DALLAS -After months of disagreement between two powerful transportation agencies, high-pressure negotiations concluded with a plan to build State Highway 161 near Dallas as a toll road.

By setting a market value of $1.1 billion on the 10-mile project west of Dallas, the Texas Department of Transportation and the North Texas Tollway Authority allowed the highway to operate as a tollway.

The unusual weekend agreement, which required a meeting of the NTTA board on Sunday, also allowed work to begin on the highway immediately.

The sticking point on the project was agreement on the market value, a step that is required under a new law governing the development of toll roads in Texas. The new law, SB 792, gives regional toll authorities such as the NTTA first rights to build toll projects. But the NTTA and similar authorities must propose terms, just as private concessionaires do. To build the project, the agency must make up-front payments to regional governments while gaining access to tolls over a set period of time.

After months of negotiation between the authority and TxDOT, the two parties could not agree on a market value and were seeking to agree on a "negotiated value."

On April 7, the NTTA made a take-it-or-leave-it proposal to value the project at $1.2 billion. If TxDOT had rejected the offer, the authority would seek to back out of plans to build the tollway, leaving it to be built as a free road or in the hands of private developers. The Regional Transportation Council, a consortium of governments in the region, last week recommended keeping the NTTA on the project. A free road would mean no up-front payment to the RTC for use on other transportation projects.

However, TxDOT and the authority still failed to reach agreement. That prompted Lieut. Gov. David Dewhurst to meet with leaders of both agencies and state senators Friday to push for an agreement.

Negotiators agreed to trim the value of the project by $90 million. The RTC would receive half of all net proceeds on the toll road after 52 years. The NTTA had proposed keeping the revenues to itself in perpetuity.

On Sunday, the authority board unanimously approved the deal. Still, the NTTA will not make a final decision on whether to finance and operate SH 161 until June, chairman Paul Wageman said.

The authority is still digesting the largest bond deal in its history, $3.3 billion for the up-front payment to RTC for the right to build and operate State Highway 121 north of Dallas. The process for winning SH 121 was similar to that for SH 161, except for the fact that SH 121 had already been awarded to a private developer, Cintra Concesiones Infraestructuras de Transporte. The RTC, at the urging of state Sen. John Carona, R-Dallas, took the project away from Cintra and awarded it to the NTTA.

Cintra, meanwhile, is waiting in the wings to build SH 161 if the authority should decline the project.

One of the NTTA's chief concerns is that taking on more debt could harm its credit rating, which slipped after it agreed to finance SH 121. The new bond issues tripled its debt load, prompting a downgrade from Fitch Ratings to BBB-plus from A-minus. The authority dismissed Fitch from rating the most recent bond issues as a result.

Standard & Poor's and Moody's Investors Service maintained their "A-category" ratings on which the NTTA had based its financing model. But Standard & Poor's issued a one-notch downgrade to A-minus after the $3.3 billion debt was approved, while Moody's maintained an A2 with both agencies holding the outlook at stable.

 

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.