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Texas teacher retirement funds invested in risky toll road schemes
By Terri Hall
Houston Examiner
June 29, 2010
We warned it was going to happen last year, and here we are. Rick Perry, who has the dominant role in selecting the Board of Trustees of the Teacher Retirement System (TRS) pension funds, has long been laying the groundwork to raid this massive source of public funds to invest in risky toll deals. Perry along with Senator Steve Ogden, Lt. Gov. David Dewhurst, and then Speaker Tom Craddick hatched a plan to raid the funds in 2008 by establishing a "revolving fund" to loan money to toll roads that the private market won't touch and fund themselves.
When the retirees along with the grassroots defeated that bill during Perry's called special session last summer, it seemed the pension funds were finally safe, albeit temporarily. So Perry has found another way to get his hands on retirees' pension money to enrich his toll road buddies at Zachry. Though its cloaked as an $800 million real estate investment, an announcement published in Euromoney Institutional Investor Online on June 25 states the purpose is to invest in infrastructure. Part of it goes directly into Zachry American Infrastructure, which is a direct investor in the Trans Texas Corridor TTC-35 and Trans Texas Corridor TTC-69 projects. Both deals use public private partnerships (PPPs) and involve risk, especially since SH 130, the first toll road that's a leg of TTC-35 is so empty that a plane landed on it during "rush hour" traffic!
TxDOT has been discussing ways to increase traffic on SH 130 for over a year. In fact, the taxpayers will subsidize that losing project for all 40 years of the bond debt to the tune of $1 BILLION.
Even though these PPPs are sweetheart deals that GUARANTEE the private operators never lose money, they are still going bankrupt all over the country due to overblown traffic projections that fail to show-up and pay-up. Today's version of toll roads are based on what amounts to pure speculation with little science and lots of manipulation to convince investors toll roads are a sure thing, since they're government-sanctioned monopolies.
The South Bay Expressway in San Diego and the South Carolina Greenville Southern Connector bankruptcies are just two recent examples of failed projects. This doesn't bode well for retirees who rely on their pensions for daily necessities. Who's going to bail them out and will there be enough taxpayer money to do so given the $12 billion in toll road debt that the State has already incurred under Perry?
In other news... Canadian economist condemns road privatization
The latest in a string of critics to condemn public private partnerships (PPPs) is Canadian economist John Loxley, whose new book, Public Service, Private Profits, exposes the truth that PPPs amount to taxpayer rip-offs.
A review by Canada's Chronicle Herald says this of the book: "Loxley and his research team succeed in amassing a mountain of evidence to prove their essential thesis that P3s are generally a bad deal -- more costly to build, less accessible to the public, and of poorer quality than their traditional public sector counterparts...The book ends, predictably, with an overview of the case studies arguing that the risks far outweigh any advantages."
To read the review, go here.