Bankrupt San Diego tollway to receive another taxpayer bailout

Link to article here.

A little background: the taxpayers subsidized this privatized toll road (it received the first federal TIFIA loan) for which the taxpayers lost nearly $80 million when it went bankrupt. Now local taxpayers are bailing it out AGAIN by buying it back from private investors, the second such example in California (the first was SR 91 for which the taxpayers bailed that one out seven years later -- for $207 million -- at nearly twice what it cost the private, French company to build it -- $130 million). Yet governments across the globe continue to preach public private partnerships (PPPs) and road privatization as the silver bullet to all transportation funding woes (let's not forget, the politicians are the ones who got us into the woes in the first place by habitually raiding our gas taxes for non-road uses). Here's a few more articles about the South Bay Expressway (here and here), including this scathing editorial. Road privatization is an idea whose time has come to an END. PPPs are public money for private profits, period. The taxpayers can no longer afford to pick up the pieces from this grand, unsustainable experiment.

San Diego Association of Govs likely to buy South Bay Expressway

Toll Road News
Posted on Sat, 2011-07-30 00:59

 The San Diego Association of Governments (SANDAG) is buying the South Bay Expressway from the post-bankruptcy South Bay Expressway LLC for $345m, about two-thirds what it cost to build.

The SANDAG board agreed in principle to the purchase Friday but will discuss financing of the purchase at their next meeting scheduled for August 26. There have to be public hearings and a final decision by about November.

A statement today from SANDAG says: "The Board made the agreement contingent on completing due diligence and conducting a public process, during which the details of the purchase and financing options will be presented and voted upon by the Board."

SANDAG chairman Jerome Stocks is quoted as saying the privately operated pike is "good value" at $345m.

He wants to reduce tolls which presently are $3.85 by transponder and $4.00 cash for traveling the 10 miles, 16km length of the road which runs north-south across the southeast fringe of the San Diego metro area.

The South Bay Expressway (SBX) opened in November 2007 just as the economy was in sharp decline due to the burst of the housing bubble and broader financial crisis. Foreclosures were especially prevalent on either side of the SBX, construction stopped, unemployment shot up, and immigration largely ended.

An important hope in earlier years had been that burgeoning trade with Mexico would generate major truck revenues since the toll road linked to a new border crossing at Otay Mesa. There was disappointment there too.

Traffic is less than 30,000 vehicles a day, almost a half of that expected.

Macquarie which bought into the road shortly before the financial collapse put the tollroad into bankruptcy March 23 2010. It had written of any equity in the pike over a year before. After lenders had taken 'haircuts' in the Chapter 11 proceedings, the holding company South Bay Expressway LLC emerged from bankruptcy April 14 2011.

Operations have continued pretty much as normal right through the bankruptcy with toll revenues more than covering operating costs even at the worst time.

The toll concession under which the road was financed was for 35 years from opening. That means there are 31 years left, after which the road passes to California Department of Transportation.

The project goes back to a 1991 concession agreement with California Transportation Ventures (CTV), largely a Parsons Brinckerhoff company. CTV had great difficulty gaining approvals and reaching agreement with locals on the route and design of the road. After construction started there were bad relations with the builder Fluor.

Fluor sued CTV's successor SBX for hundreds of millions in claimed cost overruns.

see SANDAG statement:

SBX website:

TOLLROADSnews 2011-07-29

Taxpayers bailout private toll roads

Link to article here.

We've long warned that the private toll operators "out-lawyer" our transportation agencies and write these 1,000 page public private partnership contracts in such a way as to ensure they NEVER lose money on the deal whether it's through non-compete clauses that penalize or prohibit free road expansion or through taxpayer loans and subsidies, it virtually assures taxpayer bailouts, as we're seeing around the globe.

Taxpayers' bill for toll roads

Irish Times

Mon, Aug 01, 2011

Sir, – The National Roads Authority is paying almost €500,000 a month to the private operators of the M3 motorway and the N18 Limerick Tunnel because traffic has fallen short of anticipated levels (Home News, July 20th).

We have been landed in this mess by the inclusion of assumptions that traffic will grow by 5 per cent and 6 per cent a year in road-building contracts. The Limerick tunnel contract runs until 2035, and the M3 contract continues until an astonishing 2052.

Actual traffic on the M3 is 22 per cent – almost 5,000 vehicles a day – below the level at which penalty payments must be made. And traffic using the Limerick tunnel is 26 per cent (3,500 vehicles) below the penalty fee level.

In daily terms, taxpayers are paying a bill of around €16,000 every 24 hours for car and truck journeys that don’t exist. The outlay here could retain more than 250 education and healthcare trainees.

Catherine Ketch (July 25th) is quite correct in identifying the N22 Ballyvourney motorway as another example of excess scale and overspecification in road planning. The NRA continues to assume traffic will grow and grow and grow. It clings to this mythology in an attempt to justify four-lane roads not only in West Cork but also in Monaghan between Clontribret and Moybridge (N2), between Tuam and Letterkenny (N17), between Ashbourne and Ardee (N2) and across south Wexford (N25).

The contract for the proposed 600,000-tonne Poolbeg mass-burn incinerator is tied to a similar growth-based mentality, and a penalty clause which is set to cost more than €30,000 a day, threatening to put the toll road fiasco firmly in the shade.

Such penalty clauses are based on a perplexing notion held by some who act on behalf of taxpayers: if the investor wins, he wins, but if he loses, the State will see him right because somehow the State has decided it will put taxpayers’ money behind the mirage of infinite growth.

If those who do not learn from the mistakes of history are doomed to repeat them, must the people of Ireland forever pay for them?

Yours etc,


Macro Building,

Green St,

Dublin 7.

© 2011 The Irish Times

Toll giant, Macquarie, poses 'systemic risk' to global banks

Link to article here.

Australia's Macquarie may face big-bank capital charge: Moody's

REUTERS - Mon Jul 25, 2011 10:29pm EDT

(This article was first published on Thomson Reuters Accelus, a leading provider of connected risk and compliance information and online solutions to the global financial services community.

By Nathan Lynch and Wietske Blees

SYDNEY, July 26 (Thomson Reuters Accelus) - Macquarie Group could be included as one of 28 systemically important global banks that will have to hold additional capital of between 1 and 1.5 per cent when the so-called "G-SIB" rules take effect, a leading rating agency has warned.

A report issued by Moody's on Monday listed Macquarie bank in 21st place in a list of global banks that would pose the greatest systemic risk in the event of a collapse.

The report said Macquarie had been given a score of 11 on a global scale of interconnectedness, complexity and size. The list was topped by Deutsche Bank (DBKGn.DE) with a score of 23.3.

In terms of its level of systemic risk, Macquarie was grouped together with banks such as Unicredit , Royal Bank of Canada , Mizuho Financial and Santander .

Moody's said it had selected a sample of 28 banks based on the size of their capital markets activities, given that the Basel Committee's methodology places a significant weight on intra-financial activities.

The Moody's analysis ranked the 28 banks on three main metrics: reliance on wholesale funding, which indicates interconnectedness; the holdings of illiquid level 3 financial intermediary trading assets (as a portion of total assets), which indicates complexity; and overall size, based on total assets as a portion of the combined total assets in the sample.

"The Basel Committee proposes similar metrics that capture wholesale funding, level 3 assets and size. The three metrics discussed here are only a subset of the metrics we use," Moody's said.

"Further, differences in balance sheets and accounting limit the comparability of banks. Despite these limitations, high scores on each of the three metrics indicate a bank's systemic importance."

Last week, the Basel Committee on Banking Supervision published a proposed methodology to identify global systemically important banks (G-SIBs), which will be subject to the additional capital surcharge.

According to the proposals, G-SIBs have five common qualities: size, interconnectedness, lack of substitutability, global cross-jurisdictional activity and complexity. The Basel Committee said it had identified 28 banks that would qualify as G-SIBs, but it stopped short of naming them.

Moody's, which used the Basel Committee criteria in an attempt to identify the banks in question, said Macquarie had scored highly in terms of its reliance on wholesale funding and complexity but was the smallest bank in the list.

Australia's four major banks were not included in the comparison exercise as Moody's does not believe them to pose a significant systemic risk.

(Additional reporting by Huw Jones of Reuters News in LONDON)

( This email address is being protected from spambots. You need JavaScript enabled to view it. and This email address is being protected from spambots. You need JavaScript enabled to view it.))

(This article was first published by the Compliance Complete service of Thomson Reuters Accelus. Compliance Complete (here) provides a single source for regulatory news, analysis, rules and developments, with global coverage of more than 230 regulators and exchanges.)

Cintra does damage control upon fears of default

Link to article here.

July 21, 2011

Cintra responds in more detail about the financial shape of the Indiana Toll Road, North Tarrant Express, LBJ Express and other highway/toll projects

By Gordon Dickson
Ft. Worth Star Telegram

 In recent weeks, I spent some time researching and reporting on a story that ran in Sunday's Star-Telegram about the developer of the North Tarrant Express project encountering revenue problems on a similar toll project in Indiana. During that time, I repeatedly sought comment from the developer, and ultimately I got a response, although it was a rather brief email.

This afternoon, the developer, Cintra, posted additional thoughts on the topic in a news release, which I also received by email. The release includes quite a bit of new information about Cintra's financing of the projects, and its comfort level with their soundness. Since it's too late to get these thoughts into my story, I thought I'd at least post the press release here, so that readers will have access to the supplemental information.

This press release is from the Cintra U.S. headquarters in Austin. Cintra is a Spanish company  but now has significant operations in the United States.

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Listed below are links to weblogs that reference Cintra responds in more detail about the financial shape of the Indiana Toll Road, North Tarrant Express, LBJ Express and other highway/toll projects:

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Cintra spokesperson sings sunshine to Seguin about its privatized SH 130

Link to article here.

Cintra-Zachry spokesperson, Victoria Miller, is already misleading the public. She said TxDOT sets the toll rate when that's not true. Cintra sets the toll rate based on an approved formula that can be highly manipulated based on what Cintra says its operating costs are. Then Miller tried to act concerned appearing to agree that I-10 needs to be widened, when a non-compete agreement signed by TxDOT restricts and can even prohibit the expansion of free roads surrounding Cintra's tollway. "Competing" free roads threaten Cintra's guaranteed profits. This is what Rick Perry has wrought upon the state of Texas....foreign-owned toll roads where the private investors are granted government-sanctioned monopolies over our public roads.

A savvy member of the audience brought out one of the key issues surrounding the SH 130 tollway boondoggle: why would trucks want to incur the cost of paying expensive tolls to take a road around Austin that's a much longer route? Her answer makes no sense. Current traffic patterns on the first four segments and basic economics tell us truckers WILL NOT take SH 130, despite TxDOT lowering the truck toll rate to try and incentivize truckers to take its failing toll road that's running with red ink. When the Cintra segments 5 & 6 open, we can expect the same.

Official answers questions about SH 130
By Bob Thaxton
Seguin Gazette
July 7, 2011

SEGUIN — A wide variety of questions about State Highway 130 were answered Wednesday during the monthly membership meeting and luncheon hosted by the Seguin Area Chamber of Commerce at the Seguin-Guadalupe County Coliseum.

Guest speaker for the luncheon was Victoria Miller, director of corporate affairs and public information coordinator for the SH 130 Concession Company.

A joint venture of Cintra, a multinational company based in Spain and Zachry American Infrastructure, headquartered in San Antonio, the SH 130 Concession Company is building segments 5 and 6, the southernmost sections of the 90-mile toll highway running from Interstate 35 near Georgetown to Interstate 10 east of Seguin.

“We’re hoping that the road will be done by the end of 2012,” Miller said.

After delivering a brief description of the project, she opened the proceedings to questions from the audience.

Several questions concerned the cost of traveling on the toll highway.
“We don’t set the tolls; TxDOT does,” Miller said.

The TxDOT (Texas Department of Transportation) website includes a calculator that will compute the toll for a trip along the highway which now has been completed from Georgetown to Lockhart.

The cost to travel from Georgetown to Lockhart totals $5.40 for a vehicle bearing a TxTAG and $7.20 without the tag.

Miller had noted earlier that vehicles without TxTAGs are sent bills by mail which include a processing fee in addition to the toll. Obtaining a TxTAG involves making a deposit into an account from which tolls are deducted electronically, and there are no processing fees.

There are no toll plazas or booths for collection of coins and currency along SH 130.

Asked why a trucker would want to incur the extra expense of tolls on a highway that involves a longer route, Miller said paying tolls will be less expensive than the cost of sitting in congested traffic on Interstate 35.

“There’s no good reason to keep the trucks on I-35,” Miller said. “The trucks, the weight that they have, they’re tearing up the road.” She added that the accident rate for trucks on I-35 is “staggering.”

“When a truck has a wreck with a car, the car doesn’t win,” Miller said.

Another questioner asked about traffic congestion on Interstate 10 after SH 130 has been completed.

“I-10 does need to be widened,” Miller said. “We are concerned about it.”

The SH 130 Concession Company has a 50-year contract for financing, design, construction, operation and maintenance of the highway. Miller pointed out that tolls will be reinvested in the maintenance of SH 130.

“Maintaining it is important,” Miller said. “We didn’t do a very good job of explaining to the public how much it costs to maintain a road.”

Builder of TX toll roads may default in Indiana

Link to article here.

Builder of Texas roads may default on Indiana project

Posted Saturday, Jul. 16, 2011

By Gordon Dickson

This email address is being protected from spambots. You need JavaScript enabled to view it.

Texas officials are watching with concern as reports surface about a possible default on a $3.8 billion Indiana toll road project being built by the developer that is financing major highway and toll projects in Dallas-Fort Worth, Austin and San Antonio.

Cintra, the Spain-based company that leads a team operating the Indiana Toll Road, has used up most of its rainy-day fun and is running out of money to pay debt. The shortfall is the result of lower traffic -- and lower toll revenue -- than originally forecast, according to financial news reports.

Cintra and its partners are also building the $2.1 billion North Tarrant Express, which involves the reconstruction of Loop 820 and Texas 121/183 in Northeast Tarrant County. Cintra is also the lead partner in the LBJ Express, which includes the expansion of Interstate 635 in Dallas.

The projects include both toll and free lanes.
The company is also lead partner in two segments of the Texas 130 toll road project between Austin and San Antonio.

Collectively, that's about $5 billion worth of road work in Texas, much of it financially structured similarly to the Indiana project -- using tolls to pay off debt over many years.

Cintra acknowledged using a rainy-day fund to pay debt for the Indiana project but disputes reports that it may not make required payments.

"The Indiana Toll Road is not in default, nor is default expected," Patrick Rhode, Cintra U.S. vice president for corporate affairs, said in an e-mail.

"The performance of one project, even in the unlikely case of a default in its debt obligations, has no influence whatsoever in the performance or ability to perform obligations of the same investors in other projects."

While nothing indicates that the Texas projects are at risk, transportation officials are privately expressing concern about whether Cintra and other developers will complete the work, considered an indispensable part of Texas' plan to handle population and economic growth over the next half-century.

Bill Meadows, a Texas Transportation Commission member, has asked for an analysis of the state's 52-year contracts with Cintra and its partners -- NTE Mobility Partners on the North Tarrant Express project -- as it relates to default.

With a default, the project could return to the state, which means that taxpayers and motorists could be left with an unfinished road, according to a Star-Telegram review of the state's contract with the North Tarrant Express developer. If no other developer could be found, public money would be needed to complete whatever portion of the 52-year project wasn't finished.

"It's a poignant reminder of the importance of the contract being constructed properly, because this is what can happen," said Meadows, a Fort Worth businessman and advocate of private road development. "It's important for people to know that our agreements will certainly anticipate that. The people of Texas' interests will be protected."

Rainy-day fund

Cintra and its partner, Australia-based Macquarie, leased the Indiana Toll Road in 2006. The team, ITR Concession Co., paid the state $3.8 billion for the right to collect tolls for 75 years.

In May, a report in the financial publication Debtwire said that the companies had used up about two-thirds of a $150 million interest reserve account set up in 2006 and that the account could be drained by year's end. The account is meant to ensure that the developer can pay bills even when revenue is down, and it must be maintained to keep the group's $4.1 billion in loans in good standing.

Royal Bank of Scotland, the lender, has assigned the project to its workout group to see whether the problem can be resolved, Debtwire reported.

The revenue shortage comes after Cintra and its partner raised tolls dramatically on the road, which stretches 157 miles from Illinois to Ohio.

"The reserve fund was designed to cover financial gaps that occur over long periods of operations, and it is being utilized as anticipated. We continue to meet all financial considerations, and we look forward to providing safe, reliable transportation services on the ITR for motorists now and in the future," Rhode said in the e-mail to the Star-Telegram.

In Indiana, default could mean that the toll road -- which is more than 50 years old -- would simply return to the state. Indiana taxpayers would pocket the $3.8 billion concession fee originally paid by Cintra and Macquarie.

Cintra's contracts in Texas involve roads being built and scheduled to be maintained and expanded numerous times over the next 52 years as the region grows. The contract for North Tarrant Express gives the company the power to raise tolls to pay debt, with the expectation that higher tolls will reduce traffic. A default here could leave residents with an unfinished road and a bill that taxpayers would have to cover if another developer didn't take over.

The current construction on the North Tarrant Express -- the makeover of lanes on 820 and 121/183 and the addition of two toll lanes in each direction -- is expected to be completed in 2015. Future phases, however, including the proposed addition of lanes on Interstate 35W north of downtown Fort Worth, could cost $5.7 billion, according to preliminary estimates.

Given the state's limited highway revenue and with no increases in the motor fuels tax or vehicle registration fees expected anytime soon, if the North Tarrant Express developer defaulted and were removed from the project, the state probably wouldn't complete the work unless it issued additional debt.

What the contract says

For the North Tarrant Express, construction is backed by a $250 million performance bond in case a developer defaults before the road opens, said Kelli Petras, Transportation Department spokeswoman.

Once the road opens, the main protection against financial default is a $40 million debt service reserve fund, which Cintra and its partners agreed to set up, the consortium's contract with the state shows. Cintra's partners in the North Tarrant Express project include Meridiam Infrastructure of Luxembourg and the Dallas Police and Fire Pension System.

The debt service money comes from the developers' own private equity as well as an estimated $400 million pool of funds from the issuance of private-activity bonds.

The purpose of the debt service reserve fund is to give lenders comfort that bills will be paid -- at least for about a year -- in case of financial problems, Petras said. An additional $20 million is set aside for a major maintenance reserve fund to ensure that money is on hand for about 10 years' worth of repair and upkeep, according to the contract.

The North Tarrant Express project includes $570 million in public funds from the state, but none of that money can be used for either rainy-day fund, Petras said. Of the state's commitment, $70.6 million has been paid out for ongoing construction, and $32.5 million is being paid as workers cordon off shoulders, close frontage roads and remove thousands of tons of dirt to make way for new lanes.

Default could occur for various reasons, including failure to pay bills or meet construction deadlines, a bankruptcy filing or an increase in tolls beyond permissible levels. A noncompliance point system grades each violation for seriousness, and the Transportation Department can build a paper trail and determine over time -- typically 30 to 120 days -- whether the developer has persistently defaulted on its agreement or failed to cure any violations.

If the developer is found to be in persistent default, the contract lets the Transportation Department take over operations of North Tarrant Express with no obligation to pay the developer's debts. The department could use the toll revenue, bond programs or state highway tax revenue to complete the project, Petras said.

Risk vs. reward

The idea of leasing American highways, bridges and toll roads to private developers has been a hot-button issue since it was proposed about a decade ago. But it's a risk that officials in Texas and many other states are willing to take.

"States are under pressure because they need the money," said Robert Puentes, a senior fellow at the Brookings Institution in Washington. "It's probably the wrong reason to do one of those deals, but it's the reality. There just may be a crisis moment when they start doing this because they need to plug gaps in their budgets."

Texas, Virginia, Michigan, Colorado and Oregon are among states learning as they go when it comes to structuring contracts with developers, Puentes said. The projects are known as comprehensive development agreements in Texas and public-private partnerships in other states.

Supporters of comprehensive development agreements say that even in case of a default, Texas is getting a bargain on projects such as the North Tarrant Express. The initial $2.1 billion in construction includes only $570 million in state highway funds. The rest comes from an estimated $600 million federal transportation infrastructure loan, bond revenue, and private equity arranged by Cintra and its partners.

Gov. Rick Perry and others believe that the reward outweighs the risk that something could go wrong during the 52-year contract, a longtime adviser said.

"We tried not to micromanage it, but we definitely big-pictured it," said Kris Heckmann, who was a policy adviser for Perry for nine years before co-founding a lobbying and communications firm in Austin. Perry "would just tell them to keep the important principles in mind. Make sure the reward and risk balance out. Don't let us get taken advantage of.

"TxDOT, to their credit, has learned a lot in the past four years," Heckmann said. "It's all about risk and reward. Let's say they've built half the project and go into default. It wouldn't be a disaster for the state, if the state gets the project back."

Gordon Dickson, 817-390-7796

Privatized Indiana Toll Road in trouble

Link to article here.

Best line of this story -- "The bottom line: A toll road held up as an example of public-private partnerships shows no signs of breaking even for its conglomerate."

State Budgets July 07, 2011, 5:30 PM EDT

The Public-Private Indiana Toll Road Is in Trouble

The problems facing the nation’s largest public-private road venture show how difficult it can be to apply business principles to sprawling public projects

By Carol Wolf

Eleven million trucks. That’s how many 18-wheelers needed to rumble across northern Indiana in 2010 for the state’s 157-mile toll road to break even. Unfortunately, only about half that many did and the road came up $209 million short. This sounds like the beginning of yet another story about recession-ravaged states bleeding cash. And it is, sort of. The twist is that the Indiana Toll Road is managed not by the state but by a group of corporate investors, part of a public-private partnership experiment intended to show how businesses can help government run more efficiently and save taxpayers money—all while turning a profit.

President Barack Obama and politicians from both parties have held up such private sector alliances as a model for the future, as cities and states find it increasingly difficult to shoulder the enormous cost of building and maintaining roads and bridges. California, Illinois, Michigan, Kentucky, and Georgia are all courting investors, hoping to strike deals in which corporations will assume some of the expense and risk in exchange for a share in the profits. This moneyloser in Indiana shows how difficult it can be to apply business principles to sprawling public projects.

Now five years old, the Indiana deal has yet to turn a profit, or break even. Two overseas companies—Cintra Concesiones de Infraestructuras de Transporte, a unit of Madrid-based Ferrovial, and Macquarie Infrastructure Partners, an investment fund managed by Macquarie Group (MQG) of Sydney, won the right to run the road with a daring $3.8 billion bid—$1 billion more than the next-highest offer. The companies each owned a 50 percent stake of the project, which was backed by several overseas banks. The group then attracted other investors who bought pieces of the deal.

It turned out to be a bargain for the taxpayers of Indiana. The state received the upfront payment and has avoided more than $100 million a year in operating costs. “The state got a great deal,” says Jane Jankowski, a spokeswoman for Indiana Republican Governor Mitch Daniels. “The lease agreement contains numerous protections for the taxpayer and travelers and ensures the continued successful operation of the road.”

The private investors haven’t made out so well. Had the road been profitable, they stood to make millions per year over the life of the 75-year project. As it is, they have not been able to get past the debt they incurred winning the bid. They have met their annual debt payments only by borrowing money and may default before loans mature in 2015, according to disclosure documents from Macquarie Atlas Roads, one of the investors. The project’s 2010 prospectus said that revenue from the highway is “expected to remain insufficient to cover debt service obligations over the medium term.” The document cautions that “any default under the loan documents may lead to lender actions which may include foreclosure of the project assets or bankruptcy.” Even Governor Daniels, who had enthusiastically backed the venture, recently said that the foreign investors had overpaid.

In an e-mail, Macquarie spokeswoman Paula Chirhart said the prospectus was prepared in 2009 during the global financial crisis and “was never stated as a forecast or an expectation.” She added that “we expect the Indiana Toll Road to continue to meet its debt service payments as they fall due.” Patrick Rhode, a Cintra spokesman, said in an e-mail that more vehicles are using the Indiana road as the economy recovers. A reserve account was created to cover financial gaps that occur over long periods of time, he said. “We do not expect a default.”

Even so, the poor results could dampen enthusiasm for similar projects elsewhere. In Ohio, which faces a budget shortfall of as much as $8 billion over two years, lawmakers are considering a bill that would give Republican Governor John Kasich the authority to seek a sale or lease of the Ohio Turnpike. Kasich has optimistically suggested the road might be worth $3 billion. Given the way things are going next door, he may have a hard time finding takers willing to plunk down that kind of cash.

The bottom line: A toll road held up as an example of public-private partnerships shows no signs of breaking even for its conglomerate.

Wolf is a reporter for Bloomberg News.

TxDOT to consider public-private partnership for Grand Parkway

Link to article here.

TxDOT to consider public-private partnership for Grand Parkway

 By Marie Leonard    Friday,

Community Impact Newspaper

08 July 2011

HOUSTON — Texas Department of Transportation officials are in the early stages of considering a public-private partnership to develop portions of the Grand Parkway, Houston’s third outer loop.

TxDOT stopped accepting responses July 6 for a request for information about how the state agency could develop the parkway with a public-private partnership.

When state legislators passed HB 2255 this spring, it gave TxDOT the authority to investigate what a public-private partnership could mean for the Grand Parkway. A public-private partnership is a means by which a public agency, like TxDOT, can partner with the private sector to deliver a project.

“This legislation gives us the authority to look at how we can [develop the Grand Parkway] in a partnership where there are shared risks and gains in terms of being able to deliver the project in an efficient timeframe that preserves the interest of the state,” said Raquelle Lewis, TxDOT spokesperson.
TxDOT issued the request for information June 10 in an effort to gather potential strategies from partners interested in the project, Lewis said.

“If you look at it from the big-picture perspective, TxDOT has been looking at the option of a public-private partnership for many years,” she said. “The biggest catalyst has to do with the lack of funding and the need to look at an array of solutions to bring forth projects that are critically needed in terms of transportation.”

A public-private partnership could include working together with a company in terms of a number of steps, relative to design, construction, maintenance or operation of a project, Lewis said.

“It could be a combination of any of those,” she said.  “That’s what we are exploring at this time.”

The public-private partnership could affect Grand Parkway segments E, F-1, F-2, G, H and I-1. Segment E runs from IH 10 to Hwy. 290. Segment F-1 runs from Hwy. 290 to Hwy. 249, north of Cy-Fair, and Segment F-2 will connect Hwy. 249 to IH 45, south of Tomball.

Although funding is different for each segment, the responses from the request for information could focus on how the state constructs segments yet to be built, like F-1 and F-2, or how sections are maintained after construction, Lewis said.

If TxDOT decides to enter into a public-private partnership to develop the Grand Parkway, an agreement will most likely be awarded next summer, according to a timeline on the request for information.

According to the request for information timeline on TxDOT’s website, the following dates could signify how the agency will move forward investigating a public-private partnership:

-One-on-one meetings: July 2011

-Request for qualifications issued: August 2011

-Proposer submission of qualification statements in response to RFQ: October 2011

-Proposers eligible to submit detailed proposals: November 2011

-Draft RFP to short-listed proposers: November 2011

-One-on-one meetings with short-listed proposers: December 2011

-Final RFP issued to short-listed proposers: January 2012

-Proposer submission in response to RFP: May 2012

House Republican wants to sell our roads to private corporations

Privatization & debt: The flaws in Mica’s proposal
By Terri Hall
July 8, 2011

It comes as no surprise that Congressman John Mica (R - FL), Chairman of the U.S. House Transportation and Infrastructure Committee, wants to privatize transit and enter into yet more DEBT to fund roads. What is surprising is his proposal to expand the federal TIFIA loan program by nearly 10 times while also making this claim in the opening statement of his just released proposal for the new federal highway re-authorization bill: “They (the American people) want Washington to live within its means and make the difficult but necessary spending decisions that all Americans are forced to make for their own households. They want reform.”

How is expanding its borrow-and-spend debt spiral by 10 times living within its means? The very first TIFIA loan in America was awarded to the South Bay Expressway privatized tollway in San Diego. No public highway should be handed over to a private corporation using these sweetheart deals known as public private partnerships (PPP).

They have profit guarantees, result in markedly higher toll rates, and have gotcha provisions that ensure the surrounding free lanes stay congested to guarantee the private investors have enough toll payers to make their money back. The toll rates on a privatized tollway cost as much as 75 cents per mile, which is like adding $15 to every gallon of gas you buy.

Privatizing means public money for private profits

PPPs are nothing more than public money for private profits. Fannie Mae and Freddie Mac are two visible examples. Both were massive failures that caused the global financial meltdown and subsequent taxpayer bailouts. It’s why conservative commentator Michelle Malkin called PPPs ‘corporate welfare.’ It's also why Sen. Dick Durbin and Penn State Professor Ellen Dannin have cautioned against them.

Not quite three years after the tollway opened to traffic, the South Bay Expressway went bankrupt and the taxpayers had to take a nearly $80 million hit on the chin as the private consortium wrote down its debts. The traffic projections were off by over 40,000 cars per day, which has been a longstanding pattern since this new push for tolling.

Overly optimistic traffic forecasts make toll roads look good on paper to investors to get the project built, but end-up costing taxpayers dearly when the traffic doesn’t show up. So to keep their heads above water, the public or private entities hike tolls to make-up for the losses (counter-intuitive since raising rates sheds more drivers), inject more public subsidies, or eventually default or go bankrupt.

At a time when Americans struggle to keep food on the table and pay its bills, the federal government is forgiving the debt of yet more private corporations at our expense. And Mica wants to expand this privatization failure to transit, which has never been able to pay for itself and has always required public subsidies to survive.

Mica’s summary also states his bill is fiscally responsible by “improving programs that don’t work while building upon programs that work well.” It defies logic to think you’re ‘improving’ a program by expanding it. Throwing 10 times more money at it won’t fix the fundamental flaw of public subsidies for private profits.

When PPPs grant the power to tax to private corporations, no elected official can claim to be doing his fiduciary duty to protect the public interest and ensure there’s no taxation without representation and still support PPPs. Taxpayers can’t pressure the board of a corporation if the toll rates get too high. Politicians know this. That’s why they wish to outsource the pesky tax hikes to a private corporation.

'Leveraging' means DEBT

The proposal goes on to say that “this fiscally responsible, multi-year proposal follows these clear mandates from the American people and creates long-term jobs by: Better leveraging and maximizing the value of limited federal resources...” “Leveraging” is code for DEBT. Debt on the federal level through the TIFIA loan program and debt pushed down to the state level through state infrastructure banks. Debt that must be repaid by taxpayers no matter which level of government does it.

Plus, according to the Weekly Standard the stimulus program spent $185,000 (adjusted downward from $278,000 per job using the peak of 3.6 million jobs) to create a single job and those jobs were short-lived and now fading from the scene.  So there’s no credible way to claim building transportation infrastructure creates long-term jobs. It doesn’t.

Then, how is borrowing money we don’t have fiscally conservative and an example of Washington living within its means? It’s not, it’s more smoke and mirrors by disingenuous politicians using buzz words to tickle our ears and put us back to sleep.

But we’re not going back to sleep. The American people are alert and attune to their government as never before in this generation. They know now that they can’t trust what politicians tell us, they have to VERIFY everything. Politicians are not going to get away with playing us for fools. They're setting us up for an infrastructure DEBT BOMB that will be deemed 'too big to fail,' and then they'll come to the taxpayers for yet another bailout. Remember that the last federal highway bill was plagued with over 6,000 earmarks that greatly contributed to voters dumping the Republicans in the following midterm elections.

Americans need to contact their representatives and demand they properly fund our public infrastructure without more earmarks, debt, tolls, and infrastructure banks. Punting by privatizing our PUBLIC roads at a cost far higher to taxpayers than our affordable, gas tax-funded public highway system is NOT an acceptable, nor fiscally responsible solution.

Continue reading on Privatization & debt: The flaws in Mica’s proposal - San Antonio Transportation Policy |

Trans Texas Corridor officially repealed, but is it dead?

Trans Texas Corridor finally dead? Well, mostly dead

By Terri Hall

Founder, Texans Uniting for Reform and Freedom

The people of Texas scored a big victory with the recent repeal of the Trans Texas Corridor (TTC) from state statute. Governor Rick Perry even signed it. That ought to give us pause. The TTC is Perry’s legacy building project, one he still defends despite the massive grassroots uprising against it. So why would he sign it?

Because it’s not truly dead. Like the famous line in the film Princess Bride, it’s mostly dead. During the 82nd Texas Legislative Session that ended May 30, the final repeal of the Trans Texas Corridor made it to the Governor’s desk, but with the passage of several key bills, it essentially revives a Trans Texas Corridor-style sale of Texas infrastructure through controversial public private partnerships (PPPs). Several segments of TTC-69 (most are connections to the Port of Houston) are authorized in SB 1420 and will move forward piece by piece as PPPs.

Texas politicians have been frustrated since the Trans Texas Corridor first became one of the most radioactive political hot potatoes across the state (and nation) as to how to convince constituents that the TTC is DEAD. Once Texans were educated about it and became sophisticated in their knowledge of how to identify it and kill it, they were just too smart to believe the TTC was really dead simply because a politician told them so. The flame started to burn in 2005 when Governor Rick Perry awarded the development rights for the Trans Texas Corridor TTC-35 to a Spanish company, Cintra, and would not release the contract to the public. Then the anti-TTC sentiment spread like wildfire after two rounds of public hearings, 54 hearings in a matter of weeks in 2006 for TTC-35 and then another 46 hearings again in 2008 for what was once I-69 that morphed into a Trans Texas Corridor concept of a foreign-owned toll road through mostly rural East Texas, known as TTC-69.

More than 28,000 Texans went on the record opposing that project, even more than the TTC-35 project, and those East Texas lawmakers, including Transportation Commissioner turned Texas Senator Robert Nichols (who was present when the TTC-35 development rights contract was first signed) and Senate Finance Committee Chair Sen. Steve Ogden, who carried the original bill to create the TTC,  took notice and abject panic set in. That was the most public comment against any road project in the history of Texas. Now the backlash wasn’t isolated to just Central Texas (TTC-35), it was in the hotbed of Republican fundraising country, where property rights are sacred (TTC-69).

The Trans Texas Corridor as originally envisioned was a 4,000 mile multi-modal network of toll roads (auto and truck lanes), rail lines (freight rail and commuter rail), power transmission lines, pipelines, telecommunications lines, you name it, it was part of the Trans Texas Corridor, a terrorist’s dream. It was going to be financed, operated, and controlled by a foreign company using public private partnerships in swaths of land 1,200 feet (4 football fields) wide.

Called the biggest land grab in Texas history, it was going to gobble up 580,000 acres of private Texas land (the first corridor alone was to displace 1 million Texans) and hand it over to Cintra or some other global player who would have exclusive rights to determine the route and what hotels, restaurants, and gas stations were along the corridor (a cash cow, and government-sanctioned monopoly for HALF CENTURY). The federal government calls the TTC more nebulous sounding names like “High Priority Corridors,” “Corridors of the Future,” and even the NAFTA superhighway. TTC-69 is referred to in congressional documents as High Priority Corridors 18 & 20 and is supposed to the start at the southern border of Texas and go all the way to Port Huron, Michigan.

The Trans Texas Corridor, re-named the “Innovative Connectivity Plan” in 2009, has always been about exploiting landowners and taxpayers to open up new trade corridors to facilitate the free flow of goods (mostly cheap goods from China) among nations to benefit global corporations. With WikiLeak documents confirming our government is indeed pushing for the integration of the United States with Canada and Mexico into a North American Union, these economic and trade connections are vital to their plan, and won’t die simply because the TTC statute is now gone.

Stop the freight train, er...pipeline!
Within days of Perry winning the Texas primary March 2, 2010, TxDOT revealed its intention to extend the SH 130 toll road northward. SH 130 from Georgetown around Austin extending south to San Antonio is the first leg of the Trans Texas Corridor TTC-35. So as predicted, Perry, bolstered by his re-election, continued his plans to push the TTC piece by piece all the way up to the Red River.

With Winnipeg moving a multi-modal trade corridor southward along I-35, and the expansion of US 281 south of San Antonio underway (which feeds into the I-35 corridor) moving the corridor northward, it proves the TTC's demise was mere illusion designed to put Texans back to sleep while politicians get re-elected and quietly build it, segment by segment under the radar.

When the Texas Department of Transportation announced that TTC-35 was "dead," it also clearly stated TTC-69, also given the name I-69 to make it appear more harmless, is still moving forward. In fact, expansion of US 77 is already underway in the valley as part of the initial leg of what will be known as TTC-69/I-69.

In addition, Ports to Plains (to run from Mexico all the way to Alberta, Canada) and La Entrada de Pacifico, two other active TTC corridors, show that nothing has changed there either, except dropping the official connection by name to the Trans Texas Corridor. La Entrada, to traverse through the Big Bend area, has a disturbing new twist with the resurrection of the idea to cede Big Bend to international interests by deeming it an "international" park, essentially to join it with Mexico's "Big Bend" on the other side of the U.S. border.

The idea is to eventually develop future sea-port connections with Far-East ocean shipping lanes, and to steer federal transportation dollars into several otherwise useful local projects over time, and then connect the segments into a singular, identifiable system.

Part of the TTC concept for Ports to Plains includes the transport of wind power around the state (per a TxDOT feasibility study in 2007) and a tarsands oil pipeline. So it’s not a leap to suspect the Keystone XL tarsands oil pipeline (owned by a Canadian company called TransCanada) heading down from Alberta, Canada to Houston via East Texas right now may well tie into the TTC, or at least the larger picture of trade with China. Either way, several trans-national pipelines are still in the works through Texas that have been fraught with threats of eminent domain and downright bullying - all for oil that won’t likely benefit the U.S.

“TransCanada’s own funded report shows that the Keystone XL pipeline will cause an increase in the price of gas, is not currently needed, and that it will not decrease imports from ‘unfriendly sources.’ The State Department acknowledges the fact that there is no guarantee that any of this product would stay in the U.S. This pipeline would open up the world market for landlocked tarsands and provide China’s tarsands investors with a port, while putting our lives and water supplies at risk,” notes East Texas resident David Daniel, Founder of Stop the Tarsands Oil Pipeline.

‘Come and Take it’
Anyone familiar with Texas history knows about the story behind the Gonzales flag emblazoned with a cannon and the words ‘Come and Take It.’ It was the challenge the Texians gave the commander of the Mexican army in 1835 when he sent for the cannon stationed there (in a move to disarm the Texians). They simply replied, ‘Come and take it.’ When the Mexican army came to retrieve the cannon, the Texians put up a fight and the army retreated. It was considered the beginning of the Texas revolution. The rest is history.

As part of their proud history, Texans can add another ‘Come and Take It’ moment to their epic: the rise of the Trans Texas Corridor and its subsequent defeat. Texans educated the nation on this coming land-grabbing superhighway tidal wave and generated a Texas-sized revolt against the Trans Texas Corridor, striking fear in the eyes of any politician associated with it.

Yet while Texans have a lot to celebrate for driving a stake through the heart of the Trans Texas Corridor as it was originally envisioned -- it will no longer include the vast pie-in-the-sky “multi-modal” network of rail, telecommunications, power transmission, and pipelines of all sorts in a 1,200 foot wide foreign-controlled right of way -- a toned-down version of that plan still creeps its way into existence. So all Americans must stay vigilant to kill this beast wherever it lurks. Texans stand ready.

Politicians penchant for selling off public assets

Link to article here.

Our Politicians Are Selling Off Pieces Of America To Foreign Investors – And Goldman Sachs Is Helping Them Do It

End of the American

All over the United States, politicians are selling off key pieces of infrastructure to foreign investors and big Wall Street banks like Goldman Sachs are helping them do it.  State and local governments across the country that are drowning in debt and that are desperate for cash are increasingly turning to the "privatization" of public assets as the solution to their problems.  Pieces of infrastructure that taxpayers have already paid for such as highways, water treatment plants, libraries, parking meters, airports and power plants are being auctioned off to the highest bidder.  Most of the time what happens is that the state or local government receives a huge lump sum of cash up front for a long-term lease (usually 75 years or longer) and the foreign investors come in and soak as much revenue out of the piece of infrastructure that they possibly can.  The losers in these deals are almost always the taxpayers.  Pieces of America are literally being auctioned off just to help state and local governments minimize their debt problems for a year or two, but the consequences of these deals will be felt for decades.

Sadly, this trend continues to accelerate.  Just this week, a bill that will allow the state government of Ohio to proceed with plans to lease the Ohio Turnpike to investors was approved.  The state government of Ohio will soon receive a one-time injection of cash and everyone in the area that uses the Ohio Turnpike will end up paying much higher tolls for decades to come.

Highways have also been auctioned off (most of the time to foreign investors) in Indiana, the city of Chicago, Florida, Virginia and Texas.

Amazingly, many politicians continue to insist that selling off pieces of infrastructure that have already been fully paid for by taxpayers is a wonderful thing.  In fact, there are actually some politicians that have the gall to call it a "conservative" thing to do.

For example, Rick Perry has been at the forefront of the effort to "privatize" the highways of Texas.

You would think that the people of Texas would have gotten rid of him by now, but considering the fact that he may be running for the Republican nomination in 2012, he just might be our next president.

What makes the selling off of our infrastructure even worse is that big Wall Street banks such as Goldman Sachs are helping our corrupt politicians do it.

In fact, Wall Street sees a tremendous opportunity in the "distressed assets" of our broke state and local governments.

The fact that Goldman Sachs is making millions auctioning off our public infrastructure should make the blood of all red-blooded Americans boil.  The following is a brief excerpt from a recent article posted on

On Wall Street, setting up and running “Infrastructure Funds” is big business, with over $140 billion run by such banks as Goldman Sachs, Morgan Stanley, and Australian infrastructure specialist Macquarie. Goldman’s 2010 SEC filing should give you some sense of the scope of the campaign. Goldman says it will be involved with “ownership and operation of public services, such as airports, toll roads and shipping ports, as well as power generation facilities, physical commodities and other commodities infrastructure components, both within and outside the United States.” While the bank sees increased opportunity in “distressed assets” (ie. Cities and states gone broke because of the financial crisis), the bank also recognizes “reputational concerns with the manner in which these assets are being operated or held.”

Why does Goldman Sachs always seem to be at the heart of so many things that are wrong with our financial system?

Unfortunately, Goldman Sachs is not the only one seeking to make a quick buck these days.

Foreign investors in particular seem to have an affinity for pieces of U.S. infrastructure, and Wall Street banks such as Goldman Sachs love to help them gobble it up.

The sovereign wealth funds of nations such as Saudi Arabia, China, Kuwait, Libya, Singapore and the United Arab Emirates are eagerly investing in highways, ports, toll roads and even parking meters all across America.

So precisely what is a sovereign wealth fund?

In a previous article I defined it as "a huge mountain of state-owned money that roams about the countryside looking for assets to gobble up."

The combination of sovereign wealth funds with huge piles of money to burn and state and local governments that are desperate to raise cash has created something of a "perfect storm".

In an article for Rolling Stone, Matt Taibbi documented some of the key pieces of infrastructure that these sovereign wealth funds have been gobbling up....

A toll highway in Indiana. The Chicago Skyway. A stretch of highway in Florida. Parking meters in Nashville, Pittsburgh, Los Angeles, and other cities. A port in Virginia. And a whole bevy of Californian public infrastructure projects, all either already leased or set to be leased for fifty or seventy-five years or more in exchange for one-off lump sum payments of a few billion bucks at best, usually just to help patch a hole or two in a single budget year.

As Taibbi noted, the money that is raised from these long-term leases usually only helps fix budget problems for a year or two, but the pieces of infrastructure that are being auctioned off will be in the hands of foreigners for decades to come.

Sadly, much of our own infrastructure is not even built in this country anymore.

For example, a 2,050 foot bridge that is going to connect San Francisco and Oakland is actually being built in China and is being shipped over to the U.S. piece by piece.

This bridge is being constructed by the China State Construction Engineering Group, and according to an article in The Telegraph, they have been building a whole lot of major projects all over the United States....

CSCEC has already built seven schools in the US, apartment blocks in Washington DC and New York and is in the middle of building a 4,000-room casino in Atlantic City. In New York, it has won contracts to renovate the subway system, build a new metro platform near Yankee stadium, and refurbish the Alexander Hamilton Bridge over the Harlem river.

Massive corporations that are either fully or partially owned by the Chinese government are deeply integrating themselves into the U.S. economy.

For much more on this phenomenon, please see a previous article I authored entitled "The Chinese Government Is Buying Up Economic Assets And Huge Tracts Of Land All Over The United States".

Sadly, as our state and local governments get even deeper into debt, the amount of infrastructure that is being auctioned off to foreigners will continue to grow.

Most Americans don't realize how desperate many state and local governments have become.  For example, things have gotten so tight that New York City is now actually rationing toilet paper at Coney Island.

The United States is drowning in debt from coast to coast and pieces of the country are literally being auctioned off.  The looting and the "privatization" are only going to intensify as our state and local government debt problems get even worse.

Perhaps on all future maps of the world we should just put a big "for sale" sign on the United States.

What in the world has happened to this country?

Durbin introduces bill to block road privatization

Link to article here.

US Senate Leader Introduces Bill to Block Road Privatization
Bill would force states to pay back federal contribution before leasing highways to private companies.

Senator Dick DurbinA member of the US Senate leadership is looking to stop states and cities from selling America's freeways and airports to private companies. Senator Dick Durbin (D-Illinois), the assistant majority leader, introduced the Protecting Taxpayers in Transportation Asset Transfers Act on June 17 to rein in governments officials who would sell off roads to meet short-term budget needs, leaving motorists to pay far more in the long run in tolls and other fees.

"The federal government provides states and local governments billions of dollars to build, maintain and improve transportation projects around the country," Durbin said in a statement. "The last transportation bill alone provided states with an average of $48 billion per year for upgrades to roads, bridges and mass transit systems. Any deal to sell or lease these assets should be closely examined and include a return on the federal taxpayer investment." Durbin was particularly upset by Chicago's deal to lease its parking meters to Morgan Stanley for $1.2 billion. Nearly all of this money was spent by former Mayor Richard M. Daley, leaving drivers to pay massive increases in the cost of parking that will add up to an estimated $11.6 billion over 75 years.

"This legislation protects against fire sales of our existing public assets while making certain the public's interest is fully protected in future public/private partnership agreements," the House sponsor of the legislation, Representative Peter DeFazio (D-Oregon), said in a statement.

The legislation directs the US Department of Transportation to place a lien on public transportation assets so they cannot be sold or transferred without the value of the federal expenditure on construction, maintenance and upgrades being returned to the US Treasury. Transportation assets include freeways, mass transit, airports and railroads worth more than $500 million or where the federal contribution exceeds $25 million.

The legislation also imposes conditions on any lease deal to increase transparency. Companies must disclose conflicts of interest, the estimated tax benefits and financing transactions over the life of the lease, the amount of increased tolls over the life of the deal, changes made to the workforce, and revenue estimates over the life of the deal. State governments must justify the deal in terms of the public interest and disclose the likely impact on nearby roads. In the event the private company goes bankrupt, ownership of the asset must return to the state. The contract with the private company must also be posted online 90 days before the deal can be approved.

Source: S. 1230 (US Senate, 6/16/2011)

Keystone Pipeline may gain approval despite opposition

Link to article here.

These tarsands oil pipelines are part of the original Trans Texas Corridor concept. TransCanada, a foreign corporation, has already gained a reputation of bullying and deception to get access to Texans' land for its own profits. This new source of oil is not even likely to benefit to Americans, but rather sold to the Chinese.

Keystone: Pipeline Battle Pits Economy vs. Environment, Again

By James Rosen

Published July 04, 2011 |

Keystone-XL will rank alongside the pyramids in Giza as one of the most ambitious construction projects ever undertaken – if the $7 billion pipeline ever gets built.

The proposed route runs south over 330 miles of southern Canadian soil, clipping the corner of Saskatchewan to reach the border with America, then snakes gently southeast across seven U.S. states, extending another 1,370 miles until it branches off to hit two destinations in the Gulf of Mexico.

But none of that will happen unless and until the State Department green lights the initiative. If granted, that will take the form of a presidential permit, required because the company applying for it, TransCanada, is a foreign-owned corporation. And to the dismay of environmentalists, the Obama administration appears likely to give that approval before year’s end.

Energy industry sources claimed the new pipeline would bring online an additional 830,000 barrels of crude oil a day. The source for the black gold is the rich deposits of bitumen found in Alberta, Canada, from which the crude is extracted. Already, an existing Keystone pipeline – originating in the same place but running to refineries in Oklahoma and southern Illinois – sends approximately 500,000 barrels of crude a day to American consumers.

Proponents of Keystone-XL in both countries, including numerous lawmakers in the U.S. Congress, say proper exploitation of the Alberta “oil sands” would immediately create 20,000 direct American jobs, and generate $34 billion in revenue for the U.S. Treasury. Greater rewards would accrue over time, they say.

“The U.S. oil and natural gas industry right now supports 9.2 million jobs throughout the economy,” said Marty Durbin, vice president of the American Petroleum Institute, a trade group representing 400 companies involved in various facets of oil production and distribution. “Through full utilization of Canada's oil sands, we can actually create 340,000 U.S. jobs between 2011 and 2015.”

Keystone-XL’s opponents warned that the proposed route would take the pipeline over the Ogallala Aquifer, which provides drinking and irrigation water to eight states. Environmentalists have also cautioned that the kind of pipe TransCanada proposes to use is dangerously susceptible to rupture, and that the “life-cycle” emission of greenhouse gases from tar sands oil, such as that found in Alberta, exceeds the average for crude oil imported from other sources, like Venezuela and the Middle East.

“The pipeline would pump some of the dirtiest oil on earth down from Alberta, Canada and put our farms at risk of oil spills, and it will increase pollution in communities surrounding refineries,” said Alex Moore of Friends of the Earth. “It has much higher levels of heavy metals like lead, and when it's refined those metals end up in the air – and that means more kids with asthma, and it means more elderly people with respiratory diseases.”

The most recent draft text from the State Department found that the Keystone-XL project would pose only “limited adverse environmental impacts.” Moreover, the department’s analysts found that an additional period of public comment on the project had turned up "no new issues of substance."

Both of those conclusions drew fierce dispute from environmental critics. They cite the pipeline explosion that occurred near Kalamazoo, Michigan last July, sending more than 850,000 gallons into the Kalamazoo River and prompting then-Gov. Jennifer Granholm to declare a state of emergency. That pipeline, operated by Enbridge Energy Partners, also originated in the oil sands of Alberta.

Moore said there are “hundreds” of pipeline accidents each year, and faulted the State Department for conducting an incomplete analysis. “Their first draft analysis did not include adequate analysis of oil spills, of pollution in communities surrounding refineries, and whether or not we really need this pipeline,” he said.

Still, analysts in and out of the energy industry predicted the Obama administration would allow Keystone-XL to proceed. In an April 19 newsletter the Eurasia Group, a private capital risk-assessment group, told subscribers approval was “likely.”

The group cited President Obama’s speech on “America’s Energy Security,” delivered at Georgetown University on March 30, as evidence of which way the administration is leaning. “When it comes to the oil we import from other nations,” the president said, “obviously we've got to look at neighbors like Canada and Mexico that are stable and steady and reliable sources."

Canada is already America’s leading source of foreign oil, exporting to the U.S. an estimated two million barrels per day.

With input from nearly a dozen other federal agencies in hand, the State Department is expected to issue its final ruling by year’s end. Last month the Republican-controlled House Energy and Commerce Committee voted to approve a measure that would force the State Department to rule on Keystone-XL by November 1.

Toll hikes for Washington roads

Link to article here.

Tolls will continue to jump on Washington roads

By: Lisa Gartner | Examiner Staff Writer @Lisa_Examiner | 07/02/11 8:05 PM

Beginning in October, travelers on the Chesapeake Bay Bridge will pay$5, as opposed to the current$2.50, to cross.-Andrew Harnik/Examiner

Beginning in October, travelers on the Chesapeake Bay Bridge will pay $5, as opposed to the current $2.50, to cross.-Andrew Harnik/Examiner

This is the last July Fourth weekend that Washingtonians will pay $2.50 to cross the Chesapeake Bay Bridge as they head for a getaway at the popular Atlantic Ocean beaches.
The toll will double to $5 in October and jump to $8 by 2013, shocking Marylanders.

But transportation analysts say drivers should get used to paying a high fee to cross a bridge or drive on a road -- tolls will increasingly replace gasoline taxes as the way states will pay for their transportation infrastructure in the future.

"The actual value of the gas tax hasn't been going up the way it needs to to pay for the roads we want, so there's a new interest in toll roads now," said John Gilmour, a government professor at the College of William & Mary in Williamsburg, Va. "Because of political pressure against raising taxes, if they're going to build new roads, they have to be toll roads."
The toll man cometh

Tolls for two-axle vehicles
Maryland    Rate before July 1, 2011    As of Oct. 1, 2011    As of July 1, 2013    Reason
Hatem Memorial Bridge    $10/year with decal, $5 for trip    $72/year EZPass plan to replace decal, $6 for trip    $8    $132 million in repairs needed
Bay Bridge    $2.50    $5    $8    $225 million needed to maintain Bay Bridge over next six years
Nice Bridge    $3    $5    $8    $21 million in repairs needed
I-95 Turnpike (Kennedy Highway)    $5    $6    $8    $121 million needed for highway work
Key Bridge    $2    $3    $4    $410 million needed for combined work on Fort McHenry, Francis Scott Key and Baltimore Harbor Tunnel repairs
Baltimore Harbor Tunnel    $2    $3    $4    see Key Bridge
Fort McHenry Tunnel    $0.90    $2.70    $3    see Key Bridge
ICC    $1.45/peak, $1.15/off peak/$.60 overnight    Only toll exempt from raise
Virginia    Current    Jan. 1, 2012

That's certainly the case with the carpool lanes being built on the Capital Beltway in Virginia that solo riders can buy their way into -- dubbed "Lexus lanes" -- and the brand-new Intercounty Connector, whose high tolls must help cover the $1.2 billion in toll-backed bonds that went into the road's $2.56 billion in construction costs. Maryland officials also want the toll to be high enough to discourage some drivers and defeat congestion.

Tolls on the Bay Bridge, Nice Bridge, Interstate 95 Turnpike, Key Bridge, the Baltimore Harbor Tunnel and Fort McHenry Tunnel will jump in October and skyrocket by 2013 to fund repairs and expand the area's transportation network.

The Dulles Toll Road will raise fares next year, while the Delaware Memorial Bridge's toll increased from $3 to $4 on July 1 to generate $21 million for the bridge and a ferry.

Peter Samuel, editor of Tollroadsnews, explained that the increases seen around Maryland are so steep because legislators have kept tolls stable for decades. "They're playing catch-up to an extent. I think they probably should have bit the bullet on tolls three or four years ago," he said.

But tolls are polarizing, and politicians need points. The pro-toll philosophy says it makes sense to get the money to fix roads from the people who choose to use them: States are strapped to find other funding sources, and drivers can always take the traffic-heavy free routes.

But drivers say they're fed up with tolls -- and may even abandon roads and bridges that are getting pricier.

"It's not a small increase -- it's a slap in the face," said Marianne Jansa, a 53-year-old Hanover, Md., resident who drives over the Bay Bridge every weekend. "Most of the people I've talked to said they're going to stop going over there."

Jansa said she wasn't sure where she thought the money to repair the bridge should come from, but said that it certainly shouldn't come from her change purse.

Ed Kline, a 52-year-old from Hughesville, was headed to the Eastern Shore and was speechless to learn of the upcoming toll increase. "Wow," said Kline, who thinks in the future he'll go to the Outer Banks instead.

While there aren't many alternatives to pay for roads -- Republicans especially don't want to raise taxes and no one wants to see the price of gas climb any more -- Gilmour said it's the tangibility of the tolls that get people going.

"The problem with tolls is that people hate paying for them, and they have to wait to pay for them," Gilmour said. "This weekend, people will be waiting a long time just for the privilege of paying a toll."

Amy Myers contributed to this report.

Read more at the Washington Examiner:

Privatized Indiana Toll Road headed for bankruptcy

Link to article here.

The poster child for road privatization gurus is headed for bankruptcy which may not seem like much in these economic times, but its a MASSIVE indictment against privatization advocates that have strapped taxpayers with oppressive tax increases on driving (doubling the toll rates in just 5 years) and crushing debt for generations.

Here's what a supporter penned at the news:

The big Indiana toll deal is living on borrowed time. Its reserve
account will run dry in Q1 2012. It is losing money so they have to come
up with more capital or quit. They'll default. This is bigger than all
of the previous failures combined.

Cintra and Macquarie split this concession 50-50. They took over the
existing IH 80(?) passing through Indiana. They put a lot of cash into
fixing up the road and installing toll equipment. They also paid the
state of Indiana $3.8 billion for the right to collect tolls for 75 years.

The toll is about 5 cents per mile. I think they are allowed to increase
the toll but that doesn't help. Every penny increase drives away enough
users to cause a bigger loss. They are caught in a cruel vice.

These geniuses borrowed the money for a 75 year deal on a 10 year note.
Due in 2015. Maybe they thought they could do a re-fi at CountryWide
Mortgage Company

The State of Indiana is a huge winner. They got $3.8 billion for nothing.

There is a lot more to this story that is not presented in the article. ...


London news wire says Indiana TR concession in financial trouble

Posted on Sun, 2011-06-26 22:57
Toll Road News

 Debtwire, a London Financial Times wire service claims the Indiana Toll Road Concession Company (ITRCC) is in danger of defaulting on its debt as early as the first months of next year (2012). The wire says ITRCC has been rapidly "burning through" an interest reserve account which threatens to put it out of compliance with reserve provisions of its $4.1b in bonds.

The principal lender to ITRCC is the Royal Bank of Scotland which Debtwire says has assigned the loan to its "workout" department. The wire report says the interest reserve account could be depleted by the end of 2011.

ITRCC is a joint 50/50 percent venture of Cintra and Macquarie. A Cintra spokesman said merely that the reserve account was intended for drawing upon during a recession and low traffic like that presently experienced by the US. A Macquarie spokesman said simply that no default is expected.

Traffic and revenue have been well below expectation since the 75 year concession was signed with the state of Indiana at the height of the boom  in June 2006.  Toll revenues in 2010 were $164.2m versus interest expense on debt of $268m.

There were $9m of non-toll revenues mostly from the leasing of rest stops for total  revenue of $173.3m.

Expenses included toll collection $9.6m, routine repairs and maintenance $8.7m, other operating costs $16.3m  for total operating expense before depreciation of $34.5m. That generates EBITDA (earnings before of interest taxes depreciation and amortization) of $138.8m. Depreciation and amortization was $79.7m making a profit before interest expenses of $59.1m.

It's $268m in interest expense that is killing the ITRCC.

In 2010 that interest plus a derivative loss (from hedging interest rate swaps) of $51.9m converted a modest operating profit into the net loss of $260.8m.

In mid-2006 ITRCC paid the state of Indiana $3.8b in one-time rent for the 75 year concession on the road. Cintra and Macquarie each put in $374m to produce an equity at start of $748m. They borrowed $4.1b.

They appear to be paying 6.5% interest to the Royal Bank of Scotland and associated lenders (268/4100). The bulk of the debt on the concession ($3,685m) is less-than-10 year debt due in 2015.

The concessionaires made major capital improvements including third laning in the west, and other bridge and pavement repair as well as an improved toll system.

Transactions 35% low

Traffic is reported by Macquarie as 74.6k/average day or 27.2m/yr in 2010.

We don't know what traffic and revenue forecasts Cintra and Macquarie used, but forecasting for the state (INDOT) was Wilbur Smith Associates (WSA) "Rate Review and Revenue Projections Study" August 2005.  Indiana Finance Authority commissioned Crowe Chizek & Company's "Indiana East-West Toll Road Financial Analysis" dated March 2006.

WSA had a forecast of transactions and revenues in six different columns, each for a different combination of toll rates (see nearby). At the time of the forecast the ITR had toll rates of 4c/mile for cars and 14.6c/mile for tractor trailers, while by WSA estimate maximum revenue would be gained with tolls of around 13c/mile for cars and 44c/mile for the big rigs.

Toll rates under state control were about a third of the market or revenue maximizing rates!

They've been pushed up a bit according to the maxima allowed by the concession - to 5.6c/mile for cars and 22.4c/mile for tractor trailers at present and another small increase goes into effect July 1. That puts them between two WSA transactions forecast columns 47.2m and 37.8m. If the middle point is used you get 42m as the forecast for current toll rates so actual 27.2m traffic is a huge shortfall - about 35%.

$s down 17% on forecast

Toll revenue using the same 'middling' should be $196m for 2010 compared to actual $164m, making it a 17% shortfall on forecast.

(Traffic so-called is actually toll transactions and the ITR is a barrier system of toll points over the mainline in its western commuter heavy/car heavy portion, versus a ticket system in its long stretch east which is almost a truckway. Transaction counts overweight the importance of the barrier portion and commuter car traffic because a relatively short trip there may be 2 or 3 transactions whereas all trips on the ticket portion are the single transaction even for driving its length. Traffic has obviously dropped most on the barrier system portion out west.)

Crowe Chizek & Co assumed much smaller debt by the concessionaire and higher equity - about one tenth the debt ITRCC actually assumed. Debt service was put at a mere $24.8m in 2010 versus the actual $268m in interest.

COMMENT: That's where the problem lies - assuming far too much debt for too variable and uncertain a revenue stream. Easy to say in retrospect though many said at the time that at 40x they paid too high a multiple of cash flow. Even if their traffic were at WSA forecast levels, and even with market toll rates as opposed to concession regulated toll rates, they'd still only have toll revenues of $245m. And with interest payments to be made to borrowers of $268m they'd still be losing money. They must have thought that somehow, someway they could muddle through. Maybe they still can? We'll see. But this time they can't blame forecasters for their troubles - editor.

Demerging and stapling

The Macquarie interest in ITR held originally by Macquarie Infrastructure Group along with other weak tollroads was divested (they used the goddawful word 'demerged') Feb 2010 to two entities with the name Macquarie Atlas Roads, one with the ending International Limited (MARIL), the other just Limited (MARL) managed jointly by Macquarie Atlas Roads (MQA).

At Macquarie they love to "staple" equities - a peculiarly Australian arrangement - meaning that one stock cannot be bought or sold without buying or selling the other. They call the stapled security of one MARL and one MARIL share Macquarie Atlas Roads (MQA) which security trades on the Australian Stock Exchanges.

This complicated duplication of companies followed by their forced marriage looks like a makework racket by corporate lawyers Downunner.

annual report

TOLLROADSnews 2011-06-26 ADDITIONS, EDITS 2011-06-27 11:30

U.S. to cut highway funding by nearly $10 billion

Link to article here.

Perhaps the most shocking stat in the article is the fact that 75 of our U.S. Interstate highways are already tolled. This is why Sen. Kay Bailey Hutchison and Pennsylvania lawmakers, John Peterson and Phil English, worked so hard to keep tolls off our interstates. These people will stop at NOTHING to tap the revenue stream of taxpayers. They exploit congestion weary commuters by refusing to spend our gas taxes to fix our roads (currently both federal and state lawmakers habitually raid our gas taxes for non-road uses) so they can extort money from us saying we have to pay tolls to get our roads fixed.

Declining US money for highways - where tolling fits in

Posted on Fri, 2011-06-24 00:37
Toll Road News

 Kenneth Orski who follows transport funding issues in Washington DC says US Government grants to the states for highways will drop from the current level of $41b/year to about $32b next year based on the end of deficit financing under a newly budget conscious House of Representatives. That $32b will be the result of relying solely on federal gas/diesel tax revenues - as we used to before the massive deficit spending of 'stimulus' funds the past three years. (see Orski at

It's a return to highway users "paying their way" and "living within our means" Orski says citing the popular mantras that now set the tone for US Government budgeting for surface transportation. Handouts for highspeed rail will - hopefully - be zeroed out, and other rail folliescontained. Unsustainable 'sustainability' and 'livability' nonsense won't survive the result of last November's election, and the changed composition of the US Congress.

Too much attention is sometimes to Washington DC's role. States and local governments raise fully three times as much for highways as federal funding, Orski points out. They of course face their own budgetary constraints, and lack state 'Reserve' banks with the power to print US$s. And there is almost no stomach in any legislature to raise gas/diesel tax rates - politically directed highway programs are so distrusted.

Some states have been 'borrowing up' heavily themselves for highways loading up on TIFIA and GARVE (grant anticipation) bonds, so an increasing proportion of their gas tax funds and US money goes not to new roads but to paying for past loan-based spending.

IBTTA had a useful panel this week on the major opportunity for tolling in the US - funding the rebuild of the Interstate highway system. Ed Regan of Wilbur Smith Associates gave another of his masterful analyses of the issue and a collection of others gave variations on the theme.

Key point Regan makes is that the cost of essential rebuilding of the Interstate Highways is way bigger than the costs incurred in original construction. What we have now cost around $130b but the cost of rebuilding is in the range $1,300b to $2,500b in current prices - ten to twenty times higher. If spread over 50 years that's an annual expenditure in the range $26b to $50b.

Some of the increase is general inflation, but some is real extra cost - construction under traffic is inherently more expensive than greenfields construction, and we build better than we used to in many respects.

Tolling could take on the job of rebuilding the interstates. Current toll revenues are around $10b, and they would need to be increased at least three-fold to take on the Interstate Rebuild job, which Regan calls "probably the most important transport investment in American history."

The opportunity arises out of:

- states desperate for new and sustainable revenue sources

- the greater acceptability and lower cost of all-electronic tolling as compared to earlier methods

- direct user charges and paying-your-way being a theme of the times since it allocates cost directly to those who benefit

- the power of variable and differentiated toll rates to manage traffic and offer free flow

- the potential to tap investor money and management with PPPs

- the states own the interstates so they ultimately carry the responsibility for rebuilds

7% of the interstate system (2,921 miles of 48,000) are already tolled plus most of the large bridge and tunnel crossings. 3,175 miles in 17 systems were built as tollroads. Some 254 miles and four systems (CT Tpk 129, DFW Tpk 30, KY Tpk 45, Richmond-Petersberg VA 50) were unfortunately detolled.

Most of the tollroads built in the past 10 years have been non-Interstate in classification,  but around half of the new expressway mileage built in that time has been tollroads.

Regan makes the point that tolls represent something of a return to President Franklin Delanor Roosevelt's concept of a system that would be "self liquidating" with tolls and corridor property rights. And to the fact that it started out with 17 toll systems as its basis. The oldest Interstate in the country is I-76 in central Pennsylvania: the Pennsylvania Turnpike.

Trouble is so far the US Congress and the Obama administration cling to their legislative bar on tolling the interstates. Indeed both Secretary Ray LaHood and House committee chair John  Mica have said they support tolls for new capacity but oppose its use on existing capacity.

There's little demand for new capacity, but a huge demand for rebuild funds and the management power of tolling. And for its ability to allocate money where it will be most productively used - which the political process does a dismal job of.


Emanuel: Corporate tax holiday to get Infrastructure Bank buy-in

Link to article here.

What's really amazing about this article is Rahm Emanuel's influence post-White House Chief-of-Staff turned Mayor of Chicago. But the fact his proposal is a form of bribery (they call an 'incentive') of public officials and a special interest giveaway is not surprising...there's a reason Michele Malkin calls the Federal Infrastructure Bank "corporate welfare."

Corporate Tax Holiday Could Create Infrastructure Bank -- But Devil Is In The Details

By Matt Sledge, Huffington Post
First Posted: 06/22/11 06:32 PM ET Updated: 06/22/11 11:25 PM ET
Rahm Emanuel has a proposition. A grand one, for big business, big unions, and Congress: let a corporate income tax holiday pay for a national infrastructure bank.

Let multinationals bring their money home -- the money that's parked overseas, dodging Uncle Sam's corporate income taxes -- and the federal government can use some of it to pay for the infrastructure bank, the newly minted mayor of Chicago says.

Unions, big corporations, and potentially members of both parties: a virtual rainbow coalition may be assembling in favor of the infrastructure bank. But corporate watchdogs charge there's no difference between a tax holiday with a bank and a tax holiday without one.

Under Emanuel's plan, which he is developing with Rep. Rosa DeLauro (D-Conn.), the bank would build the bridges, roads and mass transit that America has been neglecting for decades. As these structures rust and fall apart, oftentimes nothing new is being built in their place. Yet money to improve infrastructure money will not be easy to come by in the midst of a protracted deficit debate; by including the tax holiday, Emanuel's proposition aims to win over Republicans leery of adding to the deficit.

The idea for the bank is not new -- former Service Employees International Union President Andy Stern mooted it in an op-ed piece months ago -- but it seems to be gaining renewed attention. Reed Hundt and Thomas Mann wrote about it in the Washington Post last week, Emanuel treated it as his own in a speech to the U.S. Conference of Mayors on Saturday, and now Sen. Chuck Schumer (D-N.Y.) is feeling out the Senate.

For proponents, the hope is that the proposition could unite Democrats in the Senate and Republicans in the House. Emanuel said he thinks his grand compromise "brings the parties together."

The specific terms of the tax holiday, however, would be critical. Some Democrats don't want to give multinationals a free pass, and Republicans don't want to be too hard on corporate America.

Without some sort of deal, it's possible that money could continue to linger offshore -- parked in anticipation of a better deal from a different Congress. That has been the situation since 2005, when another tax holiday was declared, premised on the idea that it would create jobs; it didn't.

Critics of any sort of tax holiday say that the infrastructure bank is just the latest twist on corporate blackmail.

"Every one of these amnesties encourage greater holding offshore and Congress is being irresponsible even to say they are thinking about it," said Calvin Johnson, a professor at the University of Texas School of Law who specializes in tax law.

Former SEIU chief Andy Stern disagreed. "The problem is the money hasn't come back, there's no reason to believe it will ever come back," said Stern, now a senior fellow at Georgetown University Public Policy Institute.

"Details are appropriate and important -- you know, what's the tax rate? -- but we're now in the right framework," he argued.

In his speech to the mayors, Emanuel said he would like to see the tax rate lowered to 10 or 15 percent, down from its current 35 percent, for the tax holiday. The money the government raises from those taxes would then be directed only to the infrastructure bank, ensuring, in his view, that it would actually be used to create jobs.

Such a cut on the corporate income tax rate, however, might not sit well with small businesses, who can't use creative accounting to hide their profits overseas like the multinational corporations. And a cut to 10% might not be steep enough to win over Republicans in the House, who have been talking about taxing repatriated income at a rate in the low single digits. In the Senate, Schumer has reportedly suggested a 5% rate.

Rep. DeLauro told HuffPost that she's working with Emanuel to find a balance, and she is hopeful that Republicans can be convinced to sign on to their plan. DeLauro said she has been working on plans for an infrastructure bank for 14 years, and found the recent discussion of the idea "very encouraging."

"The concept of an infrastructure bank has wide support -- from the U.S. Chamber, from labor unions, from a whole bunch of people in between," she said.

Robert McIntyre, director of Citizens for Tax Justice, isn't one of those people. He said there was "no substantive difference" between a straight tax holiday and one that was combined with an infrastructure bank. "It's just somebody's wacky idea that the problem the world faces today is a lack of capital. Our problem is there's not enough consumer demand. The government should be out there shoving money out the door and stimulating the economy."

"This bank is going to be just another bank -- they could have given the money to SunTrust, you know?" he said.

DeLauro said capitalizing the bank via a tax holiday was not her first choice, but she thought that it would be a good approach in the GOP-controlled House.

"If we are going to have another repatriation holiday, the federal government should use the incoming revenue to capitalize a national infrastructure bank, and we do know that such an entity creates jobs, long-term economic growth," DeLauro said.

Tying the repatriation to a larger reform of corporate income taxes is also critical in her mind. "Any repatriation effort has got to be a bridge to broader corporate tax reform. We have to close tax loopholes," she said.

Her infrastructure bank plan would leverage money from corporations and the federal government to create projects that include public-private partnerships. Because of the federal backing, loans for the projects could be issued at low rates.

Such arrangements are common overseas; some have pointed to the European Investment Bank as a model for what could be created here.

The United States has relatively fewer infrastructure projects that are operated as public-private partnerships, and any ventures that smacked of privatization might prove controversial. A privately owned toll road created with lending from the infrastructure bank, for instance, might charge a high rate to pay off its government loan. Criticism might also arise if the arrangement's big winners are the same multinationals benefiting from the tax holiday, as opposed to small businesses.

Spain's rush to privatize falls flat, toll roads empty

Link to article here.

The finger-pointing over road privatization has commenced, but perhaps the best assessment below is this: "bad planing and excessive spending." The drumbeat for taxpayer-funded bailouts for this infrastructure mess that'll be deemed too big to fail begins...

June 24, 2011

Spain’s Building Spree Leaves Some Airports and Roads Begging to Be Used


New York Times

MADRID — In March, local officials inaugurated a new airport in Castellón, a small city on Spain’s Mediterranean coast. They are still waiting for the first scheduled flight.

To justify the grand opening, Carlos Fabra, the head of Castellón’s provincial government, argued that it was a unique opportunity to turn an airport into a tourist attraction, giving visitors full access to the runway and other areas normally off-limits. This Sunday, it will be used as the starting point for part of Spain’s national cycling championships, featuring the three-time Tour de France champion Alberto Contador.

Castellón Airport, built at a cost of 150 million euros ($213 million), is not the only white elephant that now dots Spain’s infrastructure landscape. Spain’s first privately held airport — in Ciudad Real in central Spain — was forced to enter bankruptcy proceedings a year ago because of a similar lack of traffic.

Across the country, nearly empty toll roads are struggling to turn a profit. Other projects are surviving only with continued public financing, which has been cast into doubt by Europe’s sovereign debt crisis.

Over the last 18 months, Spain has been in investors’ line of fire after permitting its budget deficit to balloon during a long property bubble, which finally burst alongside the worldwide financial crisis. To clean up the mess, the Socialist government of José Luis Rodríguez Zapatero introduced austerity measures last year that, among other things, shrank spending on infrastructure. That has left some projects in limbo, despite political pledges to keep them alive.

Over the last two decades, Spain built transportation networks at a rate that few other European countries approached.

Having opened its first high-speed train connection between Madrid and Seville in 1992, Spain overtook France last December as the country operating Europe’s biggest high-speed rail network, covering just over 2,000 kilometers, or 1,200 miles.

Growth in road and air transport has been just as spectacular. Between 1999 and 2009, Spain added over 5,000 kilometers of highways — the biggest road construction endeavor in Europe. And its 43 international airports handle more cross-border passengers than any other country in Europe.

Such expansion has been a source of intense national pride. It has also brought major economic benefits to some previously isolated and impoverished regions.

Yet like Castellón Airport, not all the projects were necessarily well thought out. Some experts suggest that Spain’s approach to development during the boom years placed speed ahead of risk assessment.

Joseph Santo, logistics and transportation director in the Iberian subsidiary of the consulting firm Booz & Company, said there were differences between Spain and Britain, for example, when it came to forming so-called public-private partnerships in transportation.

“In the U.K, they try to get everything into the agreement ahead of time and think of every contingency, so that it can take years to negotiate the deal,” Mr. Santo said. “In Spain, they do the reverse. They make the deal in six months and then if something comes up, they see how they can fix it.”

In separate interviews, the heads of some of Spain’s largest construction and infrastructure management companies conceded that spending had gotten out of control before the crisis. But they also predicted that most building projects, particularly in transport, would eventually yield profits.

“The problem is that such projects are generally conceived at a time when everything seems bound to succeed — even sometimes badly conceived projects — and there were no doubt some planning problems,” said Salvador Alemany, the chairman of Abertis, an infrastructure management company that is based in Barcelona. “At the same time, such projects have to live with the realities of an economic cycle that brings lows as well as highs, and there are plenty of examples of highways around the world that had difficult takeoffs.”

Baldomero Falcones, chairman and chief executive of FCC, a builder, recalled the painful opening of toll roads in the region of Catalonia in the 1970s — roads that have recently required expansion to cope with soaring traffic.

“I have never seen any transport infrastructure that at the end of the day has not proved profitable,” he said.

To help raise money, the government has recently intensified efforts to privatize some state-owned infrastructure, including the country’s two biggest airports, Barajas in Madrid and El Prat in Barcelona.

In May, the Spanish secretary of state for transportation, Isaías Táboas, said the government would sell operating concessions for the two airports by the end of the year. Iñigo Meirás, chief executive of Ferrovial, said his company was “seriously considering taking part in the tender process,” with Abertis also expected to be among the bidders.

With a general election coming in March, the issue of public spending has also fed political tensions.

José Blanco, the industry minister, has accused the previous center-right government of José María Aznar of “bad planning and excessive spending,” telling Parliament that Mr. Aznar’s government paid four times as much as it should have to expropriate land on which additional roads were then built.

Things have become so bad that the private operators of one of the roads, which links the Spanish capital and Toledo, started litigation last year against the government, seeking changes to the terms of its concession that would permit it to collect tolls for a longer time.

Mr. Alemany from Abertis noted that the Madrid-Toledo case was not the only one of its kind. “There are certainly a few other projects where a solution needs to be found to avoid a crisis outcome,” he said.

But he expressed optimism that most disputes would be settled out of court.

“I do think that something can be negotiated that would avoid legal conflicts that could certainly prove costly and lengthy,” he said.

Mr. Blanco suggested in November that the government would overhaul the toll road system to help operators of unprofitable roads, notably by extending their concessions.

Mr. Blanco also has pledged to keep on schedule certain projects that have turned into significant electoral pledges for the governing Socialists in some regions of Spain, like extending the high-speed rail network to the southeastern cities of Alicante, Murcia and Cartagena by 2014, as well as adding a link to the northwestern region of Galicia.

Mr. Falcones of FCC suggested that the biggest problems were likely to come from other types of underused infrastructure that do not stand the test of time as well as roads. The debt crisis and the slump in construction have also left Spain with several half-built or deserted museums, stadiums, public libraries, administrative offices and shopping malls.

Still, when it comes to transportation infrastructure, even Castellón’s deserted airport could have a future, Mr. Falcones predicted, as a gateway to some of Spain’s most popular beaches.

“It’s not worked out so far, but a flight from Castellón to Manchester or Frankfurt is quite imaginable,” he said.

Indiana Toll Road: Tolls more than doubled five yrs after privatization

Link to article here.

Indiana Toll Road lease: Five years later

By David Tanner, Land Line associate editor

June 27, 2011

Before Gov. Mitch Daniels leased the Indiana Toll Road to private investors in 2006, professional trucker Randy Nace would occasionally use the tollway even though it carried a $14 toll. Several toll increases later, with truckers set to pay $35.20 starting Friday, July 1, residents like Nace are reminded of why they fought so hard against the privatization deal.

“I still think it was the wrong thing to do,” Nace said from his truck on Monday. He says he’s managed to survive cost increases and the economic downturn in part by avoiding the Indiana Toll Road.

Five years ago this week, on June 29, 2006, Gov. Mitch Daniels leased the tollway to Cintra of Spain and Macquarie of Australia in exchange for $3.85 billion in cash. To date, it’s still the largest privatization deal involving a U.S. roadway and certainly one of the most controversial.

“I don’t think the people really wanted it, but they went ahead and did it,” said Nace, an OOIDA member who makes his home in Monticello, IN.
Nace and a group of plaintiffs filed a lawsuit in 2006 in an attempt to block the lease deal while it was still in the Indiana Legislature. OOIDA supported the plaintiffs in their fight against the toll road lease.

Even though they didn’t win, the plaintiffs showed resolve and helped educate the public about long-term roadway leases built on profit margins.

The 151 percent toll increase realized during the first five years of the Indiana Toll Road lease was part of a guarantee to the investors. After this year, investors will continue to increase tolls at or above the rate of inflation, likely around 3 percent.

When highways become profit centers, the end user is left holding the bag.

“Indiana’s got some of the roughest interstate highways in the nation,” says Nace.

In the U.S. House and Senate, lawmakers are currently drafting long-term legislation that could set rules for tolling in the future. Indications are that the House version could emphasize more public-private partnerships for roadway infrastructure.

Nace says instead of selling off the nation’s highways, lawmakers should heed the philosophy of President Eisenhower.

“We ought to start an ‘Ike Was Right’ campaign – because that’s how we’d like to see highways funded,” he said. “There’s no need to have any toll roads at all. It could all be taken care of at the fuel pump.”

Financial woes?
According to reports, the consortium that leased the Indiana Toll Road in 2006 isn’t on great footing right now. The Financial Times says the Cintra-Macquarie consortium, doing business as ITR Concession Co., has been burning through an account that is supposed to act as a buffer against $4 billion in loans, according to the article, which adds that the company could end up in default.

Land Line has not been able to independently verify the claim, but the recent economic downturn and decline in traffic on the roadway certainly cannot be good news for the operators.

“I don’t think they reaped as much from the investment as they thought they would,” said owner-operator Mark Elrod, an OOIDA life member from Peru, IN.

He says he hasn’t used the Indiana Toll Road at all since it was “sold” in 2006, although he admits he’s not in the region very often.

Elrod points out that the legislation that created the Indiana Toll Road in the 1950s stated that the tolls would come off once the roadway was paid off. That obviously hasn’t happened, and it’s not about to happen anytime soon because the Cintra-Macquarie lease is scheduled to last through 2081.

“It shouldn’t be a lifelong cash cow,” Elrod said.

The issue of privatization brings out all sides, but one thing most truckers agree on is that existing taxpayer highways should not be converted into toll roads.

“I’m not against a public-private partnership if it’s done right,” Elrod said. “One thing I’m definitely against is tolling existing roads.”

Tolling wouldn’t bother truckers so much, Elrod says, if the projects involved new highways or lane capacity, also known as “greenfield” projects. He says greenfield projects paid for with tolls would be OK as long as highway users benefit and the tolls are removed once construction is paid for.

Copyright © OOIDA

Grimm: Privatization reaps 'corruption'

Link to article here.

"The speakers just avoided discussing the scary aspect of privatization — how to keep public assets from getting gobbled up, for below fair-market prices, by Florida’s political bag men. They’re pretending not to see the unseemly potential of putting public institutions up for sale. They didn’t mention the influence peddlers who’ve co-opted so much of state and city and county government."

Posted on Sat, Jun. 25, 2011

Privatization’s unspoken risk: Corruption

By Fred Grimm
Miami Herald
This email address is being protected from spambots. You need JavaScript enabled to view it.

The future of government runs for 10.5 miles through the heart of Broward County, amid rocks and dust and earth-moving equipment and trucks and workers along Interstate 595, where motorists can look out their car windows and contemplate another three years of traffic hell.

Don’t think of them as commuters, stewing in their gridlocked resentment, cursing the knucklehead government planners who created this transportation mess. Think of them as potential customers for Actividades de Construcción y Servicios S.A., the Spanish highway and tunnel builder. You see brutal traffic jams. ACS sees a business opportunity — 180,000 potential customers a day of whom no small percentage will happily pay for the opportunity to zoom along on a fast private highway running parallel to the unwashed (and unmoving) masses.

It’s a brilliant business plan, nearly diabolical. After four years of construction exacerbating the already torturous traffic jams on I-595, even cheapskate commuters will be exhausted and ready to pay whatever ACS demands. Call it a toll, or call it extortion.

So the company is spending $1.8 billion up front, building two reversible toll lanes down the once grassy medium, which in the old days might have been considered public right of way. The notion of public is so passé, so 2010. ACS, with the state’s blessing, will be taking the free out of freeway. It’s the new ideal in Florida, squeezing profit and (maybe, hopefully, fingers crossed) efficiency out of government functions.

On Friday, outside a Marriott Hotel on Fort Lauderdale Beach, demonstrators near the entrance indicated that not everyone’s thrilled by the private business takeovers of public institutions. They held signs demanding, “Stop the War on Workers.”

If public workers felt left out of Florida’s first privatization conference, they weren’t out of the discussion. Cities and counties and state agencies were said to be leasing out government operations like hamburger franchises to cope with escalating worker pensions and health care costs, intransigent unions and rigid civil service structures. A city official from a community that had privatized water and sewer utilities said it was worth it, now that the private contractor’s human resources director, rather than him, had to deal with the worker “who had come in drunk for the fourth time.”

Much of the talk was about raising capital for major infrastructure projects. Private corporations, it was said, can cut years off the time it would take the government to finance and build big projects. The five-year I-595 project would have taken the state 20 years to build. And there was talk of how private companies were less risk adverse than public officials, cowed by their need to mollify the baying crowd.

But not much was said about the potential corruption that dogs public-private deals, which was like describing war without mentioning that there might be casualties.

Along with the I-595 project, the conference focused on two privatization success stories — water and sewage utilities owned by the city of Live Oak and in Clay County, both now enjoying improved service and lower costs. But those nice folks from Live Oak and Green Cove Springs come from another universe. South Florida probably has more lobbyists than Live Oak, population 7,000, has public workers. South Florida has elected officials in prison or facing trial on charges that they concocted their very own special public-private partnerships. Hey Toto, this ain’t Kansas, we’re trying to privatize.

Aside from the felons mucking up the works, the mad rush to privatize prisons, utilities, freeways, computer systems and chunks of public education has become so entangled with lobbyists and campaign contributions and donors to political slush funds that it’s tough to discern the sensible deals from low-down giveaways of public assets.

Broward Commissioner Kristin Jacobs told me last week that she was worried that the privatization push was behind a state law, just signed by the governor, “that passed under the radar. Nobody in the Florida Association of Counties knew it was coming.” She said the new law weakens open-records requirements tied to the bidding process and extends “the veil of secrecy” over so-called confidential information in the winning bids. Amid this privatization frenzy, as cash-strapped governments dole out public assets to private companies, she worried that the law was concocted to obscure sweetheart deals until they become... well... done deals.

Most of what this first-ever privatization conference broached sounded like sensible solutions to the brutal economics crippling state and local government. The speakers just avoided discussing the scary aspect of privatization — how to keep public assets from getting gobbled up, for below fair-market prices, by Florida’s political bag men. They’re pretending not to see the unseemly potential of putting public institutions up for sale. They didn’t mention the influence peddlers who’ve co-opted so much of state and city and county government.

Come the second privatization conference, maybe we’ll see signs demanding, “Stop the War on Taxpayers.”

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