NTTA Takes $5 Billion Tollway From Cintra - NCTCOG regret at not mentioning that Price Waterhouse Cooper worked for Cintra on TTC Bid

"Eastland said that he regretted that he had not mentioned that Price Waterhouse Cooper had worked for Cintra on the Trans-Texas Corridor."
by Richard Williamson - The Bond Buyer - June 19, 2007 Copyright 2007

DALLAS — In a dramatic reversal, the North Texas Regional Transportation Council yesterday handed a $5 billion toll project to the North Texas Tollway Authority less than four months after it originally selected private development team Cintra/ JPMorgan.

The vote must be seconded by the Texas Transportation Commission, which had already approved Cintra’s bid in February — before the competition with the NTTA.

Despite the NTTA’s late-entry to the bidding, top officials said the authority could quickly catch up to Cintra’s plans for completion of the road by 2010.

“We’ve already commenced work to ensure on-time delivery,” said NTTA executive director Jerry Hiebert. “We’re certain NTTA will be on time for the financial close.”

The battle between the NTTA and Cintra was set up in March, just days after the 23-mile tollway in Denton and Collin counties north of Dallas was awarded to Cintra. Cintra emerged as the favored bidder after three years of developing its proposal.

By contrast, the NTTA developed its 800-page proposal in less than a month after state Sen. John Carona, R-Dallas, persuaded the RTC and Texas Department of Transportation to reopen the bidding to the toll authority, a division of the state.

While the NTTA proposal appeared to trump Cintra’s bid by about $100 million, analysis by TxDOT and the auditing firm of Price Waterhouse Coopers showed that Cintra’s proposal netted out as the better value due to a variety of factors.

In its presentation to the RTC board Thursday, NTTA board chairman Paul Wageman and Hiebert sweetened their original offer of $2.5 billion in an up-front payment and $833 million over the life of the project. At the board’s request, the NTTA would make the entire $3.3 billion payment for the project up-front, they said.

The authority, which operates 64 miles of toll roads in the Dallas-Fort Worth area, has complained of unfair treatment of its proposal and of conflicts of interest involving Price Waterhouse Coopers. After PWC issued its report favoring Cintra, it was revealed that the firm was working as auditor for Cintra, the Spanish developer whose full name is Cintra, Concessiones Infraestructuras de Transporte.
PWC and Cintra claimed that there was no conflict because the PWC auditors in Spain were a separate team from those who conducted the analysis for the RTC.
But Wageman disagreed, pointing to the fact that PWC also worked with Cintra and its partner Zachary Construction of San Antonio on development of the Trans-Texas Corridor, a proposed network of tollways in Central Texas whose final cost could reach $150 billion.

“How can Price Waterhouse Coopers possibly be unbiased and fair in evaluating its partner’s proposal against a competitor’s?” Wageman asked.

The NTTA originally passed up the SH 121 project when the 23-mile toll project was under discussion for financing in 2004, according to TxDOT. Cintra was one of the private developers that responded to financing proposals.

The NTTA has acknowledged comments from the three rating agencies that its credit rating will likely fall as it more than doubles its debt to build SH 121. But officials say they can stay within an A-range.

“We’re going to see a decrease in our credit rating,” Hiebert said. “But the inverse of that would be to just take our money and sit on it.”

Under a protocol agreement with TxDOT and Cintra last year, the NTTA was designated the toll collector and operator for the SH 121 project while Cintra was in charge of construction and financing.

Asked at Thursday’s RTC meeting why the authority earlier had ceded the project to Cintra, Wageman pointed to legislation favoring comprehensive development agreements with private developers in order to preserve bonding authority for government entities. That position was reversed last week with Gov. Rick Perry’s signing of SB 792, which gives toll authorities first shot at projects in their regions.
“We thought the better part of valor was to step back and accept a process that SB 792 has now extinguished,” Wageman said. “This has been an imperfect process.”

Mike Eastland, executive director of the RTC, said at yesterday’s meeting that PWC was the only viable contender to accomplish the analysis of the bidders in a short period time.
Eastland said that he regretted that he had not mentioned that PWC had worked for Cintra on the Trans-Texas Corridor. “We made a mistake,” he said. “We admit the mistake, but I do not think it is material.

© 2007 The Bond Buyer:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

© 2007 The Bond Buyer

State not sold on NTTA's bid for 121 toll road

Commissioners raise doubts about toll plan OK'd by regional panel
By MICHAEL A. LINDENBERGER - The Dallas Morning News - Wednesday, June 20, 2007

Two of five Texas Transportation Commission members said Tuesday that they can't guarantee they will ratify Monday's decision by local leaders to recommend the North Texas Tollway Authority for the State Highway 121 toll project.

Commissioners Ted Houghton of El Paso and Hope Andrade of San Antonio said awarding the contract to NTTA could leave the state vulnerable.

Mr. Houghton said NTTA's proposal is subject to more unknowns than the bid from its rival Cintra, the Spanish construction firm.

"Cintra's offer was a firm bid, an iron-clad contract that we could have closed on yesterday and they would have handed us a check," he said. "NTTA's is not a firm bid; it's merely a proposal. And so now we will have to negotiate."
Commission members get the final say on who will build the coveted 26-mile toll road in Collin and Denton counties. But the Regional Transportation Council sent them a strong message Monday with its 27-10 vote in favor of giving the lucrative contract to the NTTA.

The commission's June 28 agenda will include an action item on the Highway 121 bid, according to the Texas Department of Transportation. But what that item will say – and whether it's a final decision or simply an agreement to negotiate with NTTA – is not clear.

Still, commissioners are eager to work with the RTC in North Texas, Ms. Andrade said. But she said she first must be convinced that the NTTA proposal is the best deal for Texas and doesn't expose the state to a lawsuit from Cintra.

"I want to first make sure that we don't place any risks on the state," Ms. Andrade said. "If there was any negative impact on the state, we would have to bring the region together to tell them we need to figure out how to do this."

Commissioners Ned Holmes of Houston and Fred Underwood of Lubbock could not be reached for comment Tuesday, and Chairman Ric Williamson of Weatherford declined to say what weight he will give the RTC's decision.

"Now that we have an action item before us, it's inappropriate for me to comment as it might be interpreted as how I intend to vote," he said.


Cintra's effect

Commission members and Transportation Department spokesman Randall Dillard said the regional vote will be given great weight in Austin. They argued that NTTA's win was a victory, not a setback, for Gov. Rick Perry's campaign to attract private companies willing to invest in building Texas roads.

"The world changed, and history was made," Mr. Dillard said. "And the RTC decision proves that competition has played, and can play, a vital role in the building of Texas roads."

Mr. Houghton was more explicit. The fact that NTTA was willing to propose paying billions of dollars upfront for the road is a direct result of Cintra's involvement in the bidding process, he said.

"Competition has worked," said Mr. Houghton, who has previously criticized the NTTA. "We've won. And all you have to do is look at history. Tell me, how else would we have been able to pull in $2.8 billion, or whatever the final amount will be, without bringing in the free market?"


NTTA proponent

Mr. Houghton and his fellow commissioners were appointed by Mr. Perry, a Republican. But the governor's eagerness to award Cintra the Highway 121 project met opposition from within his own party.

State Sen. John Carona, R-Dallas, opposed awarding the contract to Cintra and helped smooth the way for NTTA's bid. Mr. Carona now says he agrees that Cintra's bid resulted in a better proposal from the NTTA.

"The governor and the ... [transportation commissioners] did the right thing by introducing the free market into the process," Mr. Carona said.

But he said Mr. Williamson promised him that the regional vote would be decisive on the Highway 121 project.

"The commissioners are honorable men and women," Mr. Carona said. "And the chairman of the commission told me, in no uncertain terms, during the last session that the wishes of the RTC will be honored. I believe he is a man of his word.
"Certainly, if the Transportation Commission chose to ignore the overwhelming wishes of RTC, then that would not bode well for future relations between the Legislature and the Texas Transportation Commission.

WFAA NEWS

The Texas Transportation Commisson will rule on accepting or rejecting the RTC's choice of NTTA for SH121

Citizens and delegations wishing to address the Texas Transporation Commission regarding selection of NTTA for SH121 will have to request a waiver of the 90 requirement to be put on the agenda. They may not waive the time frame. There is a comment session at the end of the meeting and persons present can register to speak a the hearing. However, they will proabably have already ruled on accepting or rejecting the RTC selecion of NTTA for SH121.

HERE ARE THE STATEMENTS REGARDING PUBLIC ACCESS AND COMMENTS AT THE TEXAS TRANSPORTATION COMMISSION MEETINGS:

Public Access to the Texas Transportation Commission

Local citizens and interest groups can form delegations and make presentations before the commission at their monthly meetings. Individual citizens also have the opportunity to express their concerns about any item posted on the agenda, or any issue that falls under the commission’s jurisdiction. To learn more about delegations or how to be added to the commission’s meeting agenda, please visit the Texas Administrative Code Web site and click on §1.4.
If you are unable to attend commission meetings, you may write a letter to the commission at 125 East 11th Street, Austin, Texas 78701-2483

.

(d) Delegations.

(1) Petition. A delegation consisting of the representatives of one or more local governments or of an organization of two or more persons may petition the department to appear before the commission to seek commission action on a maximum of three specific transportation projects, or on the general transportation needs for a specific geographical area.

(2) Content of petition. A petition filed under this subsection must be in writing, directed to the department's district office of the district in which the project is located, and must be received by the chief executive officer in charge of the district (district engineer) no less than 90 days prior to the date of the requested appearance. The petition must include:

(A) the name and address of the petitioner;

(B) a statement that the petitioner desires to appear on the petitioner's own behalf or as the representative of a named organization or local government;

(C) a clear and concise statement of the subject of the proposed presentation;

(D) a brief summary of the action sought;

(E) a brief description of known or potential adverse impacts on the environment;

(F) the name and address of each opponent, if any, to the proposed action or relief sought; and

(G) a statement of the applicable metropolitan planning organization's position and endorsement, if any, of the project or projects.

(3) Highway projects. A delegation requesting action on a highway project must submit with the petition a letter containing:

(A) project limits;

(B) an estimate of the cost of the project;

(C) a description of the existing facility (if any);

(D) a description of the requested improvement;

(E) proposed local government participation (city, county) for:

(i) right-of-way;

(ii) utility adjustments;

(iii) environmental mitigation;

(iv) construction; and

(v) other project components; and

(F) any proposed participation in the project by other public or private entities.

(4) District review. The district will review the petition and advise the delegation if any additional information is necessary. The district will submit to the executive director the petition followed by a report containing background information, the district's analysis, and district recommendations.

(5) Opposition. The department will notify any opponents identified in a petition filed under this subsection or who may be otherwise known to the department. An opponent will be afforded an opportunity to appear before the commission as provided in paragraph (6)(A) of this subsection

.

(6) Presentation.

(A) Except as provided in subsection (h)(6) of this section, a delegation will be allowed to speak for a maximum of 20 minutes on a maximum of three projects prioritized by the delegation or on the general transportation needs for a specific geographical area, and opponents will be allowed to follow the presentation of the delegation with a presentation not to exceed a total of 20 minutes.

(B) Other than elected public officials, no more than three persons may speak for a delegation.

(e) Open comment period.

(1) At the conclusion of the posted agenda of each regular business meeting the commission will allow an open comment period, not to exceed one hour, to receive public comment on any other matter that is under the jurisdiction of the commission.

(2) A person desiring to appear under this subsection must complete a registration form, as provided by the department, prior to the beginning of the open comment period.

(3) Except as provided in subsection (h)(6) of this section, each person will be allowed to speak for a maximum of three minutes for each presentation in the order in which he or she registered.

(f) Disability accommodation. Persons with disabilities who have special communication or accommodation needs and who plan to attend a meeting may contact the office of the secretary to the commission in Austin. Requests should be made at least two days before a meeting. The department will make every reasonable effort to accommodate these needs.

(g) Notice. For each commission meeting an agenda will be filed with the Texas Register in accordance with the requirements of the Open Meetings Act, Government Code, Chapter 551.

(h) Conduct and decorum. The commission will receive public input as authorized by this section, subject to the following guidelines.

(1) Questioning of those making presentations will be reserved to commissioners and the department's administrative staff.

(2) Organizations, associations, or groups are encouraged to present their commonly held views, and same or similar comments, through a representative member where possible.

(3) Presentations shall remain pertinent to the issue being discussed.

(4) A person who disrupts a meeting must leave the meeting room if ordered to do so by the chair.

(5) Time allotted to one speaker may not be reassigned to another speaker.

(6) The time allotted for presentations or comments under this section may be increased or further limited by the chair, or, in the chair's absence, the acting chair, as may be appropriate to assure opportunity for the maximum number of persons to appear.

(i) Waiver. Subject to the approval of the chair, a requirement of this section may be waived in the public interest if necessary for the performance of the responsibilities of the commission or the department.

Full text of Commission Policy

Meetings are usually held at the DeWitt C. Greer building in Austin, located at 125 East 11th Street. To make it easier for citizens throughout Texas to participate in the transportation planning process, the commission schedules 3-4 meetings a year at locations around the state.

The Texas Transportation Commission Website states:
Q.How can I make a presentation to the Commission?

A step-by-step process must be followed before a delegation appears before the commission. The following steps require at least three months of preparation:

A delegation or group interested in appearing before the commission should contact their local TxDOT district office. The district can provide information regarding petition content and a copy of Title 43, TAC, §1.4(d) to the delegation.
No less than 90 days prior to the requested appearance date, the delegation submits a petition to the district engineer in the district where the request(s) is located.
Within 7 days after receipt of the petition, the district reviews the petition using the petition requirements checklist and advises the delegation if further information is needed or if the subject of the request does not fall under commission jurisdiction.
No less than 80 days prior to the requested appearance date, the district mails or faxes the petition to the executive director. Note: The district must include the names, addresses, and telephone numbers of any opponents which are not included in the petition, but are known to the district.
After receipt of the petition, the deputy executive director’s office notifies opponents of the delegation and asks if they want to appear before the commission.
No less than 70 days prior to the requested appearance date, the deputy executive director’s office considers the delegation for scheduling and notifies the delegation and opposition, if any, of the scheduling decision by letter.
No less than 35 days prior to the requested appearance date, the district prepares and submits a delegation report packet to deputy executive director.
No less than 10 days prior to the scheduled appearance date, the deputy executive director’s office prepares an executive summary using the delegation report and other pertinent information and submits this executive summary to the district for approval.
No less than 7 days prior to the scheduled appearance date, the deputy executive director’s office distributes copies of the executive summary, in its final form, to the commission, the governor, and appropriate TxDOT administration. (The district delegation report is made available upon request).
On the scheduled appearance date, the scheduled delegation and opponents appear before the Texas Transportation Commission.
Approximately 60 to 90 days after the delegation appearance, the deputy executive director’s office responds by letter to the delegation’s request(s).

Board members and conflict of interest ethics violations

Several members of the NCTCOG RTC are probably in violation of Chapter 176 of the Local Government Code which reads:

(4) describe each affiliation or business
relationship with a corporation or other business entity with
respect to which a local government officer of the local
governmental entity:
(A) serves as an officer or director; or
(B) holds an ownership interest of 10 percent or
more;
(5) describe each affiliation or business
relationship with an employee or contractor of the local
governmental entity who makes recommendations to a local government
officer of the local governmental entity with respect to the
expenditure of money;
(6) describe each affiliation or business
relationship with a person who:
(A) is a local government officer; and
(B) appoints or employs a local government
officer of the local governmental entity that is the subject of the
questionnaire; and
(7) describe any other affiliation or business
relationship that might cause a conflict of interest.
(d) A person described by Subsection (a) shall file an
updated completed questionnaire with the appropriate records
administrator not later than:
(1) September 1 of each year in which an activity
described by Subsection (a) is pending; and
(2) the seventh business day after the date of an event
that would make a statement in the questionnaire incomplete or
inaccurate.

Refer to the Chapter 176 Local Government Code

The By Laws of the RTC cites adherence to Chapter 171 of the Local Government Code which has a more narrow interpretion of Conflict of Interest.

At the June 14 RTC Meeting of the NCTCOG, a member inquired about possible conflicts of interest by RTC members specifically in relation to the upcoming vote on awarding the lucrative SH121 contract at the Monday, June 18th RTC meeting. A specific question was asked about members of the RTC who are TxDOT officials refraining from voting. A NCTCOG official replied that it would be left to the members, including NTTA Board Member Dallas Mayor Lauri Miller to decide whether they have a conflict of interest.

In a February phone call to NCTCOG Executive Director Mike Eastland, he stated that "We (the NCTCOG) do not usually attempt to enforce ethics conflict of interest rules on members of committees who are appointed by member governments." When questioned about a specific member with alliances which created at the very least, the impression of a conflict of interest, Eastland replied: "You'll have to go to the District Attorney in the county where the member lives to file a complaint of ethics violations." Concern was expressed to Mr. Eastland that the NCTCOG did not attempt to monitor ethical conduct of members serving on their boards and commissions in regard to actions in relation to their service on NCTCOG Boards and Commissions.

Application of ethics rules by Councils of Governments varies:
in March 2007, the Executive Director of the East Texas Council of Governments said: "We take very seriously the actions of members of boards and commissions as well as staff in service to the COG. Our attorney explains very clearly to all our members that they are to avoid conflicts of interest and the perception of conflicts of interest." He said that they "monitor and try to avoid possible violations," rather than referring them to the home county of the members. This statement was made in a telephone call within days of NCTCOG Executive Director Mike Eastland's explanation that at the NCTCOG they leave it to each member to determine if they have a conflict of interest.

At the RTC June Public Meeting in Arlington, concern was expressed that three members of the RTC serve on the Board of Directors of NASCO CORRIDOR, an organization with a mission statement to influence local, regional, state and federal governments to enact laws and fund improvements and construction of multi state tranportation corridors to priotize the shipment of international cargo over passenger transportation solutions. NCTCOG Transportation Director Mike Morris stated he saw no conflict of interest in three NASCO CORRIDOR Board Members (Tarrant County Judge Glen Whitley, RTC Chairwoman Denton County Commissioner Cynthia White and RTC member Denton Mayor Pro-tem Tex Kamp) serving on the Regional Transportation Committee, where they set policies for this region and vote awarding contracts for construction projects.

Thursday June 14 at the RTC meeting was the first time since these queries earlier in the Spring to Executive Director Mike Eastland, that RTC members have openly discusses possible conflicts of interest of RTC members. Those members who voiced the subject are to be commended. Commissioner Maurine Dickey of Dallas asked how the NCTCOG RTC bylaws address conflict of interest. Staff replied that they 'were not sure' but would research it and post the bylaws on the RTC website before the Monday meeting.

Examining the bylaws today revealed that the bylaws address adnerence to Chapter 171 of the Texas Local Government Code. It is recommended that the NCTCOG instruct its members and vendors that they must also adhere to Chapter 176, which addresses Members of Board of Directors as having conflicts of interest in addition to those who own 10% financial interest in a business or investment.