DALLAS — The North Texas Tollway Authority’s decision in 2007 to pay $3.2 billion for the right to build the Sam Rayburn Tollway was a mistake that has limited its ability to take on new projects, according to NTTA chairman Victor Vandergriff.
“Honestly, in my opinion, that was a mistake,” said Vandergriff, who replaced Paul Wageman as chairman last September. “If we had known what was going to happen with the economy, I’m not sure the authority would have stepped up and paid to build that road. That $3.2 billion has taken a lot of cash reserves out of the system.”
Speaking at The Bond Buyer’s Texas Public Finance Conference in Austin Tuesday, Vandergriff said the NTTA is nearing the end of construction of the 12-mile tolled section of State Highway 121 north of Dallas, renamed the Sam Rayburn Tollway.
In order to win the project, the NTTA in 2007 had to outbid the private Spanish developer Cintra that had already been awarded the project.
Amid political upheaval in Texas over the prospects for private toll roads, lawmakers urged the Texas Transportation Commission to reopen bidding and allow the authority to put together a proposal. The NTTA had already passed on the project at the time.
Despite reservations, the Regional Transportation Authority, which oversees funding for projects in North Texas, chose the NTTA’s $3.2 billion bid over a comparable bid by Cintra. The Transportation Commission went along with the decision in June 2007.
The NTTA is trying to complete a similar deal to finance another $1.6 billion tollway on State Highway 161, west of Dallas. A decision on federal funding is delaying a final agreement, Vandergriff said.
By contrast, the other large tollway developer in Texas, the Harris County Toll Road Authority, has never bid for a concession, does not use federal funds, and has maintained a higher degree of autonomy.
The NTTA’s timing of the SH 121 toll bidding proved disastrous, coming the year that the economy peaked and the credit markets began to freeze.
After closing on the deal, the authority had to find a way to issue long-term debt to finance the project in 2008 when the auction-rate markets vanished, Lehman Brothers was disappearing down the rabbit hole, and other major underwriters were merging or converting to commercial bank models.
At the same time, soaring gas prices were reducing tollway traffic nationally by nearly 4% in 2008, according to statistical reports. The economy’s deep slump in 2009 would add further stress to toll revenues.
The authority’s financing model was based on its A-level rating, which it managed to maintain from Standard & Poor’s and Moody’s Investors Service. When Fitch Ratings lowered the NTTA to BBB-plus, it dropped the rating agency.
Vandergriff, a business executive from Arlington, joined the NTTA board chaired by Wageman in September 2007, after the final bidding decision had been made in June.
Despite the problems with SH 121, Vandergriff said that toll authorities have become the default providers of highways in the region, since the Transportation Commission is limited in its ability to take on new projects.
The Legislature in 2009 halted all private concession agreements that were not already under consideration. The current session could revisit that decision and allow private developers to build new tollways.
Republican leaders have ruled out any increase in the state fuel tax, which was last raised in 1991.