rules. At Bear Stearns, the leverage ratio — a measurement of how much the firm was borrowing compared to its total assets — rose sharply, to 33 to 1. In other words, for every dollar in equity, it had $33 of debt. The ratios at the other firms also rose significantly.

The 2004 decision for the first time gave the S.E.C. a window on the banks’ increasingly risky investments in mortgage-related securities.

But the agency never took true advantage of that part of the bargain. The supervisory program under Mr. Cox, who arrived at the agency a year later, was a low priority.

The commission assigned seven people to examine the parent companies — which last year controlled financial empires with combined assets of more than $4 trillion. Since March 2007, the office has not had a director. And as of last month, the office had not completed a single inspection since it was reshuffled by Mr. Cox more than a year and a half ago.

The few problems the examiners preliminarily uncovered about the riskiness of the firms’ investments and their increased reliance on debt — clear signs of trouble — were all but ignored.

The commission’s division of trading and markets “became aware of numerous potential red flags prior to Bear Stearns’s collapse, regarding its concentration of mortgage securities, high leverage, shortcomings of risk management in mortgage-backed securities and lack of compliance with the spirit of certain” capital standards, said an inspector general’s report issued last Friday. But the division “did not take actions to limit these risk factors.”

Drive to Deregulate

The commission’s decision effectively to outsource its oversight to the firms themselves fit squarely in the broader Washington culture of the last eight years under President Bush.

A similar closeness to industry and laissez-faire philosophy has driven a push for deregulation throughout the government, from the Consumer Product Safety Commission and the Environmental Protection Agency to worker safety and transportation agencies.

“It’s a fair criticism of the Bush administration that regulators have relied on many voluntary regulatory programs,” said Roderick M. Hills, a Republican who was chairman of the S.E.C. under President Gerald R. Ford. “The problem with such voluntary programs is that, as we’ve seen throughout history, they often don’t work.”

As was the case with other agencies, the commission’s decision was motivated by industry complaints of excessive regulation at a time of growing competition from overseas. The 2004 decision was aimed at easing regulatory burdens that the European Union was about to impose on the foreign operations of United States investment banks.

The Europeans said they would agree not to regulate the foreign subsidiaries of the investment banks on one condition — that the commission regulate the parent companies, along with the brokerage units that the S.E.C. already oversaw.

A 1999 law, however, had left a gap that did not give the commission explicit oversight of the parent companies. To get around that problem, and in exchange for the relaxed capital rules, the banks volunteered to let the commission examine the books of their parent companies and subsidiaries.

The 2004 decision also reflected a faith that Wall Street’s financial interests coincided with Washington’s regulatory interests.

“We foolishly believed that the firms had a strong culture of self-preservation and responsibility and would have the discipline not to be excessively borrowing,” said Professor James D. Cox, an expert on securities law and accounting at Duke School of Law (and no relationship to Christopher Cox).

“Letting the firms police themselves made sense to me because I didn’t think the S.E.C. had the staff and wherewithal to impose its own standards and I foolishly thought the market would impose its own self-discipline. We’ve all learned a terrible lesson,” he added.

In letters to the commissioners, senior executives at the five investment banks complained about what they called unnecessary regulation and oversight by both American and European authorities. A lone voice of dissent in the 2004 proceeding came from a software consultant from Valparaiso, Ind., who said the computer models run by the firms — which the regulators would be relying on — could not anticipate moments of severe market turbulence.

“With the stroke of a pen, capital requirements are removed!” the consultant, Leonard D. Bole, wrote to the commission on Jan. 22, 2004. “Has the trading environment changed sufficiently since 1997, when the current requirements were enacted, that the commission is confident that current requirements in examples such as these can be disregarded?”

He said that similar computer standards had failed to protect Long-Term Capital Management, the hedge fund that collapsed in 1998, and could not protect companies from the market plunge of October 1987.

Mr. Bole, who earned a master’s degree in business administration at the University of Chicago, helps write computer programs that financial institutions use to meet capital requirements.

He said in a recent interview that he was never called by anyone from the commission.

“I’m a little guy in the land of giants,” he said. “I thought that the reduction in capital was rather dramatic.”

Policing Wall Street

A once-proud agency with a rich history at the intersection of Washington and Wall Street, the Securities and Exchange Commission was created during the Great Depression as part of the broader effort to restore confidence to battered investors. It was led in its formative years by heavyweight New Dealers, including James Landis and William O. Douglas. When President Franklin D. Roosevelt was asked in 1934 why he appointed Joseph P. Kennedy, a spectacularly successful stock speculator, as the agency’s first chairman, Roosevelt replied: “Set a thief to catch a thief.”

The commission’s most public role in policing Wall Street is its enforcement efforts. But critics say that in recent years it has failed to deter market problems.
“It seems to me the enforcement effort in recent years has fallen short of what one Supreme Court justice once called the fear of the shotgun behind the door,” said Arthur Levitt Jr., who was S.E.C. chairman in the Clinton administration. “With this commission, the shotgun too rarely came out from behind the door.”

Christopher Cox had been a close ally of business groups in his 17 years as a House member from one of the most conservative districts in Southern California. Mr. Cox had led the effort to rewrite securities laws to make investor lawsuits harder to file. He also fought against accounting rules that would give less favorable treatment to executive stock options.

Under Mr. Cox, the commission responded to complaints by some businesses by making it more difficult for the enforcement staff to investigate and bring cases against companies. The commission has repeatedly reversed or reduced proposed settlements that companies had tentatively agreed upon. While the number of enforcement cases has risen, the number of cases involving significant players or large amounts of money has declined.

Mr. Cox dismantled a risk management office created by Mr. Donaldson that was assigned to watch for future problems. While other financial regulatory agencies criticized a blueprint by Mr. Paulson, the Treasury secretary, that proposed to reduce their stature — and that of the S.E.C. — Mr. Cox did not challenge the plan, leaving it to three former Democratic and Republican commission chairmen to complain that the blueprint would neuter the agency.

In the process, Mr. Cox has surrounded himself with conservative lawyers, economists and accountants who, before the market turmoil of recent months, had embraced a far more limited vision for the commission than many of his predecessors.

‘Stakes in the Ground’

Last Friday, the commission formally ended the 2004 program, acknowledging that it had failed to anticipate the problems at Bear Stearns and the four other major investment banks.

“The last six months have made it abundantly clear that voluntary regulation does not work,” Mr. Cox said.

The decision to shutter the program came after Mr. Cox was blamed by Senator John McCain, the Republican presidential candidate, for the crisis. Mr. McCain has demanded Mr. Cox’s resignation.

Mr. Cox has said that the 2004 program was flawed from its inception. But former officials as well as the inspector general’s report have suggested that a major reason for its failure was Mr. Cox’s use of it.

“In retrospect, the tragedy is that the 2004 rule making gave us the ability to get information that would have been critical to sensible monitoring, and yet the S.E.C. didn’t oversee well enough,” Mr. Goldschmid said in an interview. He and Mr. Donaldson left the commission in 2005.

Mr. Cox declined requests for an interview. In response to written questions, including whether he or the commission had made any mistakes over the last three years that contributed to the current crisis, he said, “There will be no shortage of retrospective analyses about what happened and what should have happened.” He said that by last March he had concluded that the monitoring program’s “metrics were inadequate.”

He said that because the commission did not have the authority to curtail the heavy borrowing at Bear Stearns and the other firms, he and the commission were powerless to stop it.

“Implementing a purely voluntary program was very difficult because the commission’s regulations shouldn’t be suggestions,” he said. “The fact these companies could withdraw from voluntary supervision at their discretion diminished the mandate of the program and weakened its effectiveness. Experience has shown that the S.E.C. could not bootstrap itself into authority it didn’t have.”

But critics say that the commission could have done more, and that the agency’s effectiveness comes from the tone set at the top by the chairman, or what Mr. Levitt, the longest-serving S.E.C. chairman in history, calls “stakes in the ground.”

“If you go back to the chairmen in recent years, you will see that each spoke about a variety of issues that were important to them,” Mr. Levitt said. “This commission placed very few stakes in the ground.”

Read more in the New York Times

With Bonds in Trouble, States Seek Federal Help

By MARY WILLIAMS WALSH and RANDAL C. ARCHIBOLD - The New York Times - October 7, 2008
California and other states scrambled on Tuesday to cope with bills coming due as they pressed Washington for assistance because the municipal bond markets remain largely closed to them.

In Washington, White House officials said they were talking with state officials and reviewing the issue of aid. But despite the urgency of the problem, thorny legal issues have emerged.

Though the federal government has taken extraordinary steps to lend money to corporations in the short-term markets, and to provide more money to banks, officials have been stymied over how to assist local governments because of their status as issuers of tax-exempt bonds.

A longstanding provision of the Internal Revenue Code bars the federal government from guaranteeing tax-exempt bonds. Officials are concerned that if the federal government helps states and others without Congressional action it could put their tax exemption at risk.

While officials seek a way around this obstacle, many local governments are running into severe cash squeezes.

California has the largest and most pressing problem. The state has told the Treasury Department it might need an emergency loan of up to $7 billion to pay its day-to-day bills in coming weeks, including those to school districts and municipal governments due on Oct. 29. Massachusetts has also reached out for help.

“It’s critical,” said Jeffrey L. Esser, executive director of the Government Finance Officers Association. “There are no buyers out there for the governments, to meet their short-term financing needs.”

Among the ideas being discussed is finding a way for the federal government to provide some guarantee of municipal bonds without violating the tax code, and in that way building investor confidence in the bonds.

“I think there are partial guarantees or other federal programs that would fall short of the full guarantee that might not violate this code section,” said Richard Chirls, a partner at Orrick Herrington & Sutcliffe, the bond counsel to California.

Another approach may be to include some short-term municipal issues under the Federal Reserve’s newest program to buy commercial paper.

California has an immediate problem because, like many other places, it receives tax revenue in batches during the year. The state is accustomed to borrowing in short-term markets in the fall, to tide itself over through the lean months before the next batch of tax revenue comes in. The credit markets froze just when California would have issued its revenue anticipation notes.

Other governments have run into a cash squeeze because they have issued a type of short-term debt with an interest rate that resets every week. That worked until the credit markets froze, but now the interest rates that governments pay on such debt are tripling or quadrupling.

The trouble in the credit markets has compounded the deteriorating finances of many states and cities, which are finding the revenues they had projected months ago are now falling short, sometimes drastically.

Andrew A. Davis, executive director of the Illinois Student Assistance Commission, said that if the federal government stepped in to help California, other states might expect similar relief instead of tackling tough budget issues themselves. “There’s going to be very little incentive to levy taxes,” Mr. Davis said.

Even if states get short-term access to credit, many will need to take further steps to balance their budgets. Unlike the federal government, they are generally required to balance their budgets each year.

In California, the most populous state and one of those suffering the most from the housing slump, Gov. Arnold Schwarzenegger said he would meet with legislators on Wednesday to propose possible routes out of the state’s crisis.

The California treasurer, Bill Lockyer, said he would discuss the possibility of tapping into the state’s big public pension funds with their managers. Mr. Lockyer said he would see if they could buy some of the state’s short-term notes, or issue a line of credit, if the markets do not improve and the federal government cannot help.

Before the problem became critical this month, California was relying on optimistic revenue forecasts to balance its budget. Now it is coming up short again, possibly by as much as $1 billion.

Massachusetts, which has also told the federal government it might need assistance, withdrew a planned $750 million offer of short-term notes on Tuesday, for the second time in two weeks, saying that the market seemed inhospitable and that it could dip into a state fund for emergencies.

North Carolina said it was fielding calls from other states about how to duplicate an innovative deal it struck to borrow $1.1 billion from the state employees’ credit union. It is using the money to provide student loans. Illinois recently completed a similar deal for about $100 million with a group of eight credit unions, also for student lending.

The New York State Insurance Department put together a $1 billion package to assist Jefferson County, Ala., on Tuesday, to help keep the county from declaring bankruptcy. It has been teetering for several months, after having issued a large number of variable-rate bonds for major improvements in its sewer system.

These unusual measures show just how much pressure some local governments face as their tax revenues dry up and the credit squeeze prevents them from issuing the kind of debt that they have long relied on to handle their operations.

“Talking to our members in the last week or so, it is so bleak,” said Scott Pattison, executive director of the National Association of State Budget Officers, adding that just two weeks ago he never would have dreamed the situation would become so dire.

A handful of well-rated debt offerings did come to market on Tuesday, but for the most part the markets were quiet.

The Long Island Power Authority sold the largest municipal bond issue since the credit squeeze began, aided in part by bond insurance provided by Berkshire Hathaway, the company headed by Warren E. Buffett. Berkshire stepped in to fill a gap in the bond insurance business earlier this year, but has received more attention in recent days by investing in Goldman Sachs, the lead underwriter for the utility’s bond issue, and in General Electric.

The Cold Spring Harbor school district on Long Island also sold a relatively small $7 million issue of tax anticipation notes on Tuesday, but its success seemed to stem from not urgently needing the money. “We’re one of two school districts in the whole state that has a triple-A uninsured bond rating,” said the district’s assistant superintendent for business, William Bernhard.

Absent extraordinary measures by the Federal Reserve, investors were not buying anything except Treasury securities, said Mark V. McCray, managing director and portfolio manager for Pimco.

“There is absolute panic in the markets,” Mr. McCray said. “People are hoarding cash.”

Edmund L. Andrews and Katie Zezima contributed reporting.
Read more in the New York Times

Monday, October 6, 2008

TxDOT buys time with borrowed funds for Dallas-area projects

By MICHAEL A. LINDENBERGER - The Dallas Morning News - Sunday, October 5, 2008
State transportation officials are poised to issue billions of dollars in debt to help speed road construction, a move that will keep Dallas-area projects on schedule for now but will do little to shore up the state's long-term road-funding crisis.

The Texas Department of Transportation will likely begin issuing $1.5 billion in bonds within 60 days, pending the recovery of the nation's upended credit markets, and is taking steps to borrow another $6.4 billion over the next few years.

Historic turmoil in the credit markets is already costing the department hundreds of thousands of dollars in extra interest payments each week on some of its smaller loans, and any efforts to borrow much more will be complicated – and likely delayed – if the markets do not improve.

Credit worries aside, the decision to borrow billions enables TxDOT to end months of hand-wringing over whether it will have the money to complete projects local officials throughout Texas have been depending on. Late last year, the agency announced it was going broke and would have to delay some of those projects.

The new borrowing will allow the state to keep projects on schedule. But the big debt will do nothing to reduce the state's long-term shortage of road funds and could make paying for future projects more difficult as interest costs grow.

"Borrowing money does have the benefit of building projects faster," said Michael Morris, North Central Texas Council of Governments' transportation director. "Borrowing money does nothing for building more projects [in the long term]. Some people will be confused that building projects faster solves the problem, but it doesn't address the total funding need."

Mr. Morris says North Texas' transportation needs are $50 billion ahead of expected tax revenues between now and 2030. Some critics call those numbers too pessimistic, but everyone agrees that the number is big. Conservative estimates have said statewide needs will outpace funding by $50 billion to $60 billion.

Meeting last week in Austin, Texas Transportation Commission members said the bond program won't fix a basically busted system – and could make things worse if the Legislature doesn't eventually provide new tax funds.

"The system for funding TxDOT is fatally flawed," said Ned Holmes of Houston, one of five members of the Texas Transportation Commission that runs the department.

A political problem

Few leaders in Austin disagree with Mr. Holmes.

But while lawmakers, the governor and TxDOT all seem to agree Texas needs more money for roads, consensus on a solution beyond more borrowing has proven devilishly difficult to reach.

One camp argues that, of course TxDOT is going broke, given that state gasoline taxes have remained flat since 1991, at 20 cents per gallon. However, efforts to raise the tax rate have been dead in the water for years.

"As far as the gas tax goes, there is simply no appetite in the Legislature for that. None at all," said Allison Castle, press secretary for Gov. Rick Perry, said. "To make a real difference, you'd have to raise it 50 to 55 cents per gallon. Raising it a nickel or two would be just giving false hope."

But even simply indexing the 20-cent-per-gallon rate to inflation would have a huge impact over time, said Senate Transportation Chairman John Carona, R-Dallas. He said he is going to press for that this session.

"If we had had the courage to do that two years ago, we'd be in a substantially better place already," Mr. Carona said.


For the past five years, the governor has pushed instead to build more toll roads and then to borrow heavily against future revenue.

"Toll roads are fair, as they are essentially user fees, and drivers can decide whether to use them or not," said his spokeswoman.

Opposition to tolls, especially private toll roads, was a powerful force during the 2007 session, and even lawmakers who say some tolls are helpful also argue that Mr. Perry has pushed too hard for tolls.

"We have 15 major highways proposed in Dallas-Fort Worth, and all 15 are planned as toll roads," Mr. Carona said. "In that situation, you can no longer say tolls are an option for motorists. If they are all built, you won't be able to drive anywhere in Dallas without using a toll road."

Mr. Holmes, too, acknowledged the governor and the agency under former chairman Ric Williamson had been too focused on tolls as the solution.

"They came up with a solution that did not require TxDOT to go to the Legislature to ask for new funds," he said. "But tolling was never going to work by itself."

Ready to borrow

For now, the only solution lawmakers and the governor have agreed on is to borrow another $8 billion.

It's not a new direction. From 2002 to 2007, the department first went on a borrowing spree – and then a building spree, much to the delight of traffic-clogged regions like North Texas. In those years, the department spent as much as $5 billion a year in construction contracts.

But by 2007 TxDOT had spent the money and was left with flat revenues, rising costs and hefty interest payments. TxDOT says it has about $2.5 billion in tax money to spend on major road contracts annually, about half what it was spending in recent years. It also warns that soaring maintenance costs could soon eat up as much as $2 billion a year.

"We're fast going to be at a place where we simply have to tell the locals, we're out of the business of building new roads," said Commissioner Ted Houghton of El Paso.

To delay that, TxDOT is ready to borrow again. But those new dollars will only delay, not solve, the department's long-term funding crisis.

More time may be what TxDOT needs most of all, said Mr. Holmes, who reluctantly supported the new borrowing.

"It's going to take some time – this next session, the next one and maybe one more after that – before we reach a real solution," he said.

Read more in the Dallas Morning News

In Tarrant County, road projects are going nowhere in a hurry

By ANTHONY SPANGLER - Fort Worth Star Telegram - Mon, Oct. 06, 2008

FORT WORTH — The city of Saginaw wanted to widen an east-west thoroughfare from three lanes to six with a divided median.

Even though it combined more than $7 million in federal funds and matching dollars in the 2006 Tarrant County bond program, the city of 19,000, which has a budget of $30 million, is finding it difficult to come up with its share of the money for the project.

Now, Saginaw plans to take the Longhorn Road project back to the county commissioners to request a scaled-back version that would instead widen it to four, undivided lanes.

"The escalating costs, since the concept of the projects were done back in 2005, have made it too expensive right now," said Dolph Johnson, assistant city manager and finance director.

"The city’s share is about $1 million more than what we had expected. It would be difficult for us to come up with the difference."

Rising construction costs, tightening municipal budgets and a national credit crunch are preventing some Tarrant County cities from tapping into $140 million in matching road funds in the bond package that was approved by voters in 2006.

About 90 percent of the transportation projects in the $433 million program have been delayed at least a year. Some have been delayed as long as three years.

And several cities are coming back to the county commissioners, asking to scale back or otherwise alter their project plans to make them affordable.

Commissioner Gary Fickes warns that the problem could get worse as city budgets tighten and construction costs continue to rise.

"Time is killing them," he said during a recent discussion of the project delays. "I think the longer this goes on, the worse it is going to get."

Skyrocketing costs

The 2006 bond program set aside money to match cities’ contribution for road projects that would reduce congestion, ease traffic problems and improve air quality. Under the program, cities must cover the costs of inflation.

Since 2005, the cost of concrete has risen about 20 percent; the cost of steel about 83 percent; and the cost of asphalt paving mixtures about 107 percent, according to Labor Department commodity data.

"They submitted the projected costs in 2005, but those estimates were pre-Katrina, Rita and Ike," said Renee Lamb, Tarrant County transportation director. "The rising cost is the reason for some of the delays, according to what cities have told us. Some of the cities are awaiting bond elections this November to come up with their portion of these projects."

She said the financial crisis may make it difficult for cities to borrow money in the near future.

"I’m sure that the financial side is playing a factor in some of these delays, but it is not in anyone’s best interest to delay because construction costs are not going to go down anytime soon," Lamb said.

Set aside

Tarrant County Administrator G.K. Maenius said some cities have already set aside money for the road projects and others may not issue debt until after the financial crisis passes.

Earlier this year, Tarrant County sold $112 million in bonds as part of the 2006 program, paying 4.36 percent on that debt. The county invested the money in accounts that are earning about 3 percent annually.

Maenius said cities that try to sell bonds, or certificates of obligation, which are typically paid for with property taxes, for capital projects such as road construction may find it difficult.

"It will be a matter of timing, when they go out and try to borrow that money," he said. "A big problem will be that money will only be available to individuals and governments that are credit-worthy. I’m sure the rating agencies are going to be taking a really hard look on any government that they rate."

Read more in the Fort Worth Star Telegram

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