DALLAS — After years of battling opposition to a $1.8 billion toll road proposal on the Trinity River near downtown, ­Dallas is facing another financial challenge to the star-crossed project.

The latest obstacle is the need to repair levees before construction could begin on the toll road.

Already, the city has been forced to divert millions of dollars in bond funds earmarked for a park and lakes on the river to repair levees found to be in worse condition than anticipated. Now, Dallas is considering tapping bond funds for the tollway to continue levee repairs.

The proposed tollway, designed to be built inside the river’s levees, has faced a long series of hurdles since voters approved the project as part of an ambitious plan to transform the drab riverbanks into a scenic watercourse and park.

Voters in 2007 narrowly rejected an initiative to halt the tollway. Then the U.S. Army Corps of Engineers discovered the levees were in need of costly repairs during a study for a new bridge that was part of the beautification plan.

Now financing appears to be the greatest threat to the project.

Of the $84 million approved by voters for Dallas’ share of the toll road, $37 million has already been spent for land and related costs.

The proposed builder and operator of the $1.8 billion road, the North Texas Tollway Authority, has said it is nearing the limits of its ability to finance new projects after taking on a record $7 billion in debt.

With bond money already shifted to repairs on the levees, Dallas City Council member Angela Hunt, an opponent of the toll road who led the ballot initiative to stop the project, is seeking to use the bond funds set aside for the road to continue the levee work.

The city has maintained that it can legally divert the parks and lakes bond proceeds to pay for the levee work. At its meeting yesterday, the council considered using $4.8 million of the bond funds designated for the lakes for levee repairs instead. It plans to debate diversion of the tollway bond proceeds.

City manager Mary Suhm says the city is committed under an agreement with the NTTA to reserve $84 million for the tollway. But at the same time, the authority has said it sees no opportunity for it to raise funds for the project for the next five years.

City officials have already conceded that the levee problems mean the proposed start date of 2012 for the tollway will be delayed. To raise more money, the council and Mayor Tom Leppert are considering calling for another bond election.

The financial issues come as both Dallas and the NTTA face threats to their credit ratings.

The authority, whose bond financing on the $3.2 billion State Highway 121 tollway north of Dallas is premised on an A-category rating, is clinging to an A-minus from Standard & Poor’s and an A2 from Moody’s Investors Service. In its recent decision to take on the $1.4 billion State Highway 161 project, the NTTA first checked with the rating agencies for some assurance that their senior-lien rating would not drop. The authority is taking on SH 161 with a loan guarantee from the Texas Department of Transportation.

Dallas this week was notified that Moody’s had shifted its outlook on the city’s Aa1 to negative in advance of a $330 million general obligation issue.

“Financial flexibility for the city of Dallas is narrowing as a result of multi-year draws upon general fund reserve balances and is a negative dimension of the city’s creditworthiness,” wrote analyst Douglas Benton.

Reserves have fallen from 13.3% of general fund revenue in fiscal 2008 to 5.8% in fiscal 2010, Benton noted.

Dallas still carries a stable outlook on its AA-plus credit rating from Standard & Poor’s.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.