State official criticizes CTRMA funding plan

The Central Texas Regional Mobility Authority has called its short-term gap financing on the next phase of toll projects innovative. At yesterday’s Texas Transportation Commission meeting, Commissioner Ted Houghton had another name for it: risky.

 

It is not necessarily the method of finance that bothered Houghton. Instead, Houghton was concerned about the covenants the CTRMA put on its projects: Specifically, that any excess revenue on a single toll project must be spent in that corridor.

 

In other words, each and every project must be financially viable. The profits of one project will not cover shortfalls on any other project. Or, as CTRMA Executive Director Mike Heiligenstein noted, no one project would be funded on the back of another.

 

“We don’t want one side of town or one area funding a project on some other area of town,” Heiligenstein said. “Nor do we want non-tolled facilities to be funded on the backs of the tolls being assessed. I think that’s a common concern throughout the state.”

 

Houghton had another description for such a provision: a poison pill.

 

This is why Houghton was concerned. The original minute order to develop the projects assumed TxDOT would do the initial consultant work on five projects: US 290 West/SH 71; US 183 South from Springdale to Patton; SH 45 Southwest from Loop 1 to FM 1626; US 290 East from east of US 183 to FM 973; and SH 71 East from west of Riverside to SH 130. An additional candidate project – Loop 1 northbound and southbound managed lanes from FM 734 to Cesar Chavez – was added.

 

That was April 2005. The goal was to determine whether toll projects, funded jointly or individually, were viable. Once CAMPO took its vote on toll roads, the Transportation Commission updated that minute order to negotiate with the CTRMA for the development of the toll projects, with CTRMA completing certain engineering and pre-construction work on the projects, now part of the CAMPO FY 2008-11 plan.

 

To gain the approval of the CAMPO board, however, required a number of conditions. One of the most important was the provision of equal effort-equal benefits. Those areas that contributed the most through tolls would reap the benefits. That works fine when a funding stream is guaranteed, but it is more difficult when a variety of financing measures are being cobbled together to underwrite a project.

 

Recent funding reductions at TXDOT put the initial consulting work on the Austin-area toll/managed lane projects in limbo. That led the CTRMA to seek a partner for short-term innovative financing. That financing will come through a contract with JP Morgan, which has agreed to hold long-term debt on the projects. The projected gap funding is $65 million, which will be backed with toll revenues from US 183A. JP Morgan has agreed to hold that debt long term – sometimes called “patient debt” – before final revenues pay off the initial funding.

 

Of that $65 million in short-term financing, about $25 million would go to engineering. The rest would be spent on utility relocation and strategic right of way. The consultant work within that total, at one time, was housed under the TxDOT Austin region’s consultant contracts, which were slashed during agency cuts.

 

The problem for TxDOT in this situation is that a minute order means the agency agrees to backstop that short-term financing if the initial consultant work by the CTRMA determines that the round of toll projects are not viable. The only project where a significant portion of that work had been completed is US 290 East.

 

Heiligenstein attempted to assure the commissioners that the CTRMA – especially in light of the relationship with JP Morgan – intended to create the strongest system possible with the strongest possible funding mechanism.

 

After so much talk about holding RMAs to market valuations – agreements to set the value and viability of projects between TxDOT and RMAs in advance – it would be disingenuous for TxDOT to forgo that step for the CTRMA’s projects, Houghton said. Houghton said TxDOT should not agree to hold the bag.

 

“Until we have a comprehensive agreement with our sister agencies – this one or other RMAs – I’m not willing to expend another nickel,” Houghton said. “It’s our fiduciary obligation, and that’s where our challenge is today.”

 

Phil Russell, who handles the agency’s innovative projects, noted that the agency had already entered into six projects and completed a portion of each. Asked to put a number to what the agency had spent to date, Russell could only estimate $15 million. 

 

Heiligenstein noted that the CTRMA projects would require a coordinated debt plan. Few toll roads project as well as SH 121 in North Texas, a project so viable that it stands on its own with limited debt financing and plenty of up-front funding.

 

TTC Executive Director Amadeo Saenz did note that at least four of the six projects were identified in TxDOT’s long-term plans for development. Whether the projects were developed as toll roads or free roads, TxDOT would likely end up completing them. Those roads were priorities for the region, which minimized the risk the state assumed.

 

At the final vote, Houghton was the lone vote against the minute order for the gap financing, on a vote of 4-1.