Concerned Citizens Addressing Critical Transportation Issues
Privatization of toll road has certain risks, incentives
BY Roger Williams rwilliams@floridaweekly.com Dec. 4, 2008 
We built it, we own it, we pay $2 or $2.50 to drive across it, we earned $23.5 million from it last year, and we're spending $94 million to resurface it now.
By just after mid-century, we could be taking in almost a billion dollars a year from it.
Whether that longrange estimate is merely futuristic fantasy (it comes from Bill Thorp of the Florida Department of Transportation, whose $954 million figure is based on a $10 toll), one thing is certain: Alligator Alley, the 78-mile artery connecting Naples and Hollywood is a prize, a golden goose worth a lot more than it costs us to maintain.
But come Friday, Jan. 9, we'll consider letting somebody else have the goose.
Several foreign companies are bidding to lease the Alley for 50 years, squeezing sizeable profits from it in return for maintaining and managing it, and providing an as-yet-to-benegotiated sum, probably in the high hundreds of millions, up front to the state.
|
That's the plan pushed by Gov. Charlie Crist and the FDOT. They face budget deficits that could reach $4 billion this year and next, experts say. And since the state has cut or held down property taxes, they lack a traditional and obvious source of money to fix Florida's infrastructure.
Throughout the state, aging roads and bridges need work. In Collier, Lee and Broward counties, whose citizens do most of the regular traveling on the Alley, that's especially true. Activists here want the state to use their toll money to help other projects in their counties, not to pay for work elsewhere in Florida, they say.
Whatever the source of income, FDOT needs cash. Public hearings this week in Collier and Broward might have come about because of clamorous public resistance to the notion of getting that cash by turning over the Alley and its potentially huge future profits to outsiders and privateers.
Or not.
More time — for input or bids?
"FDOT officials have said that extending the deadline (for bids to lease the Alley) to Jan. 9 will give more time for public input. Poppycock. Public input is inconsequential to the governor or to the FDOT," surmises Gina Downs, director of the watchdog Citizens Transportation Coalition, based in Collier County.
The real reason for extending the deadline, she says, is more likely "that they need more bids. We know that of the original six bidders, two have severely altered financial pictures. One partner was Lehman Brothers…enough said. Another partner was Goldman Sachs."
Other American banks partnering with the foreign bidders included J.P. Morgan and the Carlisle Group.
In the case of Goldman Sachs, Ms. Downs points out, the company's so-called debt ratio — the money it can use to invest based on its total assets — has gone into the basement, "from the 20s to, I believe, 12."
Goldman Sachs, through an infrastructure investment arm called G.S. Global Infrastructure Partners, teamed with a Spanish firm to be one of six original bidders for the Alley who presented their cases to officials in October. They called their partnership Everglades Parkway Partners.
But that was then.
"It is doubtful they could add this type of leveraged purchase to their portfolio with an adjusted 12 percent limit," concludes Ms. Downs.
In other words, the company's total assets would not be enough, if they can now invest only 12 percent of that figure, to offer a fair or competitive price for Alligator Alley, Ms. Downs says. "So assuming (the Lehman Brothers partnership and Everglades Parkway Partners) have dropped out, four players remain."
Questions and critics
Any company that bids to lease the Alley must rely on its own experts, hired from a very small pool of qualified consultants, to judge what the toll road might really be worth over the long haul.
The same is true of FDOT officials, who are accused by critics of not doing their homework so far, and thus putting themselves — and us — in a position of giving away the Alley too quickly and cheaply.
One of those critics has been Sen. Dave Aronberg, the Greenacres Democrat reelected in November to represent the sprawling District 25 that stretches coast-tocoast across Lee, Charlotte, Glades, Hendry and Palm Beach counties.
"The idea to cede control over Alligator Alley to foreign-owned companies was born out of desperation," he wrote recently, offering an opinion to readers of a daily newspaper.
"The suitors are all foreign-owned because no American company submitted a bid. The 'For Lease' sign exists because the state wants to fill a large budget hole without any noticeable tax increases. The temptation is a short-term infusion of cash: up to $850 million over the next 50 years."
In Naples, another critic of the state plan, Bob Murray, offers something of the same argument online at www.napleschamber. org, the Web site of the Greater Naples Chamber of Commerce, which posts both a pro and con opinion on the issue.
"There are areas of work that can be accomplished more efficiently by the private sector, but this isn't one of them," insists Mr. Murray, who argues that the status quo is sufficient.
"This is nothing more than a gimmick to get cash quickly, and just about everyone knows that. Why are they going with this crazy scheme? Well, because they can — because our government decided they wouldn't be faulted for raising revenue for the so-called current need through means that wouldn't be determined as bad or good until they left office. That is not a good reason by any calculation.
Ms. Downs of the Citizens Transportation Coalition eagerly details her questions, dividing them between the topic of tolls on the one hand, and bad business in the form of a giveaway lease on the other.
About tolls, she wonders what will prevent a private company from making them uncomfortably stiff.
About bad business, she lays down several concerns.
1. When other states have leased roads to private companies, they've asked for more money than FDOT officials or the governor have suggested recently (figures ranging from $504 million to $850 million have been mentioned by state officials).Why?
"The lowest-priced road per mile to date was the Indiana-Illinois Toll Road, a 159-mile roadway, which sold for $24 million per mile," Ms. Downs reports. At that price the Alley should be worth almost $1.88 billion, she adds. And at Chicago Skyway prices (a rough comparison since it's a bridge and flyover, mostly), the Alley could be leased for about $18.3 billion.
"In the latest attempt at selling a road, the Pennsylvania Turnpike, Gov. Ed Rendell had a signed contract with a foreign investor for $12.8 billion, which averaged $80 million per mile," Ms. Downs says. At that price the Alley could be sold for $6.24 billion.
In June the Pennsylvania contract secured by Gov. Rendell was turned down by the state legislature in a 185-12 vote.
2. Isn't increasing the toll to $3.50, and repaving the Alley for $94 million, just window dressing at taxpayer expense to make the road a more attractive purchase to buyers?
Tolls were already increased by 67 percent in 2006-2007. But funds from that increase, and from re-bonding, were not spent according to plan, Ms. Downs claims.
Officials have partly ignored the justifications for those moves after they occurred, she says, ticking off a checklist:
"More funding for Everglades restoration (what's new?); more troopers and road rangers patrolling the Alley (didn't happen); construction of a rest area and recreation access on the Collier County side of the Alley (didn't happen); Oh, and repaving of the entire 78-mile roadway. Somehow THAT happened."
3. Another question is what happens if state officials bound to a 50-year lease decide to build a commuter rail line across the Alley, offering commuters and heavy users a chance to travel the way people in New Jersey, for example, travel in and out of New York City? Or if they decide to rebuild U.S. 41 to the south of the Alley?
Ms. Downs fears that "no-compete" or "adverse-action" clauses of the kind officials agreed to when they turned over toll roads to private companies in Colorado and Texas could tie the hands of any Florida officials forward-looking enough to seek alternate means of travel across the Everglades.
Politics as usual?
In all of this, Ms. Downs and many others see a cynical and calculating effort by state managers and elected leaders to grab quick money without having to disappoint voters by raising taxes.
The governor's pressing deficit problems are driving him, she insists, along with his desire to retain political capital.
"He's doing an Alligator Alley lease plan for the same reason he raids the Lawton Chiles (tobacco settlement) fund, the Sadowski (affordable housing) fund, etc., etc. We used to call him Charlie 'Sell It and Spend It' Crist. Now we've added 'Raid It' to that moniker."
Answers and defenders
Not everyone accepts this line of thinking, however. In Naples, an employee of the WilsonMiller engineering firm, David Rivera, argues on the Chamber of Commerce Web site that if state officials can meet certain criteria, they should lease out the Alley.
The reason to consider those criteria in the first place, he says, is that if Florida doesn't lease the Alley, then making money to fix the state's infrastructure "would most likely require… additional fees and taxes that politically have not been acceptable to the community in the past." Mr. Rivera suggests five criteria for a deal: • First, he says, any lease should provide a "windfall" for transportation needs in Collier and Broward counties,
alone.
• Second, all profits should be directed to the state's transportation needs, and not other needs.
• Third, a private company should take most of the "revenue risk" and pay a fair price for the value of the road over the 50-year period, in today's dollars.
• Fourth, Collier and Broward counties should decide how much each will get before the deal is done.
• And last but not least, how the money will be spent — on which projects and where — should also be decided before any lease is signed.
(Note: WilsonMiller has a transportation division, and the firm's retired CEO, Bill Barton, chaired the Southwest Florida Expressway Authority, which supported a toll road in future lanes five through 10 from Golden Gate in Collier County to Colonial Boulevard in Fort Myers. That's been put on hold, and lanes five and six, now under construction, will be toll-free.)
Defending the plan
At the FDOT, officials have answers to many of the critics' questions. And they ask for patience in the case of other questions, where answers will be easier to decide after Jan. 9, they say.
As for the question about increasing tolls on the Alley, the state will control that, not a concessionaire, promises Kevin Thibault, FDOT assistant secretary for engineering and operations.
"I've said in public meetings exactly what it's going to be from now until 2050," Mr. Thibault answers. "I'm only raising it a buck, from $2 to $3 (for those who pay tolls in advance, and to $3.50 for cash customers). "After that," he adds, "I won't touch it again until 2011. And then, I should be indexing my tolls to the CPI (the Consumer Price Index) — we assume 3 percent, since we don't know what that's going to be."
When it comes to privatizing a public road, that has already happened in part.
"I have DOT employees acting as contract managers, but the toll collection is all private sector now," Mr. Thibault says. "The whole Alley is pretty much private sector. The guy cutting grass, the guy collecting tolls - that's all private."
Not only that, but there's little difference between leasing to a private firm or raising the tolls and re-bonding as a state action, he argues.
"When I go and get a bond issue, I'm pledging future revenue to pay back the bond, to pay back that debt service.
"So there is little difference. If the state does it, we've tied up those revenues for the duration of the bond issue. I'm going to pay back those bond holders."
But there is one difference, he adds: A private company will give the state money upfront and keep the revenue, but if a "downturn in traffic" occurs, taxpayers would still have to pay bond holders, and maintain and operate the road.
In the contract Mr. Thibault imagines securing, however, the private company would be obligated to that instead.
Learning from others' mistakes
And if the road were closed for some emergency reason — say a hurricane or a terrorist act — a clause in the contract would protect taxpayers from having to make up the difference in lost traffic revenue.
That was not the case in the Indiana toll road leased to a private company three years ago. When it was shut down because of an emergency, taxpayers had to pick up the tab for lost traffic.
Florida officials have learned from those mistakes, they claim.
"When (bidders) give us their financial models (on Jan. 9), they're going to show us what the traffic revenue is going to be, the rate over time, and the return," Mr. Thibault says. "If they don't achieve their rate of return, that's their problem. I'm not locked in."
Since, as Sen. Aronberg has pointed out, the only two ways a concessionaire can make money on Alligator Alley are to raise tolls and reduce maintenance costs, such a company may do different calculations than the state when it figures why this should be a good business deal, Mr. Thibault suggests.
Trying to anticipate the thinking of bidders, Mr. Thibault offers this scenario, also promising that no state contract would include a no-compete clause, or prohibit the state from building a rail line, for example.
But that shouldn't bother a concessionaire.
"He might be more liberal in the number of trucks or axles he estimates," he says. "He may figure the reality of a rail line from Fort Lauderdale to Naples wont happen in the first 40 years. In the last 10 years, 'I'm not worried about it because I've covered my costs,' (a concessionaire might say).
"He can also be aggressive because the long term saves him a maintenance scar. We'll be done resurfacing the whole Alley, and that lasts about 12 years. So he knows he'll have to resurface three or four times.
"But he may be able to say, 'I'm going to do a different pavement design that costs more now, but I can skip a cycle or two. If I use concrete pavement, I can get 40 years out of it instead of 12, but it's twice the initial cost.' So he may have capital built up that says, 'For the long term that's more effective. And then I don't have to worry about maintaining it.'"
Mr. Thibault remains open to any possibility — including dropping the whole idea, he claims, if the bids are not worthy.
The sagging economy and the crash in the banking industry no doubt will have significant impact on the matter of Alligator Alley — from the size, nature and number of bids that come in to lease the road, to the final decision the state makes.
Time will tell just how big an impact — but not until the bidding begins, in the New Year. The Florida Dept. Of Transportation Continues Its Privatization Of Alligator Alley Which Links Southwest Florida To Broward County MIAMI (CBS4) Dec. 4, 2008
************
Debate Over The Right To Control Alligator Alley
In April, the Florida Department of Transportation publicly began steps to lease Alligator Alley's 78-mile toll road to a private company for 50 to 75 years.
The deal has gained myriad detractors from every walk of life, including local municipalities and officials from within the state legislature.
There was a final public hearing on the idea in Broward on Wednesday evening, where residents were adamantly against it.
Joann Hollingsworth, a resident in Southwest Ranches, said "I believe if they brought it to a vote of the people and trusted their own people this would not even be a consideration."
The state wants to lease the highway for a large sum of money which they would get upfront, and that would be used on transportation projects in Broward and Collier counties. The highest bidder would keep the tolls until 2069.
State Representative Matt Hudson, whose District 101 encompasses Alligator Alley, explained that "Both Broward and Collier county commissions have signed resolutions opposing it." He added he's only met one constituent in favor of the plan.
Rep. Hudson went on to say, "Think about 50 years ago in Florida, we didn't have air conditioning. We barely had mosquito control, yet we're looking at entering into a lease for 50 years from now. I don't know about you, but 50 years from now if you look at the last 60 days on the stock market, I'm not sure I want to prognosticate what's to happen in 50 years."
Originally, opposition to the lease was over foreign companies in Europe bidding, or even China, running the roadway. Now, the concern is there are U.S. banking companies also getting involved, such as JP Morgan and Goldman Sachs.
One analysis done last year said that leasing Alligator Alley - which currently generates about $23.5 million a year in tolls - would yield $504 million for a 50-year lease that envisions tolls going up to $3 next year and eventually to $6.75 in the next decade.
************
Outspoken public takes full advantage of final public forum on proposed Alligator Alley lease
By Leslie Williams Naples Daily News December 2, 2008
NAPLES — The church of transportation was all fire and brimstone Tuesday night.
Presented with one last opportunity to state their case in a public forum, Collier County residents spared no barbs for Florida Department of Transportation officials in railing against the proposed lease of Alligator Alley. The forum was held at the Hilton Naples from 6 to 8 p.m., with a turnout of about 40 people.
“You have no clue, and no right to bring us into this experiment, turn around in a few years and say, ‘That didn’t work so well.’ We’re stuck with it for 50 friggin’ years,” said Gina Downs, one of the lease’s most outspoken opponents in Collier County.
As Downs left the microphone, she was a little red in the face, as were many of the people who spoke at Tuesday’s meeting, the last in Collier County before six firms are expected to submit bids on the 50-year lease of the 78-mile road. Another meeting, the last in Broward County, is scheduled for Wednesday from 6 to 8 p.m., at the Signature Grand on State Road 84 in Davie.
Though previous meetings invited public comment, Tuesday’s meeting had an air of question-and-answer session, which invited plenty of interaction and a fair share of heated exchanges.
Project executive Kevin Thibault, an assistant secretary of transportation, said previous meetings allowed less of an opportunity to answer questions because FDOT officials did not know many of the details of the lease until recently. A revised draft of the lease agreement was posted last week, with added information about toll rates and maintenance requirements.
However, many questions Tuesday centered on perhaps the most important detail: what the state expects it can get for the road.
“Of my opinion, the Florida Department of Transportation should have a value before these bids even come in,” said Jim Flanagan, a Golden Gate Estates resident. “This information isn’t available to anyone to make a valid approach to make a decision on if this is a good thing or a bad thing.”
Flanagan asked whether administrative costs at FDOT would be reduced or increased if the state enters into an agreement with one of six teams, comprised largely of foreign firms. Thibault told Flanagan costs would not rise or fall — that the department already has staff in place to oversee contracts, even unprecedented ones in the state like a road lease.
Sandi Leddy, a Naples resident, used the format of the meeting to make her own point.
“These companies that are interested in leasing the Alley, why are they interested in leasing it?” she asked.
Thibault said they saw it as a way to invest in equity.
“To make money?” Leddy shot back. “So if they invest in the Alley, they’re going to make a profit. But if we invest in the Alley, we won’t make a profit?”
She was met with applause from the audience, a smaller turnout than at past meetings, where 100 people have come to protest the lease, signs in hand.
Thibault, flanked by District Secretary Stan Cann and FDOT’s attorney for the project, Kent Rowey, said private industry is better equipped to take on risk than governments. Additionally, he said, companies can afford to take steps, such as paving a road with concrete rather than asphalt.
It is more costly, he said, but lasts much longer and can be more cost-effective over time for private companies that have the start-up capital laying around.
Attendees, who continued to call for alternatives to the lease, particularly criticized officials for considering the deal during a recession, with bank failures becoming an almost weekly occurrence.
Rick Haylock, of Golden Gate Estates, raised the failure of Lehman Brothers, arguing that bank executives were unprepared to deal with the changing market. He said the remaining investment firms looking to bid on the alley are equally ill-equipped to take on a 50-year investment in Southwest Florida.
But Thibault, taking a cue from the fiery sermons of some of the meeting’s attendees, said the state has to be just as nimble in finding ways out of the economic crunch that has forced cutbacks in transportation spending state- and country-wide.
“We’re not going to put our heads in the sand and say, ‘Oh, I hope manna comes from heaven,’” he said.
But Haylock latched onto the budget issue.
“When things get tight, you tighten your budget,” he said. “You don’t go out looking for more money that you can spend wildly. We’re gonna make this the third rail in politics. The third rail is that if you vote for this, we vote you out.”
With a hearty thump of the lectern he took his seat, and the meeting ended.
Bids from six pre-approved teams are due to FDOT by 4 p.m., Jan. 9. A public meeting is scheduled for Jan. 12 for the department to formally announce the bids it received.
To view the draft lease agreement visit www.alligator-alley.com.
************
(Note from CTC: See the highlighted paragraph near the bottom of this article, we are learning for the first time that Yet Another Bidder has dropped out. With the collapse of Lehman Bros., the downgrading of Goldman Sachs, and the apparent outright withdrawal of Vinci, only three of the original six bidders remain!! Maybe our Alley is NOT such a hot commodity after all!!)
Alligator Alley lease far from done deal
By chelsea j. samuel • csamuel@news-press.com • December 3, 2008
Is a one-time cash infusion worth giving up 50 years of control?
That's the question posed Tuesday by opponents to the Florida Department of Transportation proposal to lease Alligator Alley, the 78-mile road connecting Naples and Fort Lauderdale.
But officials said the department has an option not to lease the road at all, if proposals don't meet standards. "We're just trying," said District One Secretary Stan Cann. "We're out there seeing what they're going to propose."
Opponents urged the department not to rush into a deal too fast.
The country got into its economic straits because of too many schemes that were too good to be true, said Bob Erbstein, who urged the department not to let outside companies get rich on toll money from Floridians. "I'd rather bet on Florida," he said.
Kevin Thibault, assistant secretary of transportation, said the state can't assume the kind of financial risk that foreign companies can. If a company pays the state a lump sum up front and the company doesn't bring in enough revenue, that's their mistake for overestimating the road's earning potential, he said.
The Alley brought in $22 million in tolls for the fiscal year that ended in June.
The state is going through this process to see how much money the private sector will invest in the road, which will experience a 50 percent toll increase in July. The department will compare its potential revenue sources to proposals from the private sector before making a decision. If the proposals come up short, none need to be accepted, he said.
Proposals are due Jan. 9 and will be opened in Naples on Jan. 12.
Thibault said one company, Vinci Concessions Development, has backed out from the deal. Thibault said he hasn't heard from other companies, including one backed by now-defunct Lehman Brothers.
"They may not even show up," he said. "The market will dictate that."
Naples resident Daniel Cook said assurances the department can back out of the deal was just talk but he said he feels more optimistic. "I learned a little more about the process going forward," he said.
