This story in Dallas’ Only Daily newspaper, which details how the North Texas Tollway Authority has had to borrow money from a bank — at a variable interest rate! — to make a debt payment deadline because it can’t sell its bonds in the wake of the implosion of the world’s credit markets, is incredibly important. It’s also very difficult to understand, so bear with me.
There are a couple of key points:
First, the tollway authority bet on the come a year ago, and didn’t sell $3.5 billion in long-term bonds to finance its Highway 121 deal. It figured it could get a better deal by selling the bonds piecemeal over the next 12 months, instead of being forced to do it when it made the agreement to take over the 121 project. This is apparently very unusual for agencies like the tollway authority, and may be about as close as they can come to creative financing. (Interestingly, the story doesn’t say if the tollway authority got a good deal on that $3 billion-plus or what the variable rate is on the bank loan.)
Second, the story notes that the tollway authority was stuck with $225 million of the $3.5 billion it couldn’t finance via bonds because of the credit market collapse.
So here’s what we need to ask, given that an agency that is “cash rich and credit worthy” can’t sell municipal bonds to finance a current project:
• How did it get in this situation? Why didn’t it do the financing in the time-honored, traditional municipal bond way? Are we going to see this from other agencies, especially if they aren’t cash rich and credit worthy?
• How will the credit crunch affect the cost of the Trinity toll road? How will the extra cost incurred by the tollway authority to pay for 121 affect other projects? As Jim Schutze has noted, the Trinity’s cost -– before the credit crunch -– had already exceeded what we were told we were going to pay. Where is the extra cash going to come from?
• Will anyone tell us these things? Given DART’s $1 billion shortfall and the missing $80 million or so at the DISD, I don’t have a lot of faith that anyone will discuss it unless we ask, and ask forcefully.
• How will the credit crunch affect other municipal bond-type projects, like the convention center hotel and the Parkland proposal that is on November’s ballot? I’m asking because I don’t know. If we approve the Parkland bonds, which I’m told are desperately needed, will the hospital authority even be able to sell them? Will the authority get the interest rate it needs, or will it be forced to raise the rate, which will make the bond proposal more expensive than first planned? Obviously, the same questions apply to the hotel, and we need more from Mayor Park Cities and the city council than to close our eyes and click our heels three times and all will be well.
The Wine Curmudgeon 