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Travis County officials concerned over pass-through financing agreements

Wednesday, January 18, 2012 by Michael Kanin

Travis County officials expressed concern Tuesday over a pass-through financing agreement with the Texas Department of Transportation (TxDOT) for road construction along FM1626 and FM969. Their worries center on contract language that could hamstring the county fiscally, while giving initial control over project change orders to the state transportation agency.

 

All told, the projects will cost the county nearly $49 million, including financing costs. The state is expected to cover roughly $13.7 million. With the money, the county will widen and reconstruct each road, also adding sidewalks.

 

County Transportation and Natural Resources Director Steve Manilla offered the court a change in wording that he felt would address some of their concerns. He added that he felt that the county would be able to complete the construction without harming itself.

 

Except for Pct. 4 Commission Margaret Gómez, commissioners agreed that the project was worth the risks. “Unfortunately, I think (it’s) worth it because of actions in the Texas Legislature,” said Pct. 2 Commissioner Sarah Eckhardt.

 

TxDOT is notoriously strapped for cash, a situation that dramatically limits the agency’s ability to cover needed repair work on roads maintained by the state. Pass-through financing is a method for road construction that enables a county to pay for the work upfront, and get reimbursed for some of the expense at a later date.

 

Travis County’s most recent set of pass-through financing applications featured a request for significantly less money than the region has previously requested. Manilla told the court that this was necessary in order to stay competitive with other jurisdictions. When the broader question came before the court in the form of project applications this past February, Eckhardt and Gómez each voted against it. “They’re asking too much,” Eckhardt said at the time. “They’re asking us to beg them to pick up their responsibility.” (See In Fact Daily, Feb 28, 2011).

 

The county will have to issue a type of bond to cover the costs of the two projects. The financing instrument is not subject to voter approval.

 

According to a Jan. 9 memo, Travis’ planning and budget office expressed concern about the pass-through agreement as early as Nov. 3. Their issues included the fact that the county would be limited in its ability to spend down any debt, should the project produce cost savings; the state will be able to initiate change orders with only a 10-day review period for the county; that reimbursements won’t begin until “the projects are ‘substantially’ completed”; that when they come, the reimbursements will be limited to 110 percent of construction costs – an arrangement that leaves no room for contingency costs; and that there is no cap to the amount of financial responsibility that the county has for the project.

 

County Auditor Susan Spataro also offered the court her concerns. Spataro is worried about a specific situation that can present itself when the court arranges road construction via pass-through financing. Though the county will pay for much of the project, the work it does remains the property of the state.

 

“When, in fact, the county takes on a debt and we do not get an asset, then on our books the fund balance shrinks,” she said. “When we financed (State Highways) 130 and 45…it made the county look like it was insolvent because we forwarded the money and we didn’t get the land.

 

“Anytime we do that there is an impact on the county’s books,” she continued. “It doesn’t mean you shouldn’t do it, but just so you understand.”

 

The SH 130 and SH 45 projects were also completed with pass-through financing.

 

Gómez held firm in her opposition. She provided the only no vote as the measure passed 4-1.

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