Texas commission sets difficult deadline for NTTA-RTC agreement on SH121, toll policy, handback date, payments

June 28, 2007
By Peter Samuel

The SH121 saga continues. It was not resolved today in favor of either NTTA or Cintra as had been expected. The Texas Transportation Commission voted a 60 day deadline for the North Texas Tollway Authority (NTTA) and the Dallas area Regional Transportation Council to reach a firm agreement on SH121, including enforcement provisions, toll rate policy, a project schedule, payment obligations, quantification of public benefits, and other matters.

This must include demonstration of the ability to go to financial close no less than 45 days later.

Ric Williamson chairman of the Commission laid down an ultimatum at the end of about two hours of talk saying that there have already been three efforts at reaching agreement. The NTTA proposal to date was a "bunch of promises" Williamson said, as compared to a "firm executable contract" of Cintra. If the RTC and NTTA can't do a deal within the deadline, then TTC will go with Cintra, the commission chairman suggested.

The commission took its lead today from Michael Morris, transportation director at the local council of governments and director of the Regional Transportation Council. Morris said that local officials would prefer to do a deal with NTTA over Cintra, but that this is conditional on NTTA and RTC getting detailed agreements on a range of issues.

Morris suggested deadlines.

NTTA chairman Paul Wageman paced angrily around, according to a person present at the meeting.

We watched a scratchy video of the meeting in which the sound track was intermittent.

Wageman at the podium sharply denounced the proposition that the NTTA had not produced a binding proposal. He then nervously explained that many aspects of an agreement and a financial close are outside NTTA control.

The NTTA chairman was clearly most unhappy with the outcome.

Williamson did refuse a request by RTC director Michael Morris that TxDOT officials be part of the negotiating team to help RTC. He said he wasn't going to allow TxDOT staff to be dragged through the dirt and vilified by critics. If the negotiations dragged out TxDOT officials would be blamed for sabotaging it, he said.

With TxDOT CDA experts standing aside from the process of reaching agreement will be difficult, and the Commission will not be invested in the result.

TxDOT issued a statement on behalf of the Commission afterward in which it said staff were were authorized to enter into a project agreement for SH121 once:
(1) RTC negotiates the major terms with NTTA and submits those to TxDOT
(2) quantification of public benefits
(3) NTTA is able to close within 45 days of the agreement

Major terms still to be negotiated include:
- the timing and amount of annual payments
- enforcement provisions
- agreement length

NTTA has never previously agreed to concession type provisions which the RTC and TTC have now laid down.

Normally NTTA, like other toll authorities assure lenders that there are no constraints on their ability to raise toll rates in case of a financial shortfall. Here the RTC is insisting on NTTA committing itself to toll caps of the kind to which Cintra would be held under a concession contract. NTTA would have to agree to a bding schedule for project delivery. And NTTA would not have control of SH121 in perpetuity but only for an agreed term after which it would revert to the state.

Michael Morris and TxDOT's Amadeo Saenz both said the competitive process of concessioning is producing huge value for the region. Morris said: "We have two people wanting to give is $6 billion or $7 billion for roads in the region. In all the argument we sometimes lose sight of that."

In a statement issued after the meeting NTTA chairman Paul Wagerman said they would work to reach a project agreeement with RTC and TxDOT: "Our promise to our NTTA customers, the citizens of north Texas, the RTC and the TTC is that the SH 121 project will be delivered on time, within budget and with the highest NTTA construction and safety standards. The NTTA is a part of the fabric of north Texas that has spurred the growth and development of this vibrant region for half a century. The action taken today enables us to play an even greater role in meeting the region's mobility needs."

Jose Lopez of the Cintra/JPMorgan group said in a statement: "As the commission noted, the NTTA proposal is incomplete and lacks a firm financial commitment. In contrast, with the Cintra/JPMorgan Fund proposal, contracts are in place, toll rates are capped, lending commitments are made, design work is complete, and we are ready to roll up our sleeves and get to work. What you get from us is a guarantee and a legally binding contract that is ready to deliver SH 121. The Cintra/JPMorgan Fund proposal provides a cost-effective, efficient and secure way to develop SH 121. As independent analyses from TxDOT and the Regional Transportation Council have shown, our proposal will deliver superior value for the Metroplex."

The vote for the highly conditioned support for NTTA was 4 to 1. Ted Houghton dissented. He said the state Commission could not abrogate its responsibilities by staying out of the issue.

Williamson the TTC chairman said in concluding remarks that it was deplorable that private sector groups were denounced as foreigners. He said that Texans owe a large debt of gratitude to the groups for participating in the com petition to build tollroads.

Michael Morris of RTC joined him saying if Dallas wants to be regarded as a world class city, it has to make clear that investors and people from all over the world are welcome. He said before the competitive process the region had almost no funding for urgently needed major projects.

A formal order to TxDOT from the Commission was issued after the meeting. It reads:

TEXAS TRANSPORTATION COMMISSION
COLLIN AND DENTON Counties MINUTE ORDER
Page 1 of2
DALLAS District
Transportation Code, 223.210(h) provides that the moratorium on
certain comprehensive development agreements imposed by that section
does not apply to a comprehensive development agreement entered into in
connection with the SH 121 project if before the Texas Transportation
Commission (commission) or the Texas Department of Transportation
(department) enters into a contract for the financing, construction, or
operation of the project with a private participant, an authority under
Chapter 366 was granted the ability to finance, construct, or operate,
as applicable, the portion of the toll project located within the
boundaries of the North Texas Tollway Authority (NTTA), and the
authority was granted a period of 60 days from March 26, 2007, to submit
a commitment to the metropolitan planning organization which is
determined to be equal to or greater than any other commitment submitted
prior to March 26, 2007.
Transportation Code, 223.21O(h) also provides that ifthe financial
value ofthe commitment submitted by the authority is determined to be
equal to or greater value than any other commitment submitted prior to
March 26, 2007, the commission shall allow the NTTA to develop the
project.
On March 26, 2007, the Chair of the Regional Transportation Council
(RTC), the metropolitan planning organization for the Dallas-Fort Worth
region, sent a letter to the chairmen of the commission and the NTTA
that in part asked the NTTA to determine if the NTTA Board wished to
submit a binding commitment for the SH 121 toll project. If so, the
submission would be due to the RTC no later than May 25, 2007.
In the March 26, 2007 letter, the Chair of the RTC indicated that any
binding commitment submitted by the NTTA would need to: (1) clearly
state what is "guaranteed" in its proposal; (2) specify and communicate
the risk that will be borne by users of the NTTA System due to (a) a
change in bond rating, (b) possible toll rate increases on other NTTA
facilities, and (c) the delayed development of committed projects; and
(3) describe any other toll projects which cannot be built by NTTA in a
timely fashion.
On May 18,2007, the NTTA submitted a public sector proposal to finance,
design, construct, operate, and maintain the SH 121 toll project to the
RTC. As requested in the RTC's March 26,2007 letter, the department
reviewed the NTTA submission and compared that submission with the
proposal submitted by Cintra Concesiones de Infraestructuras de
Transporte, S.A. (Cintra) in response to the department's request for
proposals. The RTC also contracted with PricewaterhouseCoopers to act as
independent financial advisor to the RTC for the purpose of assessing
the financial value of the Cintra proposal and the NTTA submission using
the criteria in Transportation Code, 223.21O(h).
On June 18,2007, the RTC passed a motion that the NTTA undertake the
development, design, construction, financing, operation, and maintenance
of the SH 121 toll project, and requested that the commission approve
the selection of the NTTA for the SH 121 toll project.
The NTTA submission did not include a formal commitment to execute a
pre-determined project agreement, as was required under the department's
request for proposals, or firm lending commitments. The NTTA has
indicated that their ability to achieve financial close within 60 days
from the date of the NTTA's selection is certain. However, under the
NTTA submission, commitments to finance the SH 121 toll project are
conditioned on the execution of a project agreement between the
department and the NTTA in a form acceptable to the underwriters and
lenders. Moreover, the summary of the review of the NTTA submission
prepared by RTC staff
TEXAS TRANSPORTATION COMMISSION
COLLIN AND DENTON Counties MINUTE ORDER
Page 2 of2
DALLAS District
indicates that the submission did not meet the RTC conditions set out
in the RTC's March 26, 2007 letter.
The NTTA proposes to finance the SH 121 toll project as part ofthe NTTA
System, with some project costs paid from revenue derived from other
parts ofthe system. The NTTA system is exposed ifproject costs are
higher, traffic and revenue is lower or service commencement is delayed,
or the rate of inflation by which toll rates may be escalated is lower
than current estimates. The negative impact ofthese risks could be borne
by users in the form of higher system tolls and by local communities if
previously committed projects are delayed or cannot be constructed.
IT IS THEREFORE ORDERED by the commission that the RTC recommendation
that the NTTA undertake the development, design, construction,
financing, operation, and maintenance of the SH 121 toll project is
approved.
IT IS FURTHER ORDERED that the department is authorized to enter into a
project agreement with the NTTA if: (I) within 60 days from the date of
this order, RTC staff has negotiated with the NTTA the major terms
of the project agreement and has submitted those terms to the department, and a
quantification ofpublic benefits anticipated to be derived from the
NTTA's development, design, construction, financing, operation, and
maintenance of the SH 121 toll project has been agreed to by the RTC;
and (2) the NTTA is able to achieve financial close, including payment
ofthe agreed upfront payment amount, concurrently with or no later than
45 days after the execution and delivery of the project agreement. In
the event financial close occurs after the execution and delivery of the
project agreement, the agreement shall include a provision requiring
termination ofthe agreement if financial close, including payment ofthe
agreed upfront payment amount, is not achieved by the end ofthe 45 days
allowed under this order.
IT IS FURTHER ORDERED that the major terms to be negotiated by the RTC
staff shall include: (I) the timing and amount of the annual payments;
(2) adherence by the NTTA with the RTC's toll rate policy; (3)
enforcement provisions and remedies for the NTTA's failure to comply
with the toll rate policy, project schedule, payment obligations, and
other commitments; and (4) the term of the agreement.
ExecutiveDirector


TOLLROADSnews 2007-06-28


Leave a comment: