Roads paved with debt


Link to article here.

Roads to hell paved with debt
By Ian Verrender
Sydney Morning Herald
August 28, 2008

There will come a time in the not-too-distant future when ordinary people will look back on this era, shake their heads in wonder and ask: how on earth did anyone ever think toll roads were sexy?

From the tulip bubble in Holland in the 1630s through to the dotcom boom of the late 1990s, otherwise rational minds have discarded logic and joined the frenzied mob in whatever investment fad promises fabulous wealth.

Without fail, they always end in tears. And so it is with the infrastructure boom.

Yesterday, Macquarie Group found itself under concerted attack from hedge funds as its shares fell 10 per cent to $41.61.

That's wiped out all the gains from the bull market and left senior executives floundering in a sea of confusion about how to stop the rout.


In part, the renewed attack on the Silver Donut is in part the fault of Babcock & Brown, the deeply-flawed and heavily-indebted infrastructure group.

When B&B's bankers effectively seized control in a bloodless coup last week - sidelining Phil Green and Jim Babcock while they figure out how to retrieve their $50 billion in loans - the attention inevitably swung towards the last bastion of financial engineering.

Macquarie is not a Babcock & Brown. It has a huge global banking operation that will ensure its survival. But its growth strategy of the past decade has been built on buying infrastructure, loading it up with debt, selling it off to investors in tax-effective listed trusts and then "managing" the assets - with fees extracted every step of the way.

Even dividends and distributions were paid with debt rather than earnings.

With the business model now

dead, Macquarie's future growth has evaporated. And every group that imitated the Macquarie model, such as the listed property trusts, is now in trouble.

Macquarie's early response was to start buying units in its deeply-discounted satellites, spending as much as $500 million alone on Macquarie Infrastructure Group.

Lately, the plan has morphed into a strategy to delist the satellites from the sharemarket and resell them into unlisted funds. But events appear to be overtaking the plan.

There are now serious doubts about whether it has the cash reserves to privatise the assets. A stockbroking analyst from UBS concluded yesterday Macquarie Group had between just $150 million and $500 million in excess capital - well below the $3 billion claimed by Macquarie.

That started the hounds barking and was enough to concentrate the minds of hedge funds.

Another to run into a roadblock yesterday was Transurban, which started life as the successful developer and owner of Melbourne's CityLink toll road.

It is a fairly simple model that goes something like this: cars drive on a road; they pay a toll.

The operator pays the government a concession for the right to build and operate the road for anywhere between 25 and 100 years. That invariably requires large borrowings that ensure losses in the early days. But as time goes on and the loan is paid down, the company becomes increasingly profitable.

Transurban did well out of CityLink. But as toll road mania swept the land, and then the globe, Transurban's boss Kim Edwards scouted around for expansion opportunities. First he took Sydney - with a takeover of Hills Motorways M2 and a half share in the Macquarie-controlled Westlink M7. Then he bought a major slice of the M1, M4 and M5 from Macquarie. And then it was off to show the Americans a thing or two.

Each deal meant more debt to buy assets in an inflated market. And to keep the punters happy, Edwards pumped up the dividends with - a little more debt.

Transurban's newly-appointed Chris Lynch, the former BHP executive, has inherited this mess and taken swift action. He's raised extra equity and, luckily, has a strong backer in the Canada Pension Plan. He's also slashed the dividend which left investors with a bitter taste.

Lynch, a no-nonsense former AFL player from Broken Hill, says he wants to transform Transurban back into a "fair dinkum" company. He's going to have to.

So are numerous others who bloated themselves on cheap debt and now are stuck with overpriced assets no one wants.

NYT: Cities Debate Privatizing Public Infrastructure

Link to article here.

More doubts loom over the risks of Public Private Partnership toll roads. With the increased cost of transportation causing our economy to spiral downward, now is not the time for massive leveraged debt that requires lots of driving and motorists with money to burn.

Cities Debate Privatizing Public Infrastructure
By JENNY ANDERSON
New York Times
August 27, 2008
Cleaning up road kill and maintaining runways may not sound like cutting-edge investments. But banks and funds with big money seem to think so.

Reeling from more exotic investments that imploded during the credit crisis, Kohlberg Kravis Roberts, the Carlyle Group, Goldman Sachs, Morgan Stanley and Credit Suisse are among the investors who have amassed an estimated $250 billion war chest — much of it raised in the last two years — to finance a tidal wave of infrastructure projects in the United States and overseas.

Their strategy is gaining steam in the United States as federal, state and local governments previously wary of private funds struggle under mounting deficits that have curbed their ability to improve crumbling roads, bridges and even airports with taxpayer money.

With politicians like Gov. Arnold Schwarzenegger of California warning of a national infrastructure crisis, public resistance to private financing may start to ease.

“Budget gaps are starting to increase the viability of public-private partnerships,” said Norman Y. Mineta, a former secretary of transportation who was recently hired by Credit Suisse as a senior adviser to such deals.

This fall, Midway Airport of Chicago could become the first to pass into the hands of private investors. Just outside the nation’s capital, a $1.9 billion public-private partnership will finance new high-occupancy toll lanes around Washington. This week, Florida gave the green light to six groups that included JPMorgan, Lehman Brothers and the Carlyle Group to bid for a 50- to 75 -year lease on Alligator Alley, a toll road known for sightings of sleeping alligators that stretches 78 miles down I-75 in South Florida.

Until recently, the use of private funds to build and manage large-scale American infrastructure assets was slow to take root. States and towns could raise taxes and user fees or turn to the municipal bond market.

Americans have also been wary of foreign investors, who were among the first to this market, taking over their prized roads and bridges. When Macquarie of Australia and Cintra of Spain, two foreign funds with large portfolios of international investments, snapped up leases to the Chicago Skyway and the Indiana Toll Road, “people said ‘hold it, we don’t want our infrastructure owned by foreigners,’ ” Mr. Mineta said.

And then there is the odd romance between Americans and their roads: they do not want anyone other than the government owning them. The specter of investors reaping huge fees by financing assets like the Pennsylvania Turnpike also touches a raw nerve among taxpayers, who already feel they are paying top dollar for the government to maintain roads and bridges.

And with good reason: Private investors recoup their money by maximizing revenue — either making the infrastructure better to allow for more cars, for example, or by raising tolls. (Concession agreements dictate everything from toll increases to the amount of time dead animals can remain on the road before being cleared.)

Politicians have often supported the civic outcry: in the spring of 2007, James L. Oberstar of Minnesota, chairman of the House Committees on Transportation and Infrastructure, warned that his panel would “work to undo” any public-private partnership deals that failed to protect the public interest.

And labor unions have been quick to point out that investment funds stand to reap handsome fees from the crisis in infrastructure. “Our concern is that some sources of financing see this as a quick opportunity to make money,” Stephen Abrecht, director of the Capital Stewardship Program at the Service Employees International Union, said.

But in a world in which governments view infrastructure as a way to manage growth and raise productivity through the efficient movement of goods and people, an eroding economy has forced politicians to take another look.

“There’s a huge opportunity that the U.S. public sector is in danger of losing,” says Markus J. Pressdee, head of infrastructure investment banking at Credit Suisse. “It thinks there is a boatload of capital and when it is politically convenient it will be able to take advantage of it. But the capital is going into infrastructure assets available today around the world, and not waiting for projects the U.S., the public sector, may sponsor in the future.”

Traditionally, the federal government played a major role in developing the nation’s transportation backbone: Thomas Jefferson built canals and roads in the 1800s, Theodore Roosevelt expanded power generation in the early 1900s. In the 1950s Dwight Eisenhower oversaw the building of the interstate highway system.

But since the early 1990s, the United States has had no comprehensive transportation development, and responsibilities were pushed off to states, municipalities and metropolitan planning organizations. “Look at the physical neglect — crumbling bridges, the issue of energy security, environmental concerns,” said Robert Puentes of the Brookings Institution. “It’s more relevant than ever and we have no vision.”

The American Society of Civil Engineers estimates that the United States needs to invest at least $1.6 trillion over the next five years to maintain and expand its infrastructure. Last year, the Federal Highway Administration deemed 72,000 bridges, or more than 12 percent of the country’s total, “structurally deficient.” But the funds to fix them are shrinking: by the end of this year, the Highway Trust Fund will have a several billion dollar deficit.

“We are facing an infrastructure crisis in this country that threatens our status as an economic superpower, and threatens the health and safety of the people we serve,” New York Mayor Michael R. Bloomberg told Congress this year. In January he joined forces with Mr. Schwarzenegger and Gov. Edward G. Rendell of Pennsylvania to start a nonprofit group to raise awareness about the problem.

Some American pension funds see an investment opportunity. “Our infrastructure is crumbling, from bridges in Minnesota to our airports and freeways,” said Christopher Ailman, the head of the California State Teachers’ Retirement System. His board recently authorized up to about $800 million to invest in infrastructure projects. Nearby, the California Public Employees’ Retirement System, with coffers totaling $234 billion, has earmarked $7 billion for infrastructure investments through 2010. The Washington State Investment Board has allocated 5 percent of its fund to such investments.

Some foreign pension funds that jumped into the game early have already reaped rewards: The $52 billion Ontario Municipal Employee Retirement System saw a 12.4 percent return last year on a $5 billion infrastructure investment pool, above the benchmark 9.9 percent though down from 14 percent in 2006.

“People are creating a new asset class,” said Anne Valentine Andrews, head of portfolio strategy at Morgan Stanley Infrastructure. “You can see and understand the businesses involved — for example, ships come into the port, unload containers, reload containers and leave,” she said. “There’s no black box.”

The prospect of steady returns has drawn high-flying investors like Kohlberg Kravis and Morgan Stanley to the table. “Ten to 20 years from now infrastructure could be larger than real estate,” said Mark Weisdorf, head of infrastructure investments at JPMorgan. In 2006 and 2007, more than $500 billion worth of commercial real estate deals were done.

The pace of recent work is encouraging, says Robert Poole, director of transportation studies at the Reason Foundation, pointing to projects like the high-occupancy toll, or HOT, lanes outside Washington. “The fact that the private sector raised $1.4 billion for the Beltway project shows that even projects like HOT lanes that are considered high risk can be developed and financed privately and that has huge implications for other large metro areas,” he said .

Yet if the flow of money is fast, the return on these investments can be a waiting game. Washington’s HOT lanes project took six years to build after Fluor Enterprises, one of the two private companies financing part of the project, made an unsolicited bid in 2002. The privatization of Chicago’s Midway Airport was part of a pilot program adopted by the Federal Aviation Administration in 1996 to allow five domestic airports to be privatized. Twelve years later only one airport has met that goal — Stewart International Airport in Newburgh, N.Y. — and it was sold back to the Port Authority of New York and New Jersey.

For many politicians, privatization also remains a painful process. Mitch Daniels, the governor of Indiana, faced a severe backlash when he collected $3.8 billion for a 75- year lease of the Indiana Toll Road. A popular bumper sticker in Indiana reads “Keep the toll road, lease Mitch.”

Joe Dear, executive director of the Washington State Investment Board, still wonders how quickly governments will move. “Will all public agencies think it’s worth the extra return private capital will demand?” he asked. “That’s unclear.”

Fourth man guilty in TxDOT bribery case

4th man guilty in TxDOT bribery case
Valley Morning Star
August 19, 2008

McALLEN — A fourth man has pleaded guilty in connection with a cash-for-contracts scheme at the Texas Department of Transportation.

Ricardo Ballí admitted Friday that he lied to FBI agents and Texas Rangers investigating allegations that TxDOT’s local maintenance administrator had extorted cash payments from a contractor looking for work.

The administrator, Cresenciano “Chano” Falcon, 56, and two other TxDOT inspectors pleaded guilty in May to accepting bribes in exchange for certifying completed contract projects.

Authorities have remained tight-lipped about Ballí’s connection to the scheme since opening a case against him last month, even declining to release his age, city of residence or occupation. But local TxDOT spokeswoman Amy Rodriguez has previously said Ballí never worked for the agency.

His attorney, Robert Armand Berg, refused to comment Monday.

The investigation into the three TxDOT workers was initiated after a private contractor informed authorities he was asked to pay bribes to the men in order to receive work from the agency.

Falcon and his two co-defendants — Ray Llanes, 50, and Noe Beltran, 42 — face up to 10 years in prison and $250,000 in fines at a sentencing hearing set for next week.
Under a plea agreement with prosecutors, Balli will not face any additional charges beyond lying to investigators. He entered his plea Friday before he was formally indicted in the case.

A sentencing date has not yet been scheduled for him. He could face up to five years in prison.

Public comment on TxDOT's "Public Involvement Plan" & "Strategic Plan"

Public comments DUE on TxDOT's "Public Involvement Plan" (Sept 12 by 4 PM, submit via email here) and its "Strategic Plan" (Sept 15 by 5 PM, submit via email here).

TURF Public Comment on TxDOT’s Public Involvement Plan
TURF is a non-profit, grassroots organization with close to 50,000 members. Our mission is to educate and defend citizens’ concerns about toll roads and the Trans Texas Corridor, as well as to promote non-toll transportation solutions.

1. It doesn’t matter if TxDOT properly informs the public of a transportation project that affects them if they summarily dismiss the public comment submitted. What matters is that the TAXPAYERS have veto power over projects they don’t want or to have their concerns taken into account in a meaningful way. TxDOT needs to be required to do the transportation “alternative” that the public prefers and it must be the alternative that is also the most affordable and least invasive. This must be required in order to restore the public’s trust that transportation decisions are being made in the public’s best interest.

On page 5 TxDOT claims they “thoughtfully consider the feedback received during the public involvement process” yet they DO the exact opposite.

2.  TxDOT’s document states on page 3: “All other interested parties are provided notice of the comment period and public hearing via the Texas Register public notice and TxDOT’s website.”

TxDOT’s only notification of its plans is through notice in the Texas Register (which few citizens are even aware of or have time to wade through) or its web site. The Sunset Committee Report notes the non-user friendly problems with TxDOT’s web sites. Finding needed information on TxDOT’s web sites is at times near impossible unless one knows where to look. There must be an announcement made through major news outlets under public service announcements so that a mass audience is made aware of transportation hearings or that public comment is being solicited.


3. Page 5: “Several divisions are instrumental in TxDOT’s efforts to ensure a transparent process that provides the public with comprehensive information on a timely basis to facilitate stakeholder input in key decisions throughout the transportation planning process. TxDOT encourages Coordination, Cooperation, and Communication with the public…”

Transparency is not a part of TxDOT’s standard operating procedure (SOP). The SOP is to obfuscate, mislead, and hide vital financial information in the name of “proprietary information” or “draft” document loophole.  The Trans Texas Corridor TTC-35 development contract had the financial guts withheld from the public for 18 months AFTER a contract was signed and AFTER the Attorney General ordered it be made public.

Toll viability studies, market value studies, and other financial information on toll roads are routinely denied not only to the public (they lobbied to change the law, SB 792 passed in 2007, to allow them this sham protection), but even to Legislators and MPOs who have to vote to approve certain financial terms without even seeing them first! This is an egregious breach of open and transparent government and must be changed. There’s nothing proprietary about projected traffic volumes, projected toll rates, projected diversions rates, financing scenarios, and the projected financial viability of a project. If TxDOT is truly interested in transparency, they’ll release these documents BEFORE a contract is signed and PRIOR TO any vote for approval by MPOs or other decisions makers. Otherwise, the deal is done before the public or its duly elected representatives have an opportunity to weigh in.

4. Page 3 states and SAFETEA-LU requires:
“To the maximum extent practicable, ensure that public meetings are held at convenient and accessible locations and times” and “Demonstrate explicit consideration and response to public input”

The Alamo Regional Mobility Authority held its public meeting in June 2008 on the financial disclosure of its toll rate information in the middle of a workday (1 PM) more than 20 miles from the project area with NO PARKING. In 2007, TxDOT held its final NEPA hearing for US 281 several miles to the southeast of the 281 project area at the Alzafar Shrine Temple in an area almost entirely inaccessible to public transit users, and they refused to allow concerned citizens to have a table out in front with fliers and information stating “”this is a private facility, you can’t have a table out here,” regardless of the fact that it was PUBLIC meeting paid for with PUBLIC money. TxDOT shouldn’t hold meetings at private facilities if that means public involvement and information sharing can be hindered. At a later hearing for the Loop 1604 toll project, TxDOT tried the same tactic but after a County Commissioner and lawyer got involved, they finally relented and allowed the public to hand out information at a public hearing PAID FOR BY THE TAXPAYERS!

In 2006, at another hearing for Hwy 46 in Comal County, Greg Malatek of TxDOT stated that during public comment no one would be allowed to say the word “toll.” When I got up to make my comments, Judy Freisenhahn of TxDOT ripped the microphone from my hand when I said the word the “toll” (a word in the pass through financing contract for the project, but they arbitrarily deemed it “off limits”) in a total violation of my First Amendment rights. Armed police officers then surrounded me, simply for saying the word “toll.” TxDOT staff around the state have routinely forced citizens to face the TxDOT facilitator on the stage and NOT allow any speaker to turn around to address their fellow citizens face to face during public comment. When a citizen in San Antonio pressed the issue, armed police officers surrounded him and he was threatened and intimidated into silence or risked arrest.

At an MPO Meeting on a key vote at the San Antonio MPO, David Casteel of TxDOT directly threatened retribution against the public transit board members for voting against a 281 toll project and both those members were removed from the MPO in retaliation. All of these examples demonstrate a flagrant violation of federal law as it pertains to “public involvement.” Bullying, retaliation, threats, and intimidation are not to be tolerated in a free society. This is the pattern of behavior at TxDOT and it must be changed immediately!

5. On page 6: “TxDOT divisions work closely with state and federal regulatory agencies to ensure that the planning, engineering, environmental, public involvement, and construction processes result in the safe, efficient and effective movement of people and goods throughout the state, while facilitating trade and economic opportunity, and accomplishing TxDOT’s five primary goals: reduce congestion, enhance safety, expand economic opportunity, improve air quality, increase the value of our transportation assets.”

Increasing the value of the public’s highways (that TxDOT calls “assets”) and “expanding economic opportunity” have NOTHING to do with providing transportation. These should NOT be TxDOT’s goals. Their mission changed once public opposition to toll roads and PPPs came on the scene in earnest in 2005. They use these “goals” to justify their toll and Trans Texas Corridor agenda of pushing the most expensive transportation financing option, toll roads. Increasing the cost of transportation through tolling does NOT expand economic opportunity for taxpayers, it hurts the family budget and sucks money away from other household necessities.

 
TURF Public Comment on TxDOT’s 2009-2013 Strategic Plan
 
The Texas Department of Transportation used to have admirable goals that the public could support. Now, however, their primary mission is to “maximize the value” of our public “assets,” which simply used to be called highways. On page 2, it asks, “Are we doing the right thing?” The public’s answer is a resounding “NO!” The public’s highways, bought and paid for by the taxpayers, are not the Department’s to hawk up to the highest bidder on Wall Street in a risky leveraged debt toll road scheme requiring an additional toll tax to use them.

It’s time TxDOT wake-up and smell the warning signs around them. Fitch and Moody’s have warned that toll roads are becoming more risky, not less, and that governments or private operators will have to increase tolls in order to make bond payments to prevent default since toll road usage continues to drop as the price of gas rises. A continued push for massive leveraged debt and ever increasing toll hikes is as foolish in this economic climate as it is a taxpayer rip-off.

We’re in a different era than we were in 2000 when the push for toll roads began. We’re in the midst of a volatile oil market causing high gasoline prices and an increase in the cost of basic necessities like food, as well as a credit crunch and declining dollar causing an overall economic decline. The cost of living is rising faster than wages and people’s ability to keep up. Continued reliance on tolling is a recipe for economic disaster and will likely lead to a “bubble” that will later “bust” and require massive taxpayer bailouts.

More specific concerns with the Plan are outlined below:

1. On page 2 of the proposed plan it states: “The Texas transportation system plays a critical role in the economic and social well-being of all Texans. It provides the basic infrastructure that supports our economy and quality of life.”

TxDOT acknowledges that Texans rely on our transportation system for daily living and it’s the backbone of our economy. Increasing the cost of transportation from 1-2 cents per mile in gas taxes to 20 cents or more per mile in tolls is an expense most Texans can ill afford. A recent Austin Business Journal article stated Texans are hit particularly hard by high gas prices. On average they spend over $2,000 a year in gas. Since the average cost in tolls will be $2,000-$4,000 a year per family (20 mile commute at 20 cents per mile in tolls, roundtrip daily cost = $8, $40/wk, and over $2,000/yr), tolls will, at a minimum, double the average Texan’s cost of gas!

Toll taxes will negatively impact the family budget, and hence decrease the quality of life of Texans as more money gets sucked into transportation leaving them less money for basic necessities for their families. Though toll roads may save time, it costs more money. It’s an empty promise to say toll roads will give Texans more time with their families as they race home on uncongested tollways, since most Texans will have to work longer and harder in order to pay their toll bills or remain stuck in traffic.

2. The Plan also states on page 2: “Travel demand for people and goods is growing…”

This is untrue. In March of 2008, the United States experienced the largest drop in driving (vehicle miles traveled) year over year in recorded history. Federal Highway Administration statistics show a steady decline in driving almost entirely attributable to high fuel costs. So to continue to rely on old travel demand models that assume VMT will continue to rise is fundamentally flawed and ignores reality.

3. Page 4 states: “Economic and population growth negatively affects the performance of our transportation system. As travel demand increases, congestion worsens, air quality suffers, safety concerns grow, and maintenance needs multiply.”

 

Again, TxDOT falsely assumes mere population growth leads to highway congestion. The Texas State Data Center predicts population growth will be poorer and less educated. An increase in retirees is expected and they generally do not drive during peak congestion nor contribute to peak traffic in urban areas. A less educated populace will tend to lack the personal income to own and maintain a personal vehicle and less likely to be able to afford tolls on a daily basis.

So TxDOT’s entire “Strategic Plan” is flawed since it’s based on flawed assumptions of growth in driving and congestion. TxDOT also fails to take into account that new population growth and any influx of new users on the highway will also pay gas taxes and thus increase revenues. Additionally, TxDOT fails to consider that a reduction in driving also translates into a reduction in the need for road maintenance.

4. TxDOT’s Vision, Mission, and Goals do not reflect the ideals of most Texans.

Vision
We will deliver a 21st century, multimodal transportation system that will improve the quality of life for Texas citizens and increase the competitive position for Texas industry.
Mission
We will provide safe, efficient, and effective means for the movement of people and goods throughout the state, facilitating trade and economic opportunity.
Goals
Our five goals establish the general direction we will take to realize our vision and mission: reduce congestion, enhance safety, expand economic opportunity, improve air quality, increase the value of our transportation assets.
Strategies
We will harness market-based principles to maximize competition, reduce costs, and guide investments. We will facilitate consumer-driven decisions that respond to market forces.

“Increase the competitive position for Texas industry” and “facilitating trade and economic opportunity” are goals for private industry and should NOT be the aim of a taxpayer-funded public agency. This smacks of corporatism and does not protect the public interest.

Increasing the value of the public’s highways (that TxDOT calls “assets”) and “expanding economic opportunity” have NOTHING to do with providing transportation. These should NOT be TxDOT’s goals. Their mission changed once public opposition to toll roads and PPPs came on the scene in earnest in 2005. They use these “goals” to justify their toll and Trans Texas Corridor agenda of pushing the most expensive transportation financing option, toll roads. Increasing the cost of transportation through tolling does NOT expand economic opportunity for taxpayers, it increases the tax burden and hurts the family budget by sucking money away from other household necessities.

TxDOT’s strategy of using “market-based” tolling is diametrically opposed to protecting the public interest and its access to government-sanctioned monopolies, our public highways. It is NOT the government’s role to implement market forces in order to access public “assets.” Private industry utilizes competition and market forces, but highways are monopolies built with public money to serve the public and cannot be viewed as subject to the same market forces as other private sector goods and services.

A recent poll done by Lyceum, a non-partisan public policy institute, shows only 9% of Texans use toll roads regularly and it also shows the majority of Texans do not want an increase in gas taxes or TOLLS and they are also against tolling existing freeways. TxDOT’s “goals” are in direct opposition to the majority of Texans. Its goals must be changed to reflect the will of the taxpayers who pay the bills.

TxDOT’s stated “tactics” do not protect the public interest using controversial methods like debt financing, handing control of our public roadways over to private entities through PPPs, a state infrastructure bank, and public pension funds to finance toll roads.

5. Congestion not going up, but down.

TxDOT sites the travel time index for Texas’ major cities as going up. Yet, a San Antonio Express News article July 29, 2008, using the most recent Transguide data shows the opposite…travel times in both San Antonio and Houston are going down. Peak congestion in San Antonio went from 3 hours a day down to under 2. This is function of higher gas prices and people finding other ways to get to work.

6. Increasing the cost of transportation does NOT help, but HURT the economy.

TxDOT assumes that by merely increasing the number of transportation-related jobs helps the economy when the economic data shows an increase in the cost of transportation (whether gas prices, gas tax, tolls, or other increases) hurts the economy and causes a dramatic rise in the cost of goods and services, including necessities like food.

7. Texans don’t want the Trans Texas Corridor and PPPs, and TxDOT’s claims of protecting the public interest are false.

Page 31 states:
All state highway facilities, including toll roads, will be completely owned by the State of Texas at all times.

• Only new lanes added to an existing highway will be tolled, and there will be no reduction in the number of non-tolled lanes that exist today.

• CDAs will not include “non-compete” clauses that would prohibit improvements to existing roadways.

Effective ownership is transferred when the PPP is for half century. TxDOT is taking away existing non-toll highway lanes and replacing them with frontage or access roads. That’s highway robbery plain and simple. The non-compete clauses may not prohibit expansion, but the state will have to pay the toll operator a penalty for doing so. The punitive financial consequences will in itself prohibit expansion of non-toll options.

Bottom line: Texans don’t’ trust this agency, its assumptions laid out in this plan are flawed, do not protect the public interest, and will hurt the economy, and its goals do not reflect the goals of the majority of Texans. This Strategic Plan is more of the same, not a fresh start as Chairwoman Delisi assured the Sunset Commission on July 15. TxDOT must return to a more affordable, less risky approach to highway funding.

Financial details on 281 toll road get released

Link to article here.

This traffic and revenue study conducted by the Alamo Regional Mobility Authority (ARMA, the tolling authority), was withheld from the public, MPO Board members and legislators until our lawsuit to stop the 281 toll road. Now this information is being made public because a Judge ordered it. This same study was also criticized by the State Auditor for not including high gas prices in its analysis of the financial viability of the project.

The Auditor asked the study to be re-done. So Brechtel's comments below are pure spin. The ARMA knew it needed this information since 2006 when citizens and previous toll studies warned gas prices at $3 a gallon threaten the financial sustainability of toll roads, and yet it conducted a study without analyzing it. For them to now act as if they called for a new study including gas price analysis on their own is a farce.

U.S. 281 tollway is seen as a road to $2.1 billion
By Patrick Driscoll
Express-News
08/29/2008
At 17 cents a mile, and rising steadily each year, the tolls for driving on U.S. 281 will add up fast.

Motorists could pay $2.1 billion over 37 years to use the 8-mile stretch of tolled express lanes expected to open by 2012, according to a recent traffic and revenue report needed to sell bonds for the project.

That averages almost $57 million a year, an eighth of the $472 million needed upfront to design, buy land and rebuild U.S. 281 into a tollway with non-toll frontage roads.

Bottom line, according to Moody's Investors Service, the project is a sound investment for bond buyers, Alamo Regional Mobility Authority Director Terry Brechtel said.

“It's conservative,” she said. “So we feel good about it.”

The money would trickle in at first, with toll lanes fetching just $8 million the first year, says the report by consultant URS. But as waves of people and jobs migrate north of Loop 1604 and traffic increasingly chokes area roads, drivers will warm to the idea of paying to double their speeds, analysts predict.

Toll traffic could swell five times over by 2048, when about $1.3 billion in bonds, loans and interest would be paid off. Also, the 17-cent-per-mile fee should rise to about 48 cents by then, while trucks would be paying almost triple the rate.

By the time today's teens get around to eyeing retirement four decades from now, the U.S. 281 tollway might be on track to rake in $120 million a year.

Startup and debt costs aren't the only outlays needed.

Expenses to collect tolls and pay staff would eat 18 percent, or $427 million, of revenues, a recent HNTB Corp. engineering report says. Maintenance would add another $170 million.

The biggest risks to money flows would be a major slowdown in population growth, which feeds traffic congestion, or political backlash that reigns in annual toll-rate increases, the URS report says.

If San Antonio's population and job growth falls 14 percent below forecasts — which, to be safe, URS set lower than 1990s trends — the toll road could lose more than a fourth of earnings. A recession stopping growth along the corridor for five years could slice revenues more than a tenth.

Robust growth and perpetually escalating toll rates are much of what activists fear.

A pending federal lawsuit challenges a state environmental study for not seriously considering how the toll road would spur growth over recharge areas of the Edwards Aquifer or financially harm residents.

Yet, the URS report confirms that healthy traffic and revenues rely on such growth, said Bill Bunch of Save Our Springs Alliance, which is representing two area groups.

“If you are projecting decades of substantial traffic growth along U.S. 281 and then taking on debt based on those projections, then you are basically betting in favor of polluting the aquifer and paving the Hill Country,” he said.

Another looming concern involves record-high gas prices, which the URS report doesn't specifically address.

Most experts agree that global oil production is peaking now or will in a few decades, and that the age of cheap energy is over. But how adjustments play out with alternatives, including public transit and fuel-efficient cars, is less certain.

After seeing the URS report, Brechtel requested a close look at gas-price impacts.

“I said, ‘Thank you very much, I want a specific gas-price analysis,'” she said.

With high gas prices pushing Americans to drive less this year, most U.S. toll roads lost 2 percent to 10 percent of traffic, Fitch Ratings said in a report last week. Texas losses are under 5 percent.

The trouble could last one or two years, Fitch said. If pressures continue, and policymakers start funneling more money to transit and more people begin shunning suburbs to live in urban cores, toll roads will face even bigger problems.

“The question is whether the current trend will continue for a longer period,” the report states.

Not the time for toll roads: Dow plunges after warning of 'financial tsunami'


Link to article here.

Dow plunges after warning of 'financial tsunami'
By Tom Bawden in New York
The Times Online
September 5, 2008

Weary investors in the United States received a further pummelling yesterday as data showed new unemployment claims at a near-five-year high last week, a leading fund manager gave warning that America faced a “financial tsunami” and key retailers released disappointing sales figures.

The mounting nervousness about America’s economy dragged down shares. The Dow Jones industrial average fell 344.60 points, or 3 per cent, to 11,188.20, and the S&P 500 closed down by 38.20 points, or 3.3 per cent, at 1,236.80 points.

The Labour Department reported that the number of Americans claiming unemployment benefits for the first time rose by 15,000 to 444,000 in the week to August 30. The disappointing figures came after companies cut staff in the face of a weakening global economy and contrasted with a consensus forecast that new jobless claims would fall to 420,000.

The data, combined with a call by the manager of the world’s biggest bond fund for the Government to inject more money into the banking system, spooked US investors already jittery about the outlook for the global economy. Bill Gross, co-chief investment officer of Pimco, said that the US was confronted by “systematic debt liquidation”. He added: “Unchecked, it can turn a campfire into a forest fire, a mild asset bear market into a destructive financial tsunami.”

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Dow soars as banks pump $280bn into markets
Markets take fright on deepening credit fears
Mr Gross said: “If we are to prevent a continuing asset and debt liquidation of near-historic proportions, we will require policies that open up the balance sheet of the US Treasury.”

Hugh Johnson, head of Johnson Illington Advisors, the US fund manager, said: “The stock market declines are more than just the jobless figures. Although they are not good, it is more that they tap into growing concerns that the global economy is weaker than expected and that the problems facing financial institutions are not going away.”

Furthermore, Gap and Abercrombie & Fitch, the clothing retailers, and Target, the discount retailer, all reported a decline in same-store sales for August. Gap said that its sales fell by 8 per cent in August.

Saks, the luxury department store chain, and Limited Brands, the owner of the Victoria’s Secret lingerie chain, also reported weaker sales.

A separate Labour Department report provided a glimmer of hope, announcing that productivity – the amount of output for every hour of work – rose to an annualised rate of 4.3 per cent in the second quarter, one percentage point above consensus forecasts. Analysts said that the higher productivity was encouraging because it helps to keep a lid on inflation.

Commentary: Privatizing what the public paid for


Link to article here.

Privatizing What the Public Paid For
Special to the Star-Telegram
By Ed Wallace
September 5, 2008

"Right. It takes unconventional and courageous thinking to come up with a plan that clears a highway lane for the well off, while the middle class and working poor are left to inhale each other’s $5-a-gallon exhaust fumes. The worst thing about this ill-conceived decision … is it allocates freedom of movement according to income." --From "Diamond Lanes for the Rich," by Tim Rutten (Los Angeles Times, April 26, 2008)


Few think of it this way, but America already has a major flat tax that we all pay equally: the 18.4-cent federal tax that is applied to each and every gallon of gasoline we purchase, or the 24.4 cents on every gallon of diesel. Say a young person, who just lost his job at McDonald’s, buys a gallon of gas to get to an interview at Burger King at the same time Warren Buffet buys a gallon of gas to get to the airport in Omaha to board his personal jet: Both the unemployed, below-minimum-wage worker and America’s richest billionaire contribute the exact same amount toward the nation’s highway system on that day.

Now, however, we are being told – to an increasingly urgent drumbeat – that America can no longer afford the luxury of building new infrastructure or even maintaining our current road system, because there’s just no funding for these programs. It’s here that the complete absence of critical thinking about America’s future should astonish and dismay anyone who looks at the facts even casually.

Just for the Rich?

In just a few months America has come up with nearly $1 trillion to cover foolish losses on Wall Street and in the nation’s banking system – losses primarily self-caused in the investor-driven buildup to the mortgage crisis over the past three years. But at the same time we’re being told flat out that Social Security is a disaster waiting to happen, because it will be $1 trillion in default somewhere around mid-century. Yes, you read that right: We can save our financial centers today in mere weeks when it looks like they are over $1 trillion upside down, but there’s no way we can find that much money over the next 40 years to secure all working Americans’ retirement.

And on Wall Street, many firms are pleading poverty and demanding federal intervention, claiming to be incapable of rescuing themselves from the disaster they have brought on the nation. But, according to a New York Times article from August 27th on privatizing the nation’s infrastructure, "Kohlberg Kravis Roberts, the Carlyle Group, Goldman Sachs, Morgan Stanley and Credit Suisse are among the investors that have amassed an estimated $250 billion war chest – much of it raised in the last two years [emphasis added] — to finance a tidal wave of infrastructure projects in the United States and overseas." (The last Federal Highway Bill appropriated $286 billion over a multi-year period, only $36 billion more than Wall Street has escrowed to buy up our infrastructure now.)

Likewise, Washington cries poormouth when asked how much we can spend in our next highway bill to fix and expand our nation’s highway system. Yet in less than one month Washington easily found $168 billon to send out in tax rebate checks to spur the economy – so the second-quarter GDP figures would look stronger.

Yes, America once found it necessary to "kick start" our economy in tough financial times. But back then the sudden infusion of $168 billion was spent on things everyone could use, like new highway projects: The money still had the same impact on the economy, but America gained something of lasting value to show for it. Long after the economic slowdown turned around and became a recovery, we would all benefit from better transportation.

It’s the bitterest irony of all that today elected officials talk about how great our economy has been on Monday, then on Tuesday say America doesn’t have the money to improve our nation’s infrastructure.

Which is it? Are we rich or broke?

Happy Motoring Now Has a Price

What’s even sadder is the fact that Washington is actually paying out taxpayers’ money to take the highways away from everyone who contributed to them; your dollars are being used to carve out separate lanes, so that those who can afford to pay additional tolls every day can drive unfettered by the congestion that traps the rest of us.

In Los Angeles the federal government allotted $213.6 million to convert many of that city’s HOV lanes into toll roads, on which drivers pay variable surcharges based on peak driving periods. Keep in mind that the unemployed of LA who bought gasoline paid the exact same highway taxes toward the construction of those roads as did the wealthiest individuals in Beverly Hills. What that means is that we have all contributed equally to create a system of motoring exclusion. Then again, that’s how flat taxes work. Everybody pays, most are excluded.

Recently it was mentioned that, just like LA’s, Interstate 30’s new HOV lanes could be turned into toll lanes for the well off. As they do in other cases around the nation, advocates of this divisive and unfair move claim that it will cut congestion and save fuel; but a daily casual observation of the road quickly exposes the difference between reality and that PR spin.

For if you really wanted to cut congestion and save fuel, those lanes should be immediately opened to everyone when an accident turns I-30 into a parking lot. That way, thousands upon thousands of motorists could start moving again – saving untold gallons of gas and tons of air pollution – not just the chosen few. Of course, that’s not the plan.

Just Plane Elite-Friendly

It should also be mentioned that a relatively large infrastructure campaign is now going on to improve the nation’s secondary airports. For the most part those airports are serving the ever-growing number of private aircraft; personal jets have become all the rage in the last decade. As David Cay Johnston points out in his excellent book, Free Lunch; How the Wealthiest Americans Enrich Themselves at Government Expense, airport expansions for private jets continue unabated, but it’s the average American taxpayer footing the bill.

Johnston further discusses the $31 million airport expansion for the field that serves the Bandon Dunes Golf Course in Oregon, where 5,000 private jets land each year; that’s up from three or four landings a year as recently as 1999. That airport expansion’s costs are covered by taxes paid by all fliers on commercial airlines and by a hefty chunk of the monies paid by Oregon Lottery gamblers – even though the improved airport mostly benefits executives flying in for a round of golf.

A similar report, put together by the Institute for Policy Studies, shows that private jet ownership has risen from 1,000 in 1970 to 10,000 in 2006; and, while these jets use 16 percent of the nation’s total air traffic services, they pay just 3 percent of the costs. Although this is assuredly on a different plane (pardon the pun) than selling off the nation’s already paid-for highways, the overall concept is the same: The majority of the people pay to build and improve infrastructure that will benefit and convenience only a tiny minority: the ultra-rich.

Private and Public: Don’t Mix

This is the modern politics of exclusion. But privatizing a country’s public infrastructure has already proven to be a bad business model, one that can and will reverse a half-century of smart economic expansion. One has only to look at England to find the truth behind today’s political spin.

Today England’s largest airports "… are in shambles. Terminals and runways are so overcrowded that flights depart late and bags are lost. Faulty plumbing has become a point of pride for many visitors from Africa; the lavatories at the airports back home work better." And that’s the opinion of the very conservative Economist magazine, which blasted the fact that 21 years ago the Thatcher administration’s sold London’s three largest airports to one private company.

When I returned from London in June, my plane’s passengers were all loaded onto buses and driven to our jumbo jet, which was parked nowhere near the terminal; there aren’t enough passenger gates to handle all of Heathrow’s flights. Of course, private industry’s job is to cut expenses and maximize quarterly profits; but that’s never the priority in intelligent long-term planning for public transportation — whether it is for highways or airports. England privatized its utilities, airports and other government functions in the eighties, and today that nation is paying an enormous cost, with their equivalent of our Treasury Secretary calling its recent economic downturn the worst in 60 years.

Then again, now England is saying that the current private owners should divest of many of their airport holdings to other private ownership groups (and possibly back to government hands), but this will only extend the country’s current problems. It could even make them worse.

It’s true that many things our government does, it does poorly; but there are things that government does exceptionally well. The problem today is that our government wants to sell off what it does best and keep what it demonstrably isn’t very good at.

We’ve paid for all of it; yet now government is asking the majority of us to pay so the smallest minority can enjoy the benefits. Not only is that not a sustainable plan, it’s not even remotely American.

© 2008 Ed Wallace

Ed Wallace is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and is a member of the American Historical Society. He reviews new cars every Friday morning at 7:15 on Fox Four’s Good Day, contributes articles to BusinessWeek Online and hosts the talk show, Wheels, 8:00 to 1:00 Saturdays on 570 KLIF. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
Private industry’s job is to cut expenses and maximize quarterly profits; but that’s never the priority in intelligent planning for public transportation — whether it is for highways or airports.

State Audit report reveals TxDOT incompetence behind $1.1 billion error

Link to article here. Link to Express-News blog with more here.

TxDOT error causes $1.1 billion blunder
By Janet Elliott
Houston Chronicle
08/29/2008

AUSTIN — Poor internal communication and complicated procedures caused a $1.1 billion blunder that forced Texas transportation officials to pull back on construction projects earlier this year, according to an audit released Thursday.

Texas Department of Transportation officials actually discovered the accounting error six months earlier, the report said.

The accounting error occurred when bond proceeds were counted twice when the department developed the fiscal year 2008 contract award schedule. As a result, $4.2 billion in planned projects was reduced to $3.1 billion.

This resulted in a reduction of $71.5 million worth of construction and maintenance in the San Antonio region and a $161 million deduction in the Houston area. Auditors faulted department officials for failing to immediately communicate the error to the Texas Transportation Commission, lawmakers and the public.

“Although the department asserts it briefed all commission members individually, no briefing documents, specific dates or calendars were provided to auditors to verify these briefings,” the report said.

Auditors recommended that TxDOT develop a formal process for reviewing money available for projects, keep commission members informed in open meetings, post updates on the agency's Web site and alert legislators when funding in their areas change.

The department said it was already making changes suggested in the report.

“I am committed to increasing the department's transparency, and the recommendations identified in this audit put us another step closer to realizing that goal,” said Amadeo Saenz, TxDOT executive director, in a statement on the agency's Web site.

The report comes amid a backdrop of legislative distrust about the department's financial projections as TxDOT turns to privately financed toll roads to meet future transportation needs.

The department has projected a $3.6 billion shortfall by 2015 and said that increased maintenance needs will leave little for new construction.

Lt. Gov. David Dewhurst, who along with House Speaker Tom Craddick asked for the audit, said in a written statement that the report confirms his arguments that the agency needs to be more transparent and make wiser use of its resources.

“The people of Texas deserve a world-class transportation system,” Dewhurst said. “I'm hopeful this report, along with recommendations made by the Sunset Commission, will provide the Legislature with a good roadmap for making immediate and long-term improvements to our transportation system.”

A legislator who has been critical of TxDOT welcomed the details contained in the audit.

“However, I must admit I am dismayed to learn that there were persons in the department who became aware of this error as early as September 2007, and yet it was not brought to the Legislature's attention until early this year,” said Rep. Ruth Jones McClendon, D-San Antonio, in a written comment.

McClendon sits on the Sunset Advisory Commission, which is conducting a periodic review of the department's operations. A staff report recommended replacing the five-member commission with a single commissioner.

Other proposed changes include increasing legislative oversight through a new House-Senate committee; making TxDOT's transportation planning and project development more open and easily understood; enhancing chances for public involvement; and improving TxDOT's contract management.

Backroom deal with pension funds as prize, means $1.5 billion in road projects move forward

Link to article here.

This was the compromise hatched in a backroom deal with Governor Perry, Texas House Speaker Tom Craddick,and Lt Governor David Dewhurst. Read the letter here. Perry gets access to public pension funds to build toll roads that even the private sector now deems risky, and Legislators get their $1 billion in projects TxDOT previously cut due to an "accounting error."

TxDOT to borrow another $1.5 billion
By Ben Wear
AMERICAN-STATESMAN STAFF
Saturday, August 30, 2008


The Texas Transportation Commission, taking its cue from state leaders, decided Friday to borrow $1.5 billion that would be paid back with future gas taxes.

That authority, granted on a unanimous vote of the commission in a specially called meeting, will allow the Texas Department of Transportation to issue nearly $4.3 billion in contracts in the budget year that begins Monday. At least $1.1 billion of that would be for maintenance projects. But the remainder, nearly $3 billion, would allow TxDOT to get to several state road expansions that had to be shelved this year.

That 2008 crunch directly affected the Austin area, where local leaders had approved a $1.45 billion plan to build five more toll roads based on a promise of several hundred million dollars from TxDOT. Politicians here, particularly state Sen. Kirk Watson, D-Austin, were incensed when TxDOT reneged on that promise only a few weeks after a tough October 2007 vote on the toll roads.

TxDOT Executive Director Amadeo Saenz could not say with certainty Friday whether the move to issue the $1.5 billion in gas tax bonds will restore much of that financing to Austin.

"It could help Austin," Saenz said. "We want to make sure we get projects that are ready to go in 2009."

The Central Texas Regional Mobility Authority will be building the first of those five projects, an expansion of U.S. 290 from Northeast Austin to Manor that would include toll express lanes and improved frontage roads.

However, officials with the authority this week indicated that environmental and engineering work will probably not be ready in time for construction to begin until late 2009. That would be beyond the state's budget year, which ends Aug. 31, 2009.

Saenz indicated that some of the $1.5 billion would be spent on engineering and right-of-way purchases around the state, readying projects in anticipation of even more borrowing to come. Under state law, TxDOT could borrow an additional $1.4 billion against the gas tax in the 2009-10 budget year. Austin projects could see some of that engineering money or some of the $1.4 billion if TxDOT follows through and takes on that debt as well.

And if the Legislature passes the proper legislation next year, the agency could borrow up to $5 billion more that voters approved under the Proposition 12 constitutional amendment in November. Those bonds would be paid back by general state revenue, not gas taxes.

Friday's action came in response to a letter a week ago signed by Gov. Rick Perry, Texas House Speaker Tom Craddick and Lt. Gov. David Dewhurst, the state's three most powerful elected officials. In that letter, the three backed more borrowing against the gas tax and financing the Proposition 12 bonds.

In the past year, TxDOT had resisted borrowing more against the gas tax, arguing that doing so would starve the agency's bottom line down the road as gas taxes were used to pay back the borrowed money. But in the letter last week, the three leaders supported ending or curtailing significantly the use of gas tax money for state needs other than building transportation projects.

About $1.6 billion in the current two-year state budget went to such "diversions," the bulk of it to the Texas Department of Public Safety.

If the Legislature were to return much of that money to TxDOT, replacing it with general state revenue from other taxes and fees, then TxDOT could presumably handle the additional gas tax borrowing.

Krusee sells toll road ilk to Utah politicians ready to turn freeways into FEE-ways


Link to article here. Toll roads aren't free market, they're government sanctioned monopolies. If Krusee and his crowd have their way, we'll soon be taxed for the very air we breathe. Gone will be freedom and mobility, in will be a two tiered highway system, one for the government bureaucrats, special interests, and politicians and one for the rest of us.

Fee-way: Could toll roads replace gas taxes in Utah?
By Brandon Loomis
The Salt Lake Tribune
08/21/2008

Utah's pending shift to time-of-day tolls in freeway express lanes moves the state one step closer to a necessary overhaul in highway funding, a national transportation advocate told legislators Wednesday.

Tolls are fairer and stabler revenues for road building and must anchor infrastructure plans since gas taxes will fail, starting next year, to keep the federal highway trust fund solvent, said Texas state Rep. Mike Krusee, a member of the National Transportation Infrastructure Finance Commission.

After the presidential election, that commission will recommend a national shift away from gas taxes and toward tolls to charge people for interstates they use - and more during rush hours - essentially turning freeways into fee-ways.

Both federal and state governments will have to make the change - some key Utah lawmakers are interested - as the trust fund is drained, Krusee said. The fund's shortfall will start at $5 billion next year and swell to $30 billion in 2010, likely meaning a one-third reduction in federal assistance for Utah roads, he warned.

"We don't even know in 20 to 30 years if [motorists] are going to be buying any fuel or what kind of fuel they'll be buying," Krusee told the Utah Legislature's Revenue and Taxation Interim Committee. His answer: Charge for miles traveled.

The Utah Department of Transportation plans to use electronic transmitters on Interstate 15 within two years so commuters can spot-pay for express lanes. The amount - which has yet to be set - will depend on how busy the freeway is at the time of travel. Higher traffic will mean a higher toll.

That plan could stretch to all lanes if state and federal lawmakers do as Krusee suggests.

The Texas lawmaker called the current funding plan a subsidy by taxpayers to suburban developers who use the roads to open cheaper lands and further bog down commuter-hour traffic. Charging a toll instead means everyone pays their way and the government gets a return on its investment, which it can bond against for future projects.

Electronic scanners are the method of future tolls nationwide and already are used in places such as Chicago, Krusee said. It's necessary to install cameras as well, so that cars without transmitters can be charged the toll by mail if their license plate is spotted.

Texas built a $3 billion tollway around Austin four years ago, Krusee said, and within six months sold as many transmitters for it as there are residents in the county.

UDOT pays about 85 percent for its own road projects, potentially lessening the blow from federal shortfalls compared with states that get half or more from U.S. gas taxes. But Krusee sees a market approach as the surest way for future generations to snag needed funding.

He found enthusiastic supporters in the Utah Legislature.


"Hearing you is a breath of fresh air," Sen. Howard Stephenson, R-Draper, said. "I just want to welcome you to the socialist republic of Utah," a reference to what he considers subsidized rush hours.

Stephenson is president of the business-backed Utah Taxpayers Association, which supports freeway congestion pricing. He said it is wrong for taxpayers to subsidize interstate capacity built to meet the demands of just four hours a day. Better, he added, to have those peak-hour drivers pay their way.

More than half the motorists on the nation's freeways during rush hours are not driving to or from work, Krusee said. Charging them might move them off the road until later, speeding up traffic.

Sen. President John Valentine, R-Orem, said he is "intrigued" by a market approach to roads.

Moody's warns gas prices may lead to toll increases


Link to article here.

Moody's: Gas Prices May Lead to Toll Increases
Bond Buyer
Thursday, August 7, 2008

WASHINGTON - Gasoline prices at $4.00 or more per gallon for a prolonged period could depress toll road traffic and revenue, and compel governments to increase tolls to prevent credit rating downgrades, Moody's Investors Service warned in a report issued today.

Despite the warning, Moody's gave the government-owned toll road sector a cautiously stable outlook for the next year to 18 months, pointing to steady traffic in commuter-heavy metropolitan areas as a stabilizing factor. However, greater leveraging of toll road assets could put downward pressure on the sector's A1 median rating.

"We expect continued steady debt issuance, particularly as service area economies grow and toll facilities are tapped to undertake projects that local governments would rather not fund with taxes," the report said.

Traffic and revenue growth are likely to decelerate in some regions because of deteriorating economic conditions, Moody's said. But most toll roads rated by Moody's - especially those in major metropolitan areas - should see steady, if slower, gains in traffic and toll payments.

All but four of 45 government-owned toll roads that Moody's rates are stable, and its two ratings changes this year so far have been upgrades.

"The sector's credit strength reflects favorable historical economic conditions and traffic growth in the U.S., the low elasticity of demand experienced by many toll roads, and financial strength and stability of the sector," Moody's said in its sector overview.

Other factors keeping the sector stable are solid liquidity levels, the ability to independently increase toll rates, and the "relatively resilient underlying service area economies" for many major metropolitan areas that are served by toll roads.

Moody's gave examples of why some ratings were downgraded last year.

The North Texas Tollway Authority's revenue bond rating was downgraded by Moody's in November due to increased debt issuance and "steady toll increases" to support the additional debt, Moody's noted. Nevertheless, the traffic growth rate has remained steady. As of May, traffic was up 6% over 2007.

The Santa Rosa Bay Bridge Authority's rating was downgraded because traffic and revenue failed to meet expectations. The authority had to tap its debt service reserve fund to pay on its bonds. Lower-rated toll roads tended to be new, single-asset facilities that underperform because of local economic slowdown or "overly optimistic" predictions, the report said.

Moody's analysts said older, established toll roads linking residential centers with employment centers in both urban and rural areas are not likely to suffer from sustained drops in traffic. In fact, they said, established toll roads may be the exception to a national trend.

The U.S. Department of Transportation announced last week that drivers traveled almost 10 billion fewer miles in May than in that same month last year. It was the third-largest monthly drop in U.S. vehicle miles traveled ever recorded. All three of the largest monthly mileage drops were this year.

But "the numbers cited there are on all U.S. highways, not just on toll roads," explained Maria Matesanz, a Moody's senior vice president who authored the toll road sector outlook. Matesanz said the rate of traffic growth on toll roads "may have slowed a bit, but the usage isn't declining."

Analysts emphasized that a clear-cut trend has not yet emerged that shows toll road traffic and revenues are in trouble. If tolling does see a decline because of a prolonged period of high gasoline prices, toll increases may be necessary, the report indicated.

The report did not speculate on a breaking point at which drivers might stop using toll roads because of higher toll costs.

"There's always that point, and that potential, that you could be compounding the problem, so it is a balancing act," said Tom Paolicelli, Moody's vice president and senior analyst. "Some roads are more inelastic than others."

It remains unclear, the analysts said, whether the economy, gas prices, or a combination of both is causing the decline in traffic growth rates.

Slowing regional economies combined with high fuel prices have, however, already affected some toll roads more than others, the analysts said.

The report said the government-owned toll road outlook is "more uncertain" for 2009.

"Given the reluctance to increase federal and state taxes to the levels needed to close the funding gap for road and bridge infrastructure, Moody's expects the increased use of tolling to help pay for new transportation projects, leading to greater toll revenue-backed debt issuance," the analysts wrote. In addition, more leveraging of existing toll road systems "may have a negative impact on some credit ratings."

Moody's cited examples of trends that may bolster the sector's credit health.

Increasing use of electronic toll collection and open road tolling - or cashless tolling - and congestion pricing could bring in more toll revenues, the rating agency said. But the analysts recommended against sharp bumps in toll prices, suggesting instead that "gradual, smaller" toll increases may be more acceptable to drivers and lawmakers. Cashless tolling could speed the flow of traffic and cut operating and capital costs of government-owned toll road facilities, the report said.

"Also, as tolling becomes more electronic," Matesanz added, drivers may pay less attention to toll rates. "So they're a little bit more insulated from the toll rate increases."

Judge says TxDOT withheld "numerous" documents from the feds

Link to article here.

New documents cause delay in U.S. 281 tollway lawsuit
By Pat Driscoll
Express-News
August 21, 2008

A judge on Wednesday granted a 60-day delay on the U.S. 281 tollway lawsuit so federal officials can review recently discovered documents from a state environmental study.

The documents, called “a small addition” by the Texas Department of Transportation but “numerous” by U.S. District Judge Fred Biery, could alter the Federal Highway Administration's environmental clearance for the eight-mile toll road.

Toll critics and environmentalists filed the lawsuit in February to challenge the environmental study's thoroughness.

“TxDOT has discovered numerous documents containing potential evidence which, to its credit, says should be reviewed,” Biery said in a four-page order.

The Alamo Regional Mobility Authority, which took over the U.S. 281 toll project from TxDOT, promised not to start construction during the break, the order says.

Biery also noted that court battles take time. Thirty-plus years ago, the U.S. 281 project now known as McAllister Freeway was locked in litigation for 14 years and many contracts were delayed.

“The court presumes counsel and the parties will continue to use best efforts to proceed efficiently and professionally,” the order says. “Like good wine, the court will make no opinion before its time.”

The delay, effective Aug. 7, will end in October.

TxDOT's rigged environmental study on 281 failed to include aquifer authority


Link to article here.


Did aquifer authority weigh in on toll-road study?
By Pat Driscoll
Express-News
August 14, 2008

One bone of contention with the U.S. 281 tollway's environmental study has to do with whether officials "involved" and worked in "consultation" with an aquifer authority, as required by regulations.
281.illustration.2.jpg
Illustration of U.S. 281 tollway from Alamo Regional Mobility Authority slide show.
Critics filed a federal lawsuit in February to challenge the thoroughness of the study, which says doubling U.S. 281's width for eight miles would not cause significant impacts.

The study's conclusion is ridiculous, they say, especially since the highway traverses Edwards Aquifer recharge and contributory zones.

Toll advocates say the lawsuit is frivolous and will just delay a long-needed project.

Here's some stuff plaintiff attorneys dug up:

These pages from the study say the Texas Department of Transportation sent letters to stakeholder agencies, including the Edwards Aquifer Authority, in February 2006 to solicit input:

• Download file

The Edwards Aquifer Authority, responding to an open records request, said two months ago it has no record of the TxDOT letter or any other written request since December 2005 concerning U.S. 281 and Loop 1604 widening projects:

• Download file

But there's this record of a 25-minute telephone conversation between a TxDOT consultant and the authority:

• Download file

"It's ridiculous, in our opinion, to say that that's agency coordination," plaintiff attorney Andrew Hawkins said in an e-mail. "It's not a meeting, it's not a request for EAA to participate and give input on the project — it's a consultant yanking info out of EAA staff to plug into the consultant's report."

More on the lawsuit:

• Lawsuit uncovers holes in U.S. 281 tollway study
• State responds to U.S. 281 tollway lawsuit
• Toll agency will try to step around lawsuit
• For your eyes — U.S. 281 tollway lawsuit
• Lawsuit eyed to stop U.S. 281 tollway

Toll road traffic down, Macquarie bleeding out

Link to article here.

Even toll road industry insiders must now acknowledge what the rest of us have been observing for years: toll roads are no longer financially viable with high fuel prices! It is obvious that toll roads are purely speculative risky deals that the prudent must shun. These deals depend on low fuel prices, a booming economy, and more vehicle miles traveled, none of which we have now or into the foreseeable future. Selling billions in bonds knowing these toll roads are famous for overprojecting rosy outcomes and have a history of underperformance that will require massive toll hikes and/or taxpayer bailouts, is malfeasance.

Traffic hit hard by fuel prices - average down over 5%, but some way worse
By Peter Samuel
Toll Road News
August 24, 2008

Traffic on tax roads in the US seems to have dropped on average by 4 to 5% and on toll roads by 5 to 6% over the past year. The reduced travel is attributable almost entirely to the big run-up in gasoline prices and is about was to be expected from long-established economists' estimates of the price elasticity of demand of about -0.2. Fuel prices which dominate the marginal cost of driving are about 30% higher so you would expect traffic as measured by vehicle-miles traveled (VMT) to be 6% lower (-0.2x0.30=-0.06). Deduct one percent for the sluggish economy and you have 5%.

Toll road traffic may be down marginally more than tax roads traffic because tollroads are somewhat skewed to discretionary travel.


FHWA/OHPI data for travel on all roads show the drop in traffic slightly greater in the west (excludes TX) and the southeast but single digit percent falls have occurred in all major regions. Indeed in June all 50 states were down (only DC is up slightly).

Rural travel is down more sharply (5% to 7%) than urban (3% to 5%). Rural interstates are down nearly 7%. (VMT08juntvt.xls)

Fitch Rating survey

A survey of US tollers' traffic and revenue by Fitch Ratings shows a fall-off year on year clustered in the single middle digits range. Declines are as much as 10% in Florida and California. In Texas are declines in traffic in the lower single digits.

They say that standalone toll projects have the greatest declines and the turnpikes with their dependence on longdistance and rural traffic. Next come the bridges with the least affected being the (urban) expressway networks.

TOLLROADSnews needs to do a proper survey toll agency by toll agency, but that will have to wait a bit longer. A few tollers publish their data monthly (Orange County Toll Roads) and even weekly (91 Express Lanes). There are some more spectacular drops in traffic than Fitch mentions.

91 Express Lanes down 15% to 20%

The 91 Express Lanes are way down. Through July their toll transactions were about 17% lower than the same week last year and the first two weeks of August have been down 18%. Revenue is down about 15% in the last six weeks.

It would be interesting to see if the other express lanes are losing traffic as heavily but it seems logical that they will be more volatile than full tollroads. Most of their users are occasional users taking the toll lanes only when they want a faster ride so their use is discretionary. Furthermore and maybe this is more important: declining traffic in the free lanes means there is less congestion there and faster free trips, so the Express Lanes suddenly aren't saving as much time as before.

The Toll Roads of Orange County nearby have suffered serious traffic losses too, close to 10% in the case of Foothill Eastern TR (FETR) and San Joaquin Hills TR (SJHTR).

The burst of the housing bubble has hit this part of southern California as well as parts of Florida especially hard.

Orlando Orange County toll expressways in Florida have suffered a traffic drop but not as large. (see OOCEA in table nearby).

Macquarie hemmoraging

Macquarie has reported June quarter traffic and it has some huge drops 2008Q2/2007Q2:

- Indiana Toll Road average daily traffic down from 122.8k to 95.6k, 22.2%

- Chicago Skyway from 44.2k vs 51.7k, down 14.6%

- Dulles Greenway VA is down less from 58.6k to 55.1k or 5.9%

The three major Macquarie tollroads in the US have gone from 233k/day 2007Q2 to 195k 2008Q2 or 16% down. (South Bay Expressway is at 26k day but wasn't open in 2007).

On the Indiana TR the ticket system portion of the tollroad which caters to longdistance traffic is down 5%.

The spectacular drop is on the barrier system where daily traffic is down from 98.4k 2007Q2 to 70.5k 2008Q2. That's 28.4% down!

That's commuter and weekender traffic.

Some of the drop may be attributable to opening of improvements to the competing free route of I-80/I-94 (Bishop Ford, Kingery, Borman Expressways) and the higher tolls, but regardless, it doesn't look good for the Macquarie shareholders.

Macquarie recently lowered their valuation of these toll roads substantially.

Canada not seeing the same declines in traffic

A lot of the rise in the price of gasoline in the US is simply the fall in the value of the US$ relative to other currencies. Gasoline has risen much less in C$s because C$s now bob around at parity with US$s whereas they were 15% below a year ago.

Also rises in the oil component of the gasoline price seem less north of the border, because the fuel taxes are so much higher already.

Toronto 407ETR up over last year

In Toronto 407ETR traffic continues to be above last year's levels. Its traffic is larger than all four US Macquarie tollroads combined, so the North American Macquarie traffic in total is down only 5.8% vs 16% for Macquarie's US roads.

Where from here? (SPECULATIONS)

Our sense is that traffic should stabilize at roughly present levels if gasoline prices stay where they are. Short-term adjustments to the higher prices have been made.

And if the US economy continues in its present sluggish state but avoids a real recession and systemic financial collapse then traffic won't get much lower than now.

Over the longer term one adjustment to higher prices will be a move to more fuel efficient vehicles - to smaller lighter vehicles, to hybrids, plug-in hybrids and diesels. That will allow road travel to recover somewhat.

Significant and last mode shift to rail transit seems unlikely. It is seriously unprofitable and capacity constrained and is only competitive at the margin.

Motor fuel prices of course could go strongly up, or they could collapse.

So much crude oil comes from the Middle East and South America and is under the control of hostile governments that major supply disruptions could easily occur. Iran's nuclear program could lead to war in the Persian Gulf just months from now. At home there is fierce resistance to any new production and to any new oil refinery capacity, while the Democrats vilify "Big Oil" and threaten discriminatory taxes against the very companies which will increase fuel supply if they're allowed to.

On the other hand public sentiment has shifted in favor offshore drilling and concerns about disruptions may already be reflected in oil prices. With luck and even a glimmer of good sense by governments, fuel prices could fall as quickly in the next year as they rose in the last. But you can't count on it.

With forecasting so difficult, organizational agility looks key.

Burka brings moral clarity in retirement fund raid for toll roads

Link to article here.

Investing pension funds in toll roads is an irresponsible–and immoral–idea
By Paul Burka
Texas Monthly
Saturday, August 23, 2008

I doubt whether Rick Perry, David Dewhurst, or Tom Craddick has ever heard of the Lane Cove Tunnel in Sydney, Australia. If they had, they might not be so eager to raid the teacher and state employee retirement funds to build toll roads.

On the day the Olympics opened (08/08/08), the Sydney Morning Herald carried the news that the tunnel “is rapidly turning into a bottomless pit for its financial backers….” Two credit rating agencies, Standard & Poor’s and Moody’s, have warned that the toll road could default on its $1.1 billion debt with a year. The tunnel has suffered three consecutive monthly dropoffs in traffic usage. The estimated usage before the road was built was 100,000 vehicles per day; actual numbers in June and July barely exceeded 50,000. A Standard & Poor’s analyst predicted that unless the project gets fresh capital (at least half a billion dollars), it will default within 10 to 16 months. Perhaps TxDOT, since it is such a believer in such projects, would like to invest.


The problem with the financial wheeling and dealing with retirees’ funds that Perry, Dewhurst, and Craddick have proposed is that toll road projects are risky investments. They are risky for two reasons. One is that they are subject to economic fluctuations that affect people’s driving habits, such as the price of gasoline or the pace of development. The second reason is that, when government is involved, they are vulnerable to political pressure and favoritism. Google “toll road defaults” and you will find a trove of stories with unhappy endings. The Camino Columbia toll road in Laredo, which was rife with political intrigue over which landowners would benefit from having a road go through their property, opened in 2000 and defaulted in 2004. Cost: $90 million. Auctioned off for: $12 million. Tx-DOT bail out acquisition payment: $20 million.

The Dulles Greenway toll road to Washington’s Dulles Airport defaulted on its bonds within a year of its opening in 1995. The private owner, Toll Road Investors Partnership II, have lost money every year since the road opened. When toll roads lose money, tolls go up–in this case, to $4.80 by 2012. That works out to an astronomical 35 cents per mile. There are similar stories in Orange County, California (where the state had to buy failing toll lanes), and along Florida’s west coast, and near Richmond, Virginia, where the 8.8-mile Pocohantas Parkway, financed with tax-free bonds, has suffered around a 50% shortfall in projected toll receipts; the state has had to maintain the road because the private owners don’t have the money. Bond ratings have been lowered to below investment grade. To pay off the bonds, the toll was increased by 50%.

It is true that many toll roads have been success stories. In Texas these include the Dallas-Fort Worth Turnpike, which paid off bondholders with toll revenues after thirty years and became free Interstate 30; the Dallas North Tollway and its northern extension; and the Sam Houston Tollway on the west side of Houston. The issue here is not toll roads per se. It is toll roads built with pension funds (and probably other investment funds as well, such as the Permanent School Fund and the Permanent University Fund). These are trust funds. They belong to the members. It is morally wrong to require fund managers to invest them in risky ventures like toll roads. Does anybody doubt that there will be pressure on the pension funds to invest in certain projects that favor certain people and certain contractors and certain areas? We all know what kind of people we are dealing with here. Rick Perry can’t resist it. He appointed the members of the boards that oversee the pension funds. These deals will be neck-deep in politics.

The Statesman’s story on the leadership’s plan quotes Britt Harris, the chief investment officer of the Teacher Retirement System, as saying that investments in infrastructure made sense if the proposal was “equal or better than something we can get [in another project].” Harris then pointed out that the fund’s “ultimate loyalty is to the members,” not to target investments based on geography or politics. The last clause does not appear in quotation marks in the article. Bravo for Britt Harris, but I think he should keep his resume updated.

The biggest risk in toll roads as investments is political pressure. The pressure comes in two forms. The first is pressure on the consultants to provide favorable projections for use of proposed toll roads. Does anybody trust TxDOT–or the consultants they hire, or the private entities they seek to contract with–to do hardnosed, accurate projections? If you do, then consider these comments from an article in Business Week several years ago, at about the time Rick Perry was unveiling his proposal for the Trans-Texas Corridor:

* “There is a history of feasibility studies for toll roads being overly optimistic,” says John J. Hallacy III, director of municipal bond research for Merrill Lynch and Co.

* “Of the 10 major private toll roads constructed since the mid-1990s, nearly half carry far less traffic than projected. Some $4 billion in toll road bonds risk default over the next five years unless they’re refinanced,” estimates Robert H. Mueller, a municipal bond analyst at the J.P. Morgan securities Inc.

What about financing toll roads with bonds? Well, don’t expect bond raters to give the bonds a good rating. I’m quoting here from an article that appeared eight years ago in a tollroad industry publication, so it is possible that things may have changed, though I doubt it. Credit is much harder to get today than it was in 2000.

Fitch-ICBA, the New York bond rating agency says that there is a permanent bifurcation of the toll road bond market. Established systems of toll facilities can expect to be rated in the range A to AA, whereas most standalone and startup toll facilities will be rated BB- to BBB. They see a continuing demand for new toll road financings because of what they call a “seemingly unbridgeable gap” between highway needs and the ability to finance them with tax monies that toll projects can often help to fill.

According to BondsOnline, bonds rated BBB are “lower medium grade” and bonds rated BB- are “speculative.” The lower the bond rating, of course, the higher the interest rate that bond buyers demand. No one is going to be getting any bargains on toll road bonds. And AAA ratings are just a dream: “Fitch says that the ever present possibility of state governments siphoning off surplus toll revenues or leveraging them for other borrowings prevents state owned turnpikes from achieving the AAA rating.” So how can asking pension funds to invest in these bonds ever be a prudent investment? It can’t.

The article continues: Another problem with bonds for highways is that bond rating houses distrust state governments. It is unlikely that any state owned turnpikes will ever reach AAA: The key reason is susceptibility to political interventions.

I have said this before, and I will say it again. There is a sensible way to finance roads. It is to increase the gasoline tax and index it to inflation in the highway construction index. The gasoline tax has some weaknesses. Part of it is diverted to public education. People drive less when gasoline prices go through the roof. Cars are more fuel-efficient. All of this cuts into the revenue potential of the tax. Nevertheless, Texans still love their cars. The suburban lifestyle here is designed around the automobile. Even if the revenue per mile driven is declining, there is a lot of life left in the tax. A portion of the revenue could be dedicated to paying off the bonds for toll roads. This should be capped to ensure that money will still be available for free roads. While the resistance to tax increases is formidable, so is the resistance to toll roads. If you can persuade the public that a gasoline tax increase will reduce the need for toll roads, I think that proposition could be sold. Anything is better than insisting that the savings of retired teachers and state employees be invested in risky ventures like toll roads.

Perry, Dewhurst, Craddick want to raid teacher retirement funds for toll roads

Link to article here. Link to letter from Perry, Dewhurst, Craddick to Transportation Chair Delisi here.

Teachers had better stage a Texas-sized taxpayer revolt over this sell-out by Rick Perry and his minions. As if Perry's destruction of his own Party thanks to his relentless push for toll roads and the Trans Texas Corridor that nobody wants isn't bad enough, now he's coming after teacher retirement and public employee pension funds to be his suckers on toll road schemes that even the private sector is calling "risky." And why not when Rick Perry has great influence over these boards, many appointed by him.

Here's what made it into the article:
"It's a mixed bag, ending the DPS diversions is a start, but forming a corporation and using public employees pension funds to fund risky toll projects the private sector is beginning to shy away from borders on malfeasance."

Here's what didn't:
The warning signs that toll roads are risky deals due to high gas prices and a decline in driving and toll road usage are flashing like neon lights to anyone with a pulse. Fitch just downgraded toll road bonds and Moody's warns that new toll roads may not be financially sustainable without toll hikes. How will Legislators defend to a retired teacher on a fixed income that they squandered her retirement on risky toll road deals? "Oops, we couldn't foresee the toll road bust" won't fly with the evidence already before them. The options in this letter don't change the fundamental direction away from the most expensive transportation tax, tolls. Texans can't afford Perry's long-term debt and high tax "solutions" any longer. Read more here.

Top leaders strike deal on funding Texas toll roads
By Peggy Fikac
Express-News
August 22, 2008


AUSTIN — State leaders trying to meet Texas' transportation needs said Thursday they'll work to stop the diversion of more than $1.1 billion from the highway fund and to allow state-based public investment funds — including pension funds — to invest in toll roads.

Gov. Rick Perry, Lt. Gov. David Dewhurst and House Speaker Tom Craddick also backed the sale of road bonds already authorized by voters. The GOP leaders said transportation officials should immediately sell up to $1.5 billion in bonds to “ensure that greater road funding levels are maintained through the fall and spring until we can work with other elected officials to provide additional solutions.”

Perry had stood against the sale of the bonds until leaders could agree to a broader transportation solution.

The leaders laid out their agreement in a letter to Texas Transportation Commission Chairwoman Deirdre Delisi, who is Perry's former chief of staff and who took part in the discussion over funding solutions. Their proposal drew praise from those looking for more road funds and concern over the ramifications for other programs and services.

The $1.1 billion that's now diverted from the gas-tax-fueled highway fund to the Texas Department of Public Safety, for example, would have to be replaced with general revenue money. That would pit DPS against other programs “so someone else is going to come up $1 billion short,” said Dick Lavine of the Center for Public Policy Priorities, which advocates for programs for lower-income Texans.

“It's just another indicator that we don't have a revenue system that can produce the money we need to provide the services we need,” Lavine said. Ending that diversion could be phased in over two or more years, said Perry spokeswoman Allison Castle.

While the state comptroller has projected $10.7 billion in balances will greet lawmakers when they return in regular session in January, $3 billion of that is dedicated to property tax relief and $5.7 billion is in the rainy day fund, which requires a two-thirds vote of the Legislature to spend.

In addition, collections from the state's new business tax are projected to be $1.5 billion less than anticipated this year, although other tax collections have been higher than projected.

The proposal to allow public investment funds — such as the Teacher Retirement System and Employees Retirement System — to invest directly in toll roads also drew attention. The investment would occur through a new entity that could be called the Transportation Finance Corp.

“TRS needs to make those decisions exclusively on the same basis they make any other investment decisions. The fact that the person who appointed them might have a preference really shouldn't matter to them,” said Richard Kouri of the Texas State Teachers Association. Perry and other officials appoint TRS and ERS board members.

Castle said decisions about investing in toll roads would be made using the same standards as other investment decisions.

Terri Hall of Texans Uniting for Reform and Freedom, which objects to the way that the Texas Department of Transportation has been moving forward with toll projects, called the leaders' proposal “a mixed bag.”

Ending the diversion of highway money to the DPS “is a start, but forming a corporation and using public employees' pension funds to fund risky toll projects the private sector is beginning to shy away from borders on malfeasance,” Hall said.

Justin Keener of the Texas Public Policy Foundation, which advocates limited government, called the agreement “a significant step towards reducing traffic congestion and improving the flow of people and goods.”

Fitch downgrades toll road bonds, outlook bleak

Link to article here. Add to the Fitch Report this story in the Austin Business Journal about how vulnerable Texas drivers are to high gas prices, taking 6% of one's income (tolls could easily double one's gasoline cost), it's malfeasance for politicians and their political appointees to continue to push toll roads.

Toll road and airport projects are now riskier
By Pat Driscoll
Express-News
August 20, 2008

High fuel prices, inflation and a dragging economy have made bonds for toll roads and airports riskier, Fitch Ratings said in a report today.

toll.traffic.jpgWith tollway and airport traffic down as much as 16 and 19 percent, respectively, the report said the outlook for tollways and airports is now negative, down from a stable assessment just five months ago.


"The question is whether the current trend will continue for a longer period," it states. "It is Fitch's view that challenging conditions will persist over the next one to two years."

Though fuel prices have been dropping from last month's record, the economy and credit markets remain troubled and Europe and other countries show signs of stress, the report explains. Besides, food and other commodities haven't joined the fuel-cost slide.

Not mentioned is that the U.S. Energy Information Administration expects even higher gas prices next year, and a debate slogs ahead on whether global oil production has peaked — and if not, then when — and how well technologies and alternative sources can fill the gap. Many agree that the age of cheap energy is over.

If pressures continue, and policymakers start pushing more money to public transit and more people begin shunning suburbs to live in urban cores, toll roads will face bigger problems, the report says. Airports could lose 10 percent of capacity within several years.

The report's title rings ominous: U.S. Transportation Assets: Facing a Temporary Decline or a Permanent Change?

TOLL ROADS

Most U.S. toll roads now face traffic losses of 2 to 10 percent, says the Fitch report, which tracked numbers through June. Operators may have to boost rates and cut costs to keep bond ratings healthy, which might be difficult, even more difficult for private concessionaires charging maximums allowed in contracts.

Texas toll hopes, though, aren't as bleak.

"Facilities in Texas appear to be a bright spot, with year-on-year reductions of less than 5 percent, which is half of what most other facilities in the Northeast, Midwest, Southeast and the West are experiencing to date," the report says.

AIRPORTS

Seats on domestic flights could be down nearly 8 percent in the last quarter of 2008 compared to a year ago, the Fitch report says. Major airport hubs will fare better, losing only 6 percent.

Some airports could grow mostly because Southwest Airlines continues to expand, it says. San Antonio International Airport, where Southwest is by far the biggest carrier, saw record months in May and again in June. But several airlines, including Southwest, recently announced they will pull back some flights here.

Most U.S. carriers plan to cut capacity 6 to 14 percent in the third and fourth quarters of this year, Fitch says. Airports in the middle of big projects, such as San Antonio's huge expansion, will likely have less flexibility to weather any financial storms.

TURF testimony at 3 public hearings at Transportation Summit in Irving

The road building and transportation lobby's biggest event of the year is arguably the Texas Transportation Summit, hosted annually by Dean International in Irving, TX. Not usually an invited guest among those whom ordinary citizens have ardently opposed, TURF was invited to attend by the Summit's Founder, David Dean. An olive branch and honest effort to incorporate differing views? We hope so. Time will tell. Below is the TURF testimony at three public hearings that were held concurrently with the Summit: one addressing MPOs, another public private partnership toll roads, and another addressing the diversions from the gas tax to non-transportation uses.

Testimony by TURF Founder, Terri Hall, before the Senate Transportation and Homeland Security Committee Addressing MPOs, August 12, 2008
Chairman Carona, Senators, thank you for having public testimony on this vital issue effecting transportation decision-making in the state, MPOs. The citizens have found by and large that MPOs are rife with many of the same problems we’ve experienced with TxDOT. MPOs are tone-deaf to the public and do not represent the will of the taxpayers anymore than TxDOT does, regardless of the elected officials that sit on those boards.

The process by which this shift to toll financing for nearly every road project is flawed to begin with. The public has been shut out from DAY ONE and has never been given ANY meaningful input  as to whether Texans even want to be charged both gas taxes and tolls to get to work or have any chance at mobility.

We don’t want or need any more organizations that give political cover to TxDOT (and frankly to the Governor and Legislature) that allows TxDOT to check the public involvement box and ignore the overwhelming opposition to tolling existing right of way and proceed as planned anyway.  I’ve personally witnessed it in the NEPA public hearing process and there is no meaningful public input to date.

There is no provision that allows the public to veto a project or influence how its financed. There are already 2 lawsuits pending against the MPOs in this state due their flawed decision-making processes. MPOs are not a reflection of the will of the people. When hundreds of citizens have turned out to ask MPO Boards to nix toll plans (by a 2 to 1 or even 3 to 1 margin against), they consistently vote to toll anyway.  What is the point of “public involvement” if the public’s input is consistently ignored? The only redress is to unseat at least half the MPO Board in the next election only to again have it stacked with pro-corridor, pro-toll, pro-privatization appointees. The citizens never know who will be appointed to the MPO,  and therefore have no way to truly impact the MPO even at the ballot box. If a board member votes with the people, they promptly get removed from the Board and replaced with one who will vote pro-toll. Ask former Chairwoman Andrade, she facilitated that retribution in Bexar County.

THE FAIR AND EQUITABLE SOLUTION
Ordinary citizens and taxpayers have been alienated from the process of transportation decision-making at EVERY level. The citizens have a right to self-determination in a Republic and we deserve the right to bring this to a public vote or have some other means of having citizen input heeded perhaps through the NEPA process, rather than continue the TxDOT & MPO charade of “citizen involvement.”

Let’s remind ourselves what TxDOT thinks of as citizen involvement…it’s them breaking the law to hire a lobbyist to lobby elected officials and hire marketing firms and political consultants to write and coordinate their speeches, public appearances and press statements in order to spout the glowing benefits of the tolling to taxpayers in Town Hall meetings to convince an angry public that they really do want toll roads.

Texans are smart enough to know if we truly need this new infrastructure, how they want it financed, and what the preferred route and solution ought to be. It’s not just the top-down approach that’s upsetting people, it’s the lack of any meaningful input into the decisions being made at EVERY level of the process.  It’s abundantly obvious that the decision has already been made for us. That’s what people are objecting to.

I do hope our message is clearly communicated and HEEDED in your recommendations to the Legislature.

Testimony by TURF Founder, Terri Hall, before the Legislative Study Committee on Private Participation in Toll Roads, August 12, 2008

The invited testimony before this CDA Study Committee has been noticeably stacked in favor of CDAs or PPPs, despite the overwhelming public opposition to privatizing our public infrastructure. Rather than heed the public’s concern, you have instead chosen to try and tweak PPPs in order to make them more palatable to an angry public rather than truly study what you were charged with studying: the EFFECTS of PPPs on the traveling public. This committee operated form the assumption that PPPs would continue from day one, rather than deliberate whether we should be engaging in any more of these types of contracts and whether this type of contract is in the public’ best interest.

We feel strongly that you should take a few steps back and study whether or not the government should even be in the business of making a profit and whether or not massive leveraged debt in this lending is the right approach. This committee also ought to study whether we should continue such a heavy reliance on tolling considering the sustained volatility of the price of gas. Considering both Houston and Dallas toll roads have experienced a decline in toll road usage and that there has been an overall decline in driving due to high gas prices, will 87+ toll projects be toll viable in 5 or 10 years given these conditions. Will the taxpayers be stuck with even higher toll prices because of lower ridership or worse be stuck bailing out a toll road in default?

Increasing the cost of transportation, particularly with a market-based toll rate and/or a PPP which is the most expensive transportation tax, is not only unwise, it’s a recipe for economic disaster.

Gas prices have caused a dip in toll road usage (per articles in Express-News and Landline Magazine) and caused marked drops in driving in general. The bond debt for these toll projects is very likely to default under these conditions, which most leading energy analysts agree will continue for the foreseeable future.

Where is the consideration of the taxpayer in all of this?  Short of some brief comments by Senator Tommy Williams and Rep. Wayne Smith, the taxpayers pocketbooks and their ability to pay these new taxes hasn’t even been on the radar. Where was the invited testimony from leading experts about high gas prices and the dwindling availability of oil and its effect on driving and the subsequent increase in usage of other modes of transportation? These issues have an enormous impact on the sustainability of 87+ leveraged toll projects. The Transportation Summit put on by Dean International had a speaker on this subject, and this area is being investigated by Congress, yet the Committee didn’t see fit include such an elephant in the room in its decision of whether or not to recommend the most expensive transportation funding option….PPP toll roads?

Several witnessed testified that most toll roads aren’t self-sustaining. Why are we building toll projects that can’t sustain themselves and need massive taxpayer subsidies? Raiding other public funds to piece these projects together does the exact same thing the gas tax does, takes from some to give to others. How is this process better or more efficient for the taxpayer? It’s not, it just allows an unaccountable government revenue stream.

Testimony in answer to Senator Robert Nichols’ question concluded not a single PPP currently on the books anywhere in the U.S. could be used as an ideal model or exemplary PPP deal. The taxpayers can’t afford any more untested experiments when the risks and costs to the pubic are so high. We’re not guinea pigs for the financial markets and road builders to “try out” their “innovative financing” schemes.  We’ve studied these deals for many years now and we’ve been reaching to find one that served the public well. So far, one doesn’t exist. To continue such risky schemes and to ignore the obvious warning signs to the tune of billions of dollars is totally unacceptable.

Dennis Enright testified that CDAs cost 50% more, that there is no risk transfer, and these projects should always stay in the public sector. None of these areas make PPPs palatable to the taxpaying public. We keep hearing PPPs and tolling are just a tool in the “toolbox” and that “one size doesn’t fit all,” but due to TxDOT’s Minute Order passed December 18, 2003 mandating all new capacity be studied for tolling, it’s become the only tool in the toolbox unless you remove it.

The GAO recently cautioned that public protection must be put in place when using PPPs and indicated PPPs aren’t right for every project. SB 792 took the first step toward primacy, but the fundamental assumption that everything that can be tolled will be tolled (including subsidizing projects that aren’t 100% self-sustaining) must be removed. Senator Nichols’ Primacy Determination model needs to take a few steps back to change the assumption that everything will be a toll project of one kind or another, to one where the priority is to improve freeways and keep them freeways, resorting to tolling dead last.

To ignore the economic warning signs and bury our heads in the sand and continue down the path of models that require sustained increases in driving and affordable gas, is to foolishly invite economic disaster and would be a complete failure of the Legislature’s fiduciary duty to the public it swears an oath to protect and serve.

Testimony by TURF Founder, Terri Hall, before the House Appropriations Transportation Subcommittee on Transportation Financing Options, August 13, 2008
Thank you for studying the vital issue of transportation. There are many considerations before this committee that will impact the taxpayers’ everyday lives. The shift to privatizing and even maximizing profit (even on public toll roads) should cause every public servant to pause.

While some are trying to “fix” PPPs to make them more palatable to an angry public already suffering under high gas prices, we need to take a step back and look at whether this shift to reliance on tolling to fund new road construction is prudent, protects the public interest, and is sound fiscal policy that best serves the public interest. We submit that tolling satisfies none of those areas.

While we’re not opposed to all tolling, the tolling of existing right of way, market-based tolls, and privatization smack of runaway taxation and both government and private profiteering exploiting what amounts to government-sanctioned monopolies, our public highways. The toll-first Minute Order #109519 passed by the Transportation Commission on December 18, 2003 demonstrates tolling isn’t just a “tool in the toolbox,” it’s the only tool they’ll continue to use in order to fill their coffers. Through the prolific use of tolling, TxDOT has become a defacto taxing entity with no accountability to the traveling public who depends on these highways for their daily living.

We’d like to bring some things to your attention that we feel are vital to setting transportation on the right course.

TOLL ROAD USAGE, DRIVING DOWN
First, we cannot bury our heads in the sand and ignore the warning signs around us. In a San Antonio Express-News article July 29 and a Landline Magazine article from August 1, it states that toll road usage is down in both Dallas and Houston, largely due to high gas prices. The FHWA also reports that driving is going down causing gas tax revenues to also drop.

One can see there is an inverse relationship between a drop in driving and the escalating price of gasoline. So any transportation policy that substantially increases the cost of transportation will not only wreak havoc on the economy and leave less money for taxpayers to cover other necessities, it’ll actually reduce tax revenues, particularly toll road usage, necessitating increases in toll rates or causing the massive leveraged debt used to build these facilities to go into default leaving the taxpayers to bailout a HUGE mess not unlike the mortgage and banking crisis we’re seeing now.

INDIRECT EFFECTS OF TOLL ROADS
We must also consider indirect effects and the unintended consequences of toll proliferation like traffic diversion to surface streets which will increase wear on county and city roads, not meant to handle such traffic loads. In a study called the Empirical Evidence of Toll Road Traffic Diversion by Peter Swan of Penn State and Michael Belzer of Wayne State, released January 14, 2008, Swan and Belzer noted that efforts to "monetize" existing toll roads is a recipe for the level of higher toll rates that increase truck diversion.

A summary of the findings published in the Newspaper.com (January 14, 2008) states:

The researchers analyzed decades of data from the Ohio Turnpike and nearby alternate routes in Ohio, comparing both to national data to determine the effects the toll rates had on nearby free roads. Ohio raised toll rates in the 1990s and subsequently lowered them, allowing an easier calculation of the effect of different rate levels. The study showed that as the Turnpike toll increased, truck traffic increased on alternate, free routes as truckers balanced the monetary savings with the cost of the extra time needed to take an indirect route.

Swan and Belzer's economic modeling showed that the Turnpike could maximize its revenue by setting a truck toll rate of 46 cents per mile and collecting $111 from each truck driving the length of the Turnpike. At this high rate, however, the number of trucks avoiding the toll road would quadruple and place 608 million vehicle miles of added traffic and wear on secondary roads.

The study did not directly examine accident rates but the results suggested that imposing tolls on divided highways would increase the number of road fatalities by pushing truck traffic onto roads not designed to handle heavy truck traffic.

"Because we know that secondary roads pose greater safety hazards, the safety cost of diversion will be substantial," the study explained. "We know enough about the frequency and severity of crashes based on highway type to suggest that a substantial increase in crashes, crash severity, and fatalities in the state of Ohio probably would occur as a result of this diversion."

Interestingly, 46 cents a mile is the exact truck toll rate set by the Alamo RMA in the 281 toll project. In a TURF lawsuit to stop that toll project due to an insufficient environmental study of the impacts of that toll road on existing residents and businesses, no economic impact was conducted nor any study of the indirect effects of the toll road on surface streets and neighborhoods due to diversion.

DELIBERATE SUPPRESSION OF POTENTIAL NEGATIVE IMPACTS HIDDEN
Also found through litigation to stop the 281 toll road, TURF attorneys discovered a key study by a geologist TxDOT hired was deliberately hidden from the FHWA during the environmental review process. The report speaks of potentially “severe” impacts from the toll road on the Edwards Aquifer. Obviously this information could have changed the outcome of the FHWA’s environmental clearance (“Finding of No Significant Impact” or FONSI) for the 281 toll project had it been submitted with the environmental assessment. TURF’s attorneys also uncovered correspondence that shows management at TxDOT tried to pre-determine a FONSI on both 281 and 1604.

Such deliberate deception by a state agency cannot be tolerated, not to mention it violates the National Environmental Policy Act (NEPA). The public trust can only be restored by direct punishment (employee terminations) for such violations and through strong legislative oversight.

PUBLIC PROTECTIONS PARAMOUNT
The GAO recently released a report to Congress in February 2008 citing concerns about needing more rigorous up front analysis of PPPs to ensure pubic protections are put in place. Senator Robert Nichols released a draft of a decision tree of sorts called a “Primacy Determination” that suggests a process by which any decision to toll would go through to determine if a PPP was the right type of method for a given project. We think this sort of process must be in place to ensure the public interest is protected. However, it assumes most if not all projects will be toll projects.

We submit that this decision-making draft ought to take one step back, and that is, to have a process by which TxDOT and the MPOs must go through to keep our freeways toll-free FIRST. Tolling should be the last option considered (PPPs, if not completely eliminated, the last on the tolling option list), especially considering high gas prices and tighter, more expensive lending conditions.

HIGH COST OF BORROWING
Even if a public toll authority does the project, a Bloomberg article, Not Even 2% Fed Funds Help Munis Amid Record Rates, from just days ago, August 7, 2008, shows that even municipal bonds and other government financial instruments are experiencing higher lending rates.

Two experts didn’t parse words:

``The world is falling apart'' for borrowers, said Robert Doty, the president of American Governmental Financial Services, an advisory firm in Sacramento.

``The unwinding of the credit bubble has had dramatic implications,'' George Friedlander, a municipal strategist at Citigroup Inc. in New York who has covered the market for more than 30 years, said in an Aug. 1 report.

Government and certainly the Appropriations Committee cannot ignore its fiduciary duty to the public by looking the other way and ignoring the warning signs.

OVERSIGHT AUTHORITY MUST HAVE TEETH
Another area the Legislature needs to consider addressing in statute is giving the State Auditor the authority to force a tolling entity (whether public or private) to redo their traffic and revenue studies if the methodology or study is insufficient in any area. For instance, the State Auditor asked the Alamo RMA to redo its traffic and revenue study to take into account high gas prices, which is an obvious factor tolling authorities must consider in whether a toll road will be viable long-term. These agencies are doing inadequate studies to ram their agendas through. An article in the Express-News about this recommendation from the Auditor, emphasizes that the Auditor cannot force the RMA to re-do anything, that SB 792 only has the Auditor review their methodology. The Auditor should have the ability to force a tolling entity or TxDOT to redo an inadequate study that could potentially put these public roads in default at the taxpayers' expense.

MPO TONE DEAF TO PUBLIC
Also, MPOs can be just as tone-deaf to the public as TxDOT. Certainly RMAs and unelected toll authorities fit into this category as well. The public by and large has been left out of transportation decision-making at EVERY level. There is no provision that allows the public to veto a project or influence how its financed. There are already 2 lawsuits pending against the MPOs in this state due their flawed decision-making processes. MPOs are not a reflection of the will of the people.

When hundreds of citizens have turned out to ask MPO Boards to nix toll plans (by a 2 to 1 or even 10 to 1 margin against), they consistently vote to toll anyway.  What is the point of “public involvement” if the public’s input is consistently ignored? The only redress is to unseat at least half the MPO Board in the next election only to, again, have it stacked with pro-corridor, pro-toll, pro-privatization appointees. The citizens never know who will be appointed to the MPO, and therefore have no way to truly impact the MPO even at the ballot box. If a board member votes with the people, they promptly get removed from the Board and replaced with one who will vote pro-toll. Ask former Chairwoman Andrade, she facilitated that retribution in Bexar County.

THE FAIR AND EQUITABLE SOLUTION
The taxpayers have a right to self-determination in a Republic and we deserve the right to bring this to a public vote or have some other means of having citizen input heeded, perhaps through the NEPA process, rather than continue the TxDOT & MPO charade of “citizen involvement.” We need some public involvement REQUIREMENTS that FORCE TxDOT to implement the alternative chosen by the public, not the one that makes the State the most tax revenue.

LOBBYING FOR TOLLS/PPPs
Let’s remind ourselves what TxDOT thinks of as citizen involvement…it’s them breaking the law to hire a lobbyist to lobby elected officials and hire marketing firms and political consultants to write and coordinate their speeches, public appearances and press statements in order to spout the glowing benefits of the tolling to taxpayers in Town Hall meetings to convince an angry public that they really do want toll roads.

We provided the Sunset Commission as well as the Chairwoman Harper-Brown’s office with in-depth documentation of TxDOT’s illegal lobbying activities. The Texas Government Code Chapter 556 states that TxDOT is subject to a reduction in appropriations per 556.005

(c)  A state agency that violates Subsection (a) is subject
to a reduction of amounts appropriated for administration by the
General Appropriations Act for the biennium following the biennium
in which the violation occurs in an amount not to exceed $100,000
for each violation.

DETERMINE TRUE NEEDS, COMPARE FREEWAY FIX TO TOLLWAYS
We need to end the toll road wish lists (MPO TMMP plans that even the Governor admitted were based on an if-money-were-no-object principle) and get a true side-by-side, apples to apples comparison of the cost of fixing our roads and keeping them freeways versus the cost of turning them into tollways. If it's anything like the US 281 project in Bexar County, TxDOT/ARMA has turned a $100 million gas tax funded FREEway plan into a $1.3 billion toll project. This side-by-side comparison will help Legislators and the public discern our true "unfunded needs,” since we cannot rely on TxDOT's "funding gap" figures to be accurate. Then and only then can we accurately assess funding our roads in the least invasive, most affordable, and most transparent fashion.

Thank you for allowing us testify to the citizens’ concerns and we trust their voices will be heard and heeded as we seek to restore trust in the transportation decision-making process across the state and to put the citizens back in the driver’s seat.

Gas tax diversions get legislators’ attention, so does bogus TxDOT study

TxDOT's trumped-up study by yet more consultants, at a company called Cambridge, is based on totally bogus assumptions. They assumed vehicle miles traveled by Texans would go up 70% by 2030 and that our population would be more prosperous and thus own more vehicles (and do more driving). What planet are they on? The Federal Highway Administration's statistics have shown Texas driving as flat or going down since gas prices began to escalate in 2005. The Texas State Data Center's (basically the Texas' census data center, SDC) own population projections show the complete opposite of what these consultants divined from the blue sky. Texas' projected population growth will be poorer, less educated and older. In a UT Austin study from 2005, outlining the potential pitfalls of the Trans Texas Corridor (TTC), it cites this data as problematic to the TTC, and, we conclude, to TxDOT and the road builders' larger agenda that requires more cars, more driving, and lots more money from taxpayers to get around.

Since retirees aren't the ones clogging our roads during commute time, and the less educated struggle just to make ends meet much less take on the exploding cost of owning and using a personal vehicle, TxDOT's numbers are all wet. Their assumptions also fail to take into account the high price of gas (as the State Auditor recently admonished a tolling authority to do) and the reality of dramatic reductions in driving and toll road usage as a result. Our Legislature must do its duty to exercise oversight over such a blatantly trumped-up figure that is not even remotely based on reality.

Harper-Brown: Highway fund getting short-changed
by Mark Lavergne
Lone Star Report
August 19, 2008

IRVING - The Transportation Summit abounded with big transportation ideas to meet the state's big future transportation needs. Meanwhile, the state itself is coming up short on funds to meet transportation needs of the present.

The House Appropriations Subcommittee on Transportation met Aug. 13 to examine problems in funding for the state's highways old and new, and possible solutions.

In the spotlight was Fund 6, the state fund that, in theory, is designated for building and maintaining the state's highways. The problem, said committee chairman Linda Harper-Brown (R-Irving), is not merely funds that go to Fund 6 that are then diverted to things other than roads, but also funds that ought to go to Fund 6 but never make it there in the first place.

Harper-Brown said she anticipates that in 2009 "we will have an opportunity to make it a transportation session," as TxDOT is under Sunset and because of gas prices and new funding needs. "This is the time if there ever was one," she said.

What Fund 6 pays for

Thomas Galvan, of the Legislative Budget Board (LBB), told the subcommittee what percentage of the Fund 6 money goes where: 86.2 percent to the Texas Department of Transportation (TxDOT); 7.1 percent (about $1 billion) to the Texas Department of Public Safety (DPS); 5.1 percent to benefits for employees at Texas Department of Transportation, the Attorney General's Office, and a few other agencies; a few hundred million to other small agencies, salary increases for the various agencies, etc.

That's just the beginning. Some funding for SB 10, the healthcare bill from last session, is coming from Fund 6 this biennium ¡V about $107 million for medical transportation. DPS's $1 billion a year pays for employees benefits including insurance and retirement. The Texas Education Agency receives $100 million each biennium for public school transportation. (The recent school finance summit hosted by Commissioner Robert Scott featured a veritable choir of superintendents saying they will need more.)

The Health and Human Services Commission gets $20 million each biennium for ambulance services. Also $66.9 million goes for (mostly TxDOT but a few others) employee salary increases (for salaries altogether it's about $623 million). The Texas Transportation Institute gets $12.8 million each biennium, and the Office of the Attorney General $11.5 million. The latter went towards transportation-related cases such as right of way acquisition.

The Texas Historical Commission also is receiving funding from TxDOT's portion of Fund 6, about $500,000 a year. Another $6.3 million each biennium goes to the State Office of Administrative Hearings (SOAH), for DPS' license verification program. The Public Integrity Unit at the Travis County District Attorney's Office receives about $1.9 million a biennium to prosecute motor vehicle tax fraud cases. The unit has received money from Fund 6 as far back as LBB's records show, which is 1990, Galvan said. Most other diversions started after 2000.

Jim Smith, a financial analyst for the Comptroller's Office, told the subcommittee that currently 10 state agencies receive appropriations from Fund 6. As of July 31, Fund 6's cash balance was $4.3 billion. But Harper-Brown questioned how much of that was going to local communities for local transportation needs.

What Fund 6 should be getting paid, but isn't

Harper-Brown asked for a consolidated list of revenue that should be going to Fund 6 but isn't. "One of the things that concerns me is that we're always talking about diversions out of Fund 6 that need to be paid for from that fund," Harper-Brown said. "But there are a lot of funds that don't go into Fund 6 and not only are there funds that go into GR that are transportation-related and never made it to our transportation funding, but then some of those ¡K fees are going into the general revenue side, but the expenditures are coming out of the Fund 6 side."

TxDOT's chief financial officer, James Bass, told the subcommittee that a lot of revenue generated by operations managed and paid for by TxDOT, which thus should go to Fund 6, is going instead into the state's general revenue (GR) fund.

Among these are the Automobile Burglary and Theft Prevention Authority, which assesses a $1 fee for each auto insurance policy in the state. That fee is deposited into GR, and paid for by Fund 6. Likewise, historically there has been a $20 permit required to drive oversized and overweight vehicles. From each of those $20 fees, Fund 6 only got 30 cents. Recently the fee was upped to $40, and now the fund receives $20.30, Bass told the subcommittee.

Bass said that if those funds were directed back into the state's highway fund, it could save the state each year about $15 million for the auto theft prevention program, and $7.5 million for overweight permits, or $45 million in Fund 6 per biennium.

TxDOT executive director Amadeo Saenz said lack of funding for Fund 6, along with diversions from there, were preventing TxDOT from "building and maintaining highway systems."

Rep. Dan Gattis (R-Georgetown) told Saenz, "We need transparency to know what certain agency's budgets are being spent on and making sure that they are being spent on the appropriate things."

Another TxDOT-produced study

Members of the subcommittee balked when Saenz told them that TxDOT had hired two analysts to produce yet another detailed study forecasting the state's future transportation funding needs. The study's magic number: $15.9 billion more per year. Members were skeptical of the report's findings, saying its assumptions and methodology were unclear.

Gattis told study co-author Allan Rutter of Cambridge Systematics that "$15.9 billion doesn't mean squat to me if you don't tell me what it's based on."

Harper-Brown said TxDOT's credibility was in question because of how the agency had crunched numbers.

Rutter defended the report, saying that neither he nor co-author David Rose was told what to put in the report.

Rutter said the number is attributable to the state's booming population, saying vehicle miles traveled (VMTs) will go up 70 percent by 2030 with increased population and affluence.

But Terri Hall of Texans United for Reform and Freedom, the transportation watchdog group that has opposed TxDOT's recent toll road policies, told LSR that the premise of VMTs varying directly with population increase is "totally bogus," citing a 2005 study from the University of Texas-Austin showing that although the state's population is indeed growing, much of the new population is older and making less money, and thus not driving their own vehicles. Harper-Brown also observed that the baby-boom generation was getting ready to retire.

She also criticized the report for not taking high-speed rail, which she believes will play a big role in the state's future infrastructure, into account for determining the state's future funding needs. "Shouldn't we look at a total big picture?"

"Maybe high-speed rail's time has come," she said. "We just can't continue to build these roads. We can't get them done quick enough."

Texas drivers hit hard by gas prices, spend over $2,000/yr on gas

Link to article here. Perhaps what's most frightening about this reality is that this report doesn't take account the 87+ toll road projects yet to be built, and how that could add a minimum of 20 cents PER MILE to drive in Texas costing the average family $2,000 or more per year (the equivalent of doubling the cost of gasoline!).

Report: Texas Drivers Spend 6 Percent of Income on Gasoline
Austin Business Journal
Published in Texas Insider: 08-11-08

Drivers in Texas spend nearly 6 percent of their income on gasoline, twice as much as what drivers in some states spend, according to a report released today by the Natural Resources Defense Council.The report highlights two areas: state-by-state vulnerability to high oil prices and implementation by states of alternatives and solutions.

Texas is the 16th most vulnerable state when it comes to gas prices. The average Texas motorist spent $2,174 on gasoline in 2007, or about 5.85 percent of income, the report shows.

Motorists in Mississippi, which ranks at the top of the list, spend an average of more than 8 percent of their income on gasoline, while drivers in Connecticut, the least vulnerable state, spend 3.17 percent of income on fuel.

The states in which drivers are most at risk to high gas price increases are Mississippi, South Carolina, Georgia, Louisiana, Kentucky, New Mexico, Indiana, Arkansas, Oklahoma and Iowa.
States doing the most to promote energy-saving policies to reduce oil dependency and protect residents from oil price spikes include California, New York, Connecticut, Washington, Pennsylvania, New Jersey, Rhode Island, New Mexico, Colorado and Maryland.

Despite a growing focus on alternative energy, Texas, where the petroleum industry remains a large part of the economy, has a long way to go to wean itself from oil dependency. The report ranks the Lone Star State 36th on the solutions list.

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