The corporate toll road is not doing well, Moody’s downgrades toll road company.
Moody’s Investor Service has downgraded the credit rating of the private company that built and operates the Texas 130 toll road extension, a rating that could continue to drop unless traffic “aggressively” grows on the road in the next two years.
Moody’s issued the rating April 12 after putting the SH 130 Concession Co., a partnership between Spanish-based Cintra and San Antonio’s Zachry American Infrastructure, on review in March.
The toll road, from Seguin north to South Austin, was billed as the nation’s fastest when it opened to drivers in late October, boasting an 85-mph speed limit.
But traffic counts on the road are about half the initial projections, the Moody’s report said, forcing the company to dip into its financial reserves to make loan payments and raising concerns about the possibility of future default.
A downgraded credit rating can indicate a greater risk to bondholders.
The report lists the company outlook as negative, which indicates the possibility of future credit downgrading in the next one to two years, Moody’s communications strategist David Jacobson said.
Moody’s lowered the rating of a senior secured bank loan of $685.7 million from Baa3 to B1, a four-step decline, which Jacobson said is unusual.
And if this road does default Texas taxpayers will be on the hook for it.
TxDOT’s contract with the concession company lays out complex procedures to determine how much TxDOT would pay the concession company to take over the road in the event of a default or for any other reason. The Moody’s report doesn’t mention the possibility of default.
No on say this coming!! We should have just raised the gas tax, it would have been much, much less expensive in the long run. More privatized gains and socialized loses.
[UPDATE]: TxDOT appears to be going all in with taxpayer money, TxDOT May Sweeten Pot to Draw Private Funds to Projects.
In its first meeting after a legislative session in which requests for transportation funding fell billions of dollars short of requests, the Texas Transportation Commission voted Thursday to open the door to allowing private firms to take on a larger role in some road projects.
“We’re trying to stretch our resources as far as possible,” TxDOT Executive Director Phil Wilson said.
The five commissioners voted unanimously to consider amending the agency’s rules to allow for a new kind of public-private partnership for the agency in which TxDOT would share financial risk with private entities on a project and even agree to reimburse them from the state highway fund if needed to ensure they make a profit. TxDOT will accept public comments on the rule change until July 15. Afterward, the commission will consider adopting the proposal.
Currently, toll projects in Texas range from privately developed ones like State Highway 130 south of Austin, where a private entity takes on all the financial risk, to the DFW Connector Project in North Texas, where public entities are on the hook. Wilson described this latest proposal as allowing for projects that fall in between those two extremes.
“This would be more of a blended model,” Wilson said.
This is not surprising. The Texas GOP has been starving transportation funding for more then a decade now, in order to create a “crisis” just like this so they can justify these privatization schemes. I think someone wrote a book about this.
I like everything about this study, even the parts I don’t particularly agree with. The study is from U.S PIRG, A New Direction. This is from the Executive Summary.
The Driving Boom—a six decade-long period of steady increases in per-capita driving in the United States—is over.
Americans drive fewer total miles today than we did eight years ago, and fewer per person than we did at the end of Bill Clinton’s first term. The unique combination of conditions that fueled the Driving Boom—from cheap gas prices to the rapid expansion of the workforce during the Baby Boom generation—no longer exists. Meanwhile, a new generation—the Millennials—is demanding a new American Dream less dependent on driving.
Transportation policy in the United States, however, remains stuck in the past. Official forecasts of future vehicle travel continue to assume steady increases in driving, despite the experience of the past decade. Those forecasts are used to justify spending vast sums on new and expanded highways, even as existing roads and bridges are neglected. Elements of a more balanced transportation system—from transit systems to bike lanes—lack crucial investment as powerful interests battle to maintain their piece of a shrinking transportation funding pie.
The time has come for America to hit the “reset” button on transportation policy—replacing the policy infrastructure of the Driving Boom years with a more efficient, flexible and nimble system that is better able to meet the transportation needs of the 21st century.
Here’s an excerpt from the study on page 38 regarding PPP’s, in the section “Increased Risk for Public-Private Partnerships”
As gasoline tax revenues have dried up, federal and state transportation officials have sometimes looked toward publicprivate partnerships (PPPs) as a potential alternative. There are many possible ways for government to partner with the private sector, including traditional forms of financing and procurement that raise private money through the municipal bond market and hire private contractors to provide materials and labor. But most of the attention given to PPPs involves the potential for a private entity to agree to build and/or maintain a highway for a given period of time in exchange for revenue—in many cases, from vehicle tolls.
Uncertainty regarding VMT trends reduces the attractiveness of toll revenue as a payout to private investors. Fewer investors will be willing to invest the massive amounts of capital required to build and maintain a toll road if the number of paying customers is not likely to rise over time. In 2005 and 2006, foreign toll road operators financed by large financial companies made large bets on future traffic volume by purchasing a 99-year lease in Chicago and a 75-year lease in Indiana for major toll roads. In
each of these deals and many smaller ones, the private investors acted as concessionaires, collecting tolls for their own bottom line. Many people thought these toll concessions were the wave of the future.
Several toll concessions have produced less revenue than expected. Some have needed to be bailed out by the government. Others—such as a brand-new billion-dollar toll road in Texas that sought to attract traffic by posting the nation’s fastest speed limit, 85 miles per hour—have faced the threat of a credit downgrade as a result of flagging traffic. These shortfalls in privately collected tolls do not necessarily mean that the government received a “good deal,” since more expensive private capital costs and other potential compensation must also be covered.
Changing vehicle travel trends pose risks not just for private investors but for taxpayers as well—regardless of how the risks are distributed at the outset of a PPP arrangement.
Toll roads, in and of themselves, were never the problem. The problem has always been with how our elected leaders decided to go about paying for, are in reality, financing them.
The main problem I see is that there really is no place in our state or in our country right now where we can have a sane and honest debate on a topic like this. But this study certainly makes it seem like continuing to spend our transportion dollars just on highways is shortsighted and ignorant. In light of this study, it’s definitely time to re-think transportation.
This is a very interesting statement from Rep. Drew Darby. He’s explaining why he pulled his bill down, even though he thought it would pass.
Gov. Rick Perry, conservative groups and tea party-backed House Republicans forced House leaders Thursday to pull down a bill that would have increased car registration fees to help build more roads.
Rep. Drew Darby, R-San Angelo, said a vote count showed a compromise version of his bill probably could squeak through in the House.
However, he said, “I didn’t move forward because of the prospects of cutting the members up on a vote [on a bill] that may not become law.
Let’s put aside scorecards for now. But we have a legislator who thought his bill would pass this stage of the process, but doesn’t want to continue to fight for its passage. Isn’t that what legislating is all about? Get your bill through one stage, and then start fighting for it at the next stage. Is this where The Lege is now? No legislation can move forward, no votes can be taken unless they’re safe, and the legislation is guaranteed to pass.
The reason it’s this way is that too many, GOP legislators in particular, don’t want to get on the wrong side of the post-session scorecards of groups like Empower Texans. Or face the wrath of TPPF, and Perry and the wing nuts.
The truly sad part is that Texas really needs to spend money on transportation infrastructure.
Asked if House leaders are finished with transportation funding this session, Darby said they’ve completed consideration of new sources of highway money.
“This is the last bill coming out of the House to add transportation infrastructure funding,” he said.
Darby said that’s a shame because Texas has virtually no money for launching new road projects. He said the state has borrowed almost all that it can borrow to build highways. It’s at risk of choking off economic and population growth. [Emphasis added]
The state hasn’t generally raised vehicle registration fees since 1985, nor the gasoline tax since 1991, he noted. And families bear a $1,500 “hidden tax” each year in car repairs and lost productivity from being stuck on bad roads and in traffic jams, Darby said.
Rep. Jimmie Don Aycock, R-Killeen, said the bill was a test of seriousness about tackling big problems.
“If we really want to govern, at some point you can’t live on 1991 revenue streams at 2013 prices,” Aycock said.
Darby replied, “A dollar in 1991 is worth 62 cents today.”
But freshman Rep. James Frank, R-Wichita Falls, said he prefers looking at the motor vehicle sales tax as a way to fund more roads. Frank suggested he would vote against Darby’s bill, as did Rep. George Lavender, R-Texarkana.
It’s hard to feel sorry for Darby and the GOP. They’ve let the right wing take over their party and now we are all suffering, themselves included. And now that it’s obvious to most people that we need to spend money we do have, we can’t even do that.
Why can’t we have funding for transportation in Texas? Or public education? Or health care and Medicaid expansion? Or higher education? Or water? Or the many other things that we need in this state? The DMN’s Transportation Blog sums it up pretty well.
Transportation lobbyists say they have been counting votes on the bill and believe they have enough commitments of support. At the same time, there is the possibility that some of these “supporters” are privately telling Speaker Joe Straus that they don’t want to have to vote on a fee increase and would be grateful if the bill died in Calendars.
For the tea party, a fee increase is no different than a tax increase, and supporting one could be political suicide for some GOP members.
Many Republicans fear the wrath from the tea party right more than they value support from the business community, and Texas business has been nothing if not foursquare behind better funding of roads. Let the transportation system crumble under the stampede of new Texans, and the Texas miracle evaporates. [Emphasis added]
Yes the scorecard rules their world.
The discussion about road funding has ever so slowly moved from, we don’t need any new revenue, to how are we going to get new revenue. This HChron article tells how many options their are, Lawmakers vow not to kick funding can down the road.
Texas lawmakers have about three dozen possible ways to pay the increasing cost of improving roads and easing congestion for commuters and freight haulers.
While that may be true, they haven’t done anything about it in decades. Perry wants more debt and a tax shift.
Gov. Rick Perry said Friday that Texas should move quickly, before historically low interest rates – and construction costs – rise, to capitalize a revolving infrastructure fund using very long-term bonds. Perry also said he would like to see future increases in automobile sales tax receipts dedicated to road projects.
But as Kuff goes on to point out very well, no one has come up with anything better then raising and indexing the gas tax, Still arguing about road funding.
Ending diversions, most of which is funding for the Department of Public Safety, is a popular option, but as noted no one ever discusses how to fill the hole in general revenue that would leave. It now looks likely that money from the Rainy Day Fund will be used to start an infrastructure bank, but that’s one-time money and all this would really do is push more of the responsibility for transportation away from the state and to counties, which among other things would mean a lot more toll roads. Williams’ preferred solution is raising vehicle registration fees, which has support from the Texas Association of Business. I don’t necessarily oppose this, but I haven’t seen a comparison of how much revenue that would bring in versus how much a ten-cent increase in the gas tax would bring. I recognize that advances in fuel efficiency and the advent of hybrids and electric cars makes the gas tax a declining source over time, but it’s still the single biggest source of revenue for transportation, and it’s the only one that has any connection to how much one uses roads and highways. It’s also the case that a small increase in the gas tax plus indexing it to inflation of construction costs would wipe this problem out. Down the line, a transition to a vehicle miles traveled tax can deal with the issue of less revenue from better fuel efficiency. I know, I know, nobody likes raising taxes but now that we are finally admitting to the need for more revenue it just amazes me at how quickly the most obvious solution is dismissed. Can’t we at least talk about what it would look like to raise the gas tax so we can have a basis for comparison to all these other proposals? A more informed discussion, that’s all I’m asking for.
Raising the gas tax has always been the solution, Forget Toll Roads Let’s Raise The Gas Tax.
Ross Ramsey documents the new governing majority in the Texas House, The Three-Party System. He describes it this way.
Instead of establishment and populist Republicans banding together against the Democrats, the working coalition during this week’s budget debate combined the traditional Republicans and the Democrats against the populists.
Call it the anti tea party coalition. This is important because it’s this kind of a coalition that’s needed to get things like Sen. Tommy Williams (R-The Woodlands) Rainy Day Fund deal passed, Senate Sets Up Debate on Rainy Day Fund Spending.
Senate Finance Committee Chairman Tommy Williams, R-The Woodlands, laid out an ambitious plan to spend $6 billion from the state’s Rainy Day Fund on Thursday morning while also setting the stage for a serious debate in the remaining weeks of the session on whether to tap the fund for public education.
Williams’ proposal, called Senate Joint Resolution 1, would ask Texas voters to approve spending $3.5 billion on transportation projects and $2.5 billion on water projects. The comptroller’s office has projected the fund, fed largely by taxes on the state’s oil and gas production, will grow to $11.8 billion by the end of the next biennium.
Though the committee unanimously approved Williams’ resolution, senators’ remarks predict that the measure will launch a spirited debate on the Senate floor over funding for schools.
“We shouldn’t pit the need for water or highways against public education,” state Sen. John Whitmire, R-Houston, said. “We’re not a poor state by any means.”
Whitmire said he was voting to get the resolution out of committee as part of a “good-faith effort to deal with public ed on the floor.”
“I have told you and others repeatedly that at the appropriate time I would like to address public education funding,” Williams told Whitmire. “I think that appropriate time is soon to be at hand.”
It’s unlikely they’ll get tea party votes for this. Under normal circumstances the ultimate roadblock is Gov. Perry. But this plan is a joint resolution (SJR 1) and they do not require the governor’s signature. If it gets the required two-thirds vote in both chambers it will be on the ballot in November.
From Ben Wear, Legislative push for highway cash hitting roadblocks.
This was going to be the session when legislators began weaning the Texas Department of Transportation off its decade-long reliance on debt and found a substantial and sustainable source of money to build and repair roads.
Gov. Rick Perry called for taking $3.7 billion from the state’s $12 billion rainy day fund and putting it into water and transportation projects — he didn’t say how much for each. Texas Department of Transportation Executive Director Phil Wilson said that, to do the job right, he needs an additional $4 billion a year and $1.6 billion for oil country roads under stress from heavy trucks in the current shale oil boom.
But with the session in its final two months, few if any of a raft of bills introduced to come up with cash have moved out of committee, and most haven’t even gotten a hearing. Lawmakers and transportation lobbyists say the push for road money now is surviving mostly on hope.
Although gas tax revenue has failed to keep pace with either inflation or the state’s explosive growth since the early 1990s, TxDOT has been in a building boom over the past 10 years, its budget roughly doubling to the more than $20 million proposed for 2014-15.
But that surge was largely funded by three debt programs authorized by the Legislature, by toll roads with still more debt tied to them and by outsourcing some projects to private companies that then pocket most of the toll revenue. The total debt, Senate Transportation Committee Chairman Robert Nichols, R-Jacksonville, said Tuesday, has reached $23 billion.
Another way to say this is that since our state has not raised the gas tax in over 20 years we’ve been building new roads with debt and gimmicks. The bills are coming due and we still need to build new roads. But Perry and the wing nuts are in charge and still locked in their ideological box. Therefore tax cuts, no matter how needed and rationale they are, cannot be on the table.
Much of the state’s 20-cent-a-gallon gas tax is used to maintain the state’s 80,000-mile highway system, and most of the rest of the budget — supported by federal gas tax grants and other fee revenue — is devoted to paying off debt and paying contractors on construction already in progress. Without new funding, TxDOT leaders say, the agency will be unable to schedule additional construction projects after 2015.
There has been no shortage of ideas for ginning up more money. Among at least two dozen bills filed, the proposals include dedicating the state’s sales tax on vehicles, tires and automotive parts to the highway fund; using rainy day money to create a revolving transportation fund; increasing the state’s vehicle registration fee; repealing the constitutional requirement that 25 percent of gas tax money go to K-12 education; and stopping the “diversion” of as much as $1.5 billion a year in gas taxes to state needs other than transportation.
That last one is a particular priority, lobbyists said, of the amorphous but large tea party contingent in the House. Don’t talk about raising revenue, their litany goes, until properly directing that revenue to TxDOT. Doing so would require filling in that $1.5 billion hole in the state’s general fund to keep paying for the Texas Department of Public Safety and its troopers.
Bad roads go hand in hand with bad government. And that’s why our transportation problems are stalled in the slow lane and going nowhere fast.
Not surprisingly the corporate toll road is performing worse then expected, and the taxpayers will be on the hook for it. Light 130 traffic prompts credit review of toll debt.
The privately operated section of the Texas 130 tollway south of Mustang Ridge is attracting about half the predicted traffic, according to Moody’s Investor Service, prompting it to investigate downgrading credit ratings for more than $1.1 billion in debt attached to the toll road.
The SH 130 Concession Co., a partnership of Spanish tollway company Cintra and San Antonio-based Zachry Construction Corp., over the past several years built the $1.3 billion, 41-mile road with its own equity and debt — including $430 million borrowed from the federal government — and is operating it under a 50-year contract with the Texas Department of Transportation. Neither the company nor TxDOT has released traffic or revenue figures for the road, which opened Oct. 24 and began charging tolls on Nov. 11.
But Moody’s apparently has gleaned at least a rough idea of traffic volume and toll revenue on those four lanes in southern Travis, Caldwell and Guadalupe counties, and wasn’t impressed with the early results.
“While the operating history is very limited,” Moody’s analysts said in a five-page, March 21 credit opinion, “the magnitude of the shortfall from original projections warrants a review of the rating category.”
The report said that because of weak revenue, the concession company could exhaust one “liquidity” account by June, but has least an additional $30 million to draw from. Cintra’s parent is Ferrovial S.A., a Spanish corporation with toll roads worldwide that could potentially serve as a financial backstop for poor performance of this road.
Moody’s spokesman Eduardo Barker said the credit review would be complete in no more than 90 days.
Releasing notice of the review, Barker said, “indicates some concerns, and we’re taking a look to see if our concerns are real.”
TxDOT’s contract with the concession company lays out complex procedures to determine how much TxDOT would pay the concession company to take over the road in the event of a default or for any other reason. The Moody’s report doesn’t mention the possibility of default.
Chris Lippincott, a spokesman for the concession company, said it is meeting “contractual obligations to operate and maintain a world-class highway. We remain confident that the recently opened SH 130 … will benefit our investors and the people of Texas.”
Isn’t that beautiful if the corporation that built the tool road defaults, then TxDOT, aka the Texas taxpayer, will then have to pay the corporation for the road. Isn’t the free market wonderful?! Maybe Rep. Paul Workman’s idea isn’t all that bad after all.
As McBlogger points out transportation is getting short shrift this session. Not only is it stuck behind education and Medicaid as an issue but also water. Not that any of those are not important, but what is shows is that our GOP state elected leaders have been neglecting several really important issues for far too long.
But the other thing McBlogger points out is that now that they’ve created a bad situation, some of the supposed “fixes” are only likely to make things worse, Transportation… pissing into the wind.
While there’s so much going on with regard to education funding and Medicaid, transportation is receiving very little attention from the outside.
All three are extremely important… all three effect the economy is very real ways and those effects, for good or ill, will be felt now and in the decades to come. That being said, someone has to say something about transportation and two bills that’ll have pretty deleterious effects need to be defeated.
1) HB 3391 – This bill gives TXDOT and the RMA’s the ability to enter into PPPs from now until 2017. The impact of this could be massive as it would shift ever increasing numbers of roads to the same old failed PPP model. We have PPP roads in this state that have been open for 7 years that are still not producing a profit and may never. This is risky finance that leaves Texas taxpayers exposed to investment banks which, let’s be honest, don’t have a stellar track record at controlling risk. If you’d like to take action against this, please email the entire transportation committee here.
2) SB 1110 – This rather odious piece of legislation allows local property taxes to be diverted to toll road schemes. As if Texas property taxes aren’t already too high, this bit of responsibility dodging on the part of the Lege would put the burden on local officials and local taxpayers for toll roads that fail to live up to the irrational revenue expectations set for them. Democrats who voted for this bill include our own Senator Watson who, inexplicably, continues his practice of just voting for anything that will, ostensibly, get roads built regardless of the cost to his constituents.
These two pieces of legislation aim to achieve a goal of providing for roads and improvements the state desperately needs. However, they do so in a way that will cost Texas taxpayers far too much and leave them exposed to risk that is simply too much to bear. While TURF and others are fighting desperately to stop the diversions of transportation taxes, it’s become increasingly obvious that those diversions can’t be stopped because they provide funding to a number of needed programs.
McBlogger goes on to point out that while it’s not perfect there is a solution.
So, what’s the solution? Easy… Sen. Eltife’s bill to index the gas tax. While I’m not thrilled with the desire to rapidly pay off the bonds we’ve sold (since paying off that money reduces that which is available to build and grow the economy which would, in turn, increase tax revenue and allow the bonds to be paid off sooner anyway), if that’s the compromise that has to be made to get this done, then that’s the damn compromise.
Of course raising and indexing the gas tax has always been the best solution. (Here is EOW’s take on Eltife’s plan). There are several other ideas out there. Ending funding diversions and raising registration fees, or all of the above. The governor is endorsing an infrastructure bank and more debt. We need to be very careful with anything the governor is proposign with the work “bank” in it. It’s liable to be just another boondoggle, aka wealth creation for his donors. Heck there’s even a plan put forward to spend $3 billion to end tolls on Texas 130.
What all of this makes clear is that other then Sen. Eltife the GOP is not really interested in fixing our transportation funding issue. For all the talk of leadership and courage when it comes to taxes, almost all of the GOP doesn’t have any. They would rather throw bad ideas at the wall to see what’ll stick. They’re looking for politically safe positions that are won’t do near enough to fix our transportation funding problem.
Better late then never I guess. What state Sen. Kevin Eltife said yesterday many of us have been saying for years. Welcome aboard Senator, GOP state senator from East Texas promotes gas tax increase to fund transportation.
A Republican state senator is arguing forcefully for raising taxes to fund transportation, saying it would be more conservative to pay as you go with increased tax revenue than to go further into debt to complete road projects.
And Sen. Kevin Eltife of Tyler went a step further Monday during a panel discussion at the Texas Transportation Forum in Austin, adding that he’s not concerned about how such a stand might impact his re-election chances in typically anti-tax East Texas.
“It is what it is,” he said, earning loud applause from the crowd. “I was fine before I got this job. If they kick me out of office, I’ll be fine.”
Eltife’s unusual tactic – by Texas standards, at least – came as he discussed the state’s transportation funding challenges with three other state lawmakers: House Transportation Chairman Rep. Larry Phillips, R-Sherman; Sen. Chuy Hinojosa, D-McAllen; and Rep. Larry Gonzales, R-Round Rock.
But Eltife, chairman of the Senate Administration Committee, blazed his own path by declaring that it would’ve been more conservative to raise taxes 10 years ago than to go billions of dollars into debt. He added that the state is in a transportation crisis because “we have maxed out the credit card.”
“There are times when taxes are the conservative thing to do,” he said.
Eltife said he would add a dime to the state’s 20-cents-a-gallon gas tax — which hasn’t been raised since 1991 — and then index it to inflation. He said he would also look to dedicate sales tax revenue on auto repairs to the highway fund.
When moderator Rodger Jones, a Dallas Morning News editorial writer, joked that tea party voters would likely remember that idea, Eltife didn’t blink. He said he’s explained the transportation funding problem to some of his tea party constituents and that they said they would rather have taxes than even more debt.
Again, it’s great that Sen. Eltife is saying this, but his sudden outspokenness likely has more to do with business groups in Texas finally getting tired of the neglect. That has made it safe for some members of the Texas GOP to say nice things about taxes. That’s what’s driving this recent change of heart more than anything.
The neglect is really starting to show. Whether it’s education, health care, water or transportation it’s really starting to build up. And the it’s not just working and middle class Texans that are noticing. It may be hurting business owners and corporations, the true constituents of The Lege. And if that’s the case taxes may be raised, but not on businesses and corporations, that’s for sure.
The reality is it has no chance of happening with our current governor and the partisan make up of The Lege.
From Texas Weekly we find out that the man that at one time was a Deputy Campaign Manager for Michelle Bachman’s presidential campaign is now trying to get the gas tax and user fees raised in Texas to pay for roads. Road Warriors Want Better PR.
“Water” and “roads” were the big buzzwords leading up to this legislative session. State leaders from Gov. Rick Perry on down went on record touting the importance of finding funding for water infrastructure and highway projects.
One month in to the session, water is right on track. There is widespread agreement on tapping the Rainy Day Fund to create a revolving fund to implement the state’s water plan.
Meanwhile, transportation advocates are worried that road funding reform remains as stalled as ever. So much so that Texas Future, a transportation-focused group that launched late last year, began airing a TV ad in Austin this week.
Here’s the link to Texas Future. A constitutional amendment to raise taxes and fees, again probably not likely in this state right now.
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