North Texas public toll authority tops Cintra with $3.3b bid for SH121 concession

North Texas Tollway Authority (NTTA) are getting into the concession business. They say they can improve substantially on Cintra's proposal for SH121 north of Dallas in Denton and Collin counties. Today they put out a press release, an executive summary and a powerpoint on their bid for SH121 - the first time in the US that a public toll authority has made a bid in competition with investor groups for a toll concession.

NTTA's board of directors - local officials - met in special session today and unanimously approved the concession bid. The bid is being submitted to the Regional Transportation Council of the local association of governments.

This is all very odd. The original procurement was by TxDOT, which went along with the regional council's finalization of the concession. NTTA chose not to bid at the time. The belated bid after TxDOT/TRC had nearly completed the procurement and made a selection (Cintra) opens a legal pandora's box.  

The feds are wild about these developments and say they are a breach of federal laws and they may withdraw support and permits. There is no federal record of decision for this project and it could well be withheld.

(see coming separate article "Feds say NTTA move in breach of federal law on fair and open competition - may withdrawn funds, permits" - this report in the works)

NTTA bid

NTTA's detailed offer has not been made available but the summaries put out say NTTA's bid:

- has a present value of $3.33b (vs Cintra $2.8b) consisting of an upfront concession fee of $2.5b (vs Cintra $2.1b) and guaranteed annual payments equal in total to $833m (vs Cintra $700m) in present value 2007$s.

- an expectation of $1.3b in profits to be available locally

- provides for quicker project delivery than Cintra by five months

- involves $698m in construction cost vs $560m for Cintra

- has operating & maintenance costs of $560m vs $1.7b Cintra

- has $343m rebuild expenditures and $400m reserve maintenance vs zero Cintra

- toll rate growth "lower than CPI"

There is something about "revised demographics" - apparently some different population forecasts assumptions.

The bid presentation claims that NTTA's SH121 bid will strengthen five other regional toll projects:

(1) Chisholm Trail/SH121 in Tarrant & Johnson counties southwest radial out of Ft Worth
(2) SH170 in Tarrant, Parker counties. east-west road north of Ft Worth
(3) SH360 north-south TR between Dallas and Ft Worth areas
(4) Pres Geo Bush Tpk East Branch in Dallas Co
(5) Trinity parkway along Trinty River just northwest of central Dallas

The SH121 project is a 42km (26mi) highway that is about half built or committed by TxDOT and involves 12 lanes comprising 2x3 toll lanes straddled by 2x3 continuous frontage road lanes. The free frontage road lanes will be posted to a slower speed and than the toll lanes and traffic will ace signals at each cross street while the toll lanes will have bridging.  SH121 is a southwest-northeast trending route heading from the northeast fringe to Dallas Fort Worth airport and to Fort Worth. It partly parallels the President George Bush Turnpike of the NTTA.

NTTA talks quick close of the deal

NTTA says it has firm bankers' commitments for $3.5b for a concession close and underwriter commitments for a bond anticipation note sale, together with $75m in escrow on TxDOT's acceptance of the NTTA bid.

They say the project will cover debt service 1.35x to 1.97x and that NTTA's toll system coverage - it will pledge total system revenues - 1.52x to 3.03x.

A finance timeline provides for TxDOT acceptance within 30 days of the submission (early June), financial close in another 60 days (early Aug) and bonds to be sold in another 120 days (Dec 2007).

NTTA expects to get A rating for bonds issued in connection with the concession, and to have remaining debt capacity of $3b to $4b.

Stress tests of the forecasts, it says, suggest "robust cash flows."

COMMENT: A year or so ago NTTA staff said they had no interest in doing SH121. They were heavily committed to other toll projects in the region and were happy for a concessionaire to build it.

Now suddenly they are eager to build it, and can do better in a concession than the private sector. What a turnaround.

This is great. Maybe it sets a precedent in which public toll authorities will compete with investor groups for concessions, offering upfront funds and gaining contracts which assure them freedom from arbitrary political interference in toll setting and the like.  

Let the best proposals win.

Another precedent is a bad one. You don't do a procurement with one set of rules (only investor groups bidding) then, after a selection is made, change the rules and invite another bid.

That is banana republic stuff.

What happens now? Do the investor groups get to reconsider their bids?

If NTTA gets to top Cintra, doesn't Cintra have the right now to top NTTA? What about the others who submitted bids under the now trashed set of rules?

Investor groups may not litigate. More likely many of them will just stay away from Texas, writing it off as a place with a hopeless bunch of amateur politicians who can't get their act together. One session of the legislature they all endorse a sweeping program of concessions and the next they want to call it all off. There are plenty of other places to invest.

TOLLROADSnews 2007-05-07