Registration Fees Are Key for El Paso Mobility Authority

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DALLAS – With doubts over the future of tolling in El Paso, the Texas city's designated toll authority will issue $35 million of revenue bonds backed by vehicle registration fees this month.

The Camino Real Regional Mobility Authority bonds will finance a variety of non-toll projects in El Paso, officials said.

Bearing 30-year maturities and an A-minus rating from S&P Global Ratings, the subordinate-lien bonds are expected to price March 22 through book runner Citi, led by managing director Ron Morrison.

Emily Hundley, vice president at First Southwest Co., is financial advisor, with Paul Braden of Norton Rose Fulbright as bond counsel.

The upcoming sale will be the sixth in CRRMA's 10-year history.

"We anticipate strong demand," said Raymond Telles, executive director of the authority. "This is a very stable repayment source."

Although state law authorizes regional mobility authorities to finance projects through tolling, the CRRMA has no outstanding debt backed by toll revenue and manages only one tolled project – the 7-mile-long Cesar Chavez Express Toll Lanes.

That project has created doubts about the viability of tolling in a city with high levels of poverty. The toll lanes are running at a near $593,000 deficit over the past three years.

An assessment of the toll lanes by Texas A&M University's Texas Transportation Institute found "the toll lanes could severely impact residents in this community who live below the poverty level."

Telles said that the managed lanes in the middle of the freeway operate at a disadvantage because they do not connect to another tollway.

"The tolled lanes are only intended to be utilized during peak periods," Telles said. "Outside of that they don't see a lot of traffic."

The under-construction Border West Expressway toll road is designed to connect with the Cesar Chavez toll lanes, he said.

State Rep. Joe Pickett, D-El Paso, has taken the lead in opposing tolls on the two highways. Both were financed by TxDOT with no project revenue pledged to bond debt, so there is no need for tolls on either one, Pickett argues.

"This project was part of a different era, a time when the Texas Department of Transportation was forcing communities to 'toll' as part of their transportation plans in order to make it look like 'everyone' had accepted the concept of toll roads or no roads," Pickett wrote in an El Paso Times opinion piece.

Although RMAs are authorized to manage toll projects in their regions, they do not have to rely on tolling, Pickett noted. Furthermore, tollways cost more to build than freeways.

Telles said that CRRMA does not object to removing tolls, as long as TxDOT agrees.

"We would entertain a discussion of removing them," Telles said of the tolls. "We told him (Pickett), certainly, we would consider removing them. We've had some fairly detailed discussion with TxDOT."

In a letter to TxDOT, CRRMA asked that the state's debt incurred on the Cesar Chavez toll project be shifted to the new Border West Expressway, which will consist entirely of toll lanes. If the debt is shifted to Border West, the tolls on Cesar Chavez would be removed, and TxDOT would assume operation and maintenance of the Border Highway.

Regional Mobility Authorities were a product of the Gov. Rick Perry era of highway finance, when tolling was seen as the only viable alternative to raising the fuel tax, a taboo among Republican politicians who control the state.

Under Senate Bill 342 passed in 2001, RMAs were authorized to finance, design, construct, operate, maintain and expand a wide range of transportation facilities and services. Potential projects included tolled and non-tolled highways, ferries, airports, bikeways, and intermodal hubs.

Financing tools included tax-exempt revenue bonds, private equity, public grants, government loans and revenue generated from existing projects.

The Camino Real RMA is unique in Texas because it was created in 2007 by the city of El Paso, rather than the county. Eight other RMAs were created by one or more counties.

With no capital resources of its own, the CRRMA relies on a $10 per vehicle registration fee on all non-government vehicles in the county. The fee cannot be reduced until all bonds are paid off.

The authority's initial $230 million of debt came in 2008 and was followed by another $230 million in 2012. Most recently, the authority issued $72 million in 2014. The authority's senior-lien bonds carry S&P's AA-minus rating.

Subordinate lien debt service payments begin in fiscal year 2018, with maximum annual debt service occurring in 2044. At that point, the ratio of revenue to debt service declines to 1.02 times based on audited fiscal 2015 pledged revenues, S&P said.

CRRMA is constrained, in the opinion of S&P, by its "limited operating responsibilities, coupled with a service mandate to fund transportation-related capital projects, which creates a disincentive to issue additional parity debt as needs arise and revenue growth allows."

Along with the highway projects, CRRMA is working with the city on a 4.8-mile, $97 million streetcar project that will run from one of the international bridges on the Rio Grande to the University of Texas at El Paso campus.

While the RMA is overseeing construction of the project, the system will be operated by El Paso's Sun Metro transit authority when it begins collecting fares in late 2018.

To revive the streetcars that plied the streets from 1949 to 1974, the RMA is refurbishing six original streetcars built in 1937 and stored at the El Paso International Airport after the line closed. Although the restoration is more expensive than building replicas, the work is proceeding at the Brookville Equipment Corp. in Pennsylvania.

The streetcar project suffered a damaging financial and public relations blow last September when a hacker bilked the RMA out of $2.9 million in state funds. City officials said the sophisticated "phishing" operation made out phony invoices for work on the streetcar project.

According to an investigation by the city, the fake vendor exchanged a series of emails with the CRRMA.

During the exchange, the emailer submitted false checking account information that replaced the legitimate account for another vendor, city officials said.

Investigators said they intend to recover all of the stolen money.

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Transportation industry Texas
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