[Texgreen] Where to find willing toll road lenders as fuel prices soar?

[Roger Baker]

As some may know, I have been skeptical that TxDOT, or their  
supposedly independent helper agency the CTRMA, will still be able to  
find willing lenders to provide funds to build toll roads on credit  
two years from now when TxDOT gets its federal NEPA permits.

Who is going to be willing offer the THIRTY YEAR loans to fund toll  
road deals, knowing that the price of gasoline will keep going up in  
close pace with price with the price of oil, and that the price of  
oil is going to be going up sharply as world production peaks.

Given the fact that the road lobby is fully organizing to get prop 12  
passed to permit a loan of $6 billion to be authorized to TxDOT out  
of general obligation funds bankrolled by the citizens of Texas, it  
gradually dawned on me who the sucker probably is in this game.

The record indicates that Texas voters are willing to support state  
amendments to approve pretty dumb stuff when its packaged right and  
in combination with a special-interest media campaign. Get ready for  
something like Austin's "TakeOnTraffic" on a state level.

Why would politicians be promoting a taxpayer-funded toll road  
approach when the CTRMA could just go to the banks and borrow the  
money on their own? Or borrow toll road money from those foreign deal  
makers like Cintra, who puts together the 50 year deals?

I think foreigner lenders are more and more after quality  
investments. At the same time, TxDOT has operated under the  
assumption that Macquarie Bank in Australia could wrangle up lots  
more Australian pension funds or something.

Probably it is because the CTRMA can't find the lenders anymore. Or  
not lenders nearly as generous as Texas taxpayers. Voters typically  
won't know much about the issue in a lightly attended election  
besides the traffic jam commercials they saw on TV urging them to  
vote for congestion relief.

As a matter of fact, oil went up to a record price of $85 --  TODAY!  
(in dollar terms we're now approaching the 1970s oil crisis peak of  
about $90/bbl adjusted for inflation).

This chart gives you a bit of historical perspective:

<http://static.seekingalpha.com/wp-content/seekingalpha/images/ 
OilPrices.GIF>

If you extended this chart to the end of 2007 and $85 per barrel, you  
can see a roughly straight line extending ever upwards.

It is doing so as total world oil production falls short of demand of  
the world economy, which depends on oil for nearly 100% of its  
transportation energy. Since aggregate world oil exports are  
stagnant, we're effectively rationing oil by price right now. Here's  
what the future looks like, as a chart, according to one smart  
analyst's supply-demand model:

<http://www.theoildrum.com/node/2828>

As a result of all the above considerations, I think any sober look  
at the facts would tell us that the roads are unlikely to generate  
the anticipated toll revenue growth, which are almost always  based  
on optimistic straight line projections of past travel demand trends.

But FHWA ridership figures indicate that driving in Texas (and the  
rest of the country) has stagnated, undoubtedly due to high fuel  
prices, for several years.

It is true that people have to drive to their jobs from their homes  
no matter what. But this doesn't mean that they won't move closer  
over time, or decide not to live in Hays County and commute to  
Austin, as the numbers provided to CAMPO by the land developers would  
indicate.

And this does not mean that the dollar will not get devalued and  
generate more inflation and the cost of driving will not compete more  
with the price of food, before the road construction even begins. It  
is thought that in good times, people will switch behavior a lot when  
gasoline goes to about $6 a gallon. This sounds like we can be in  
denial a little longer, but what if there is a recession next year  
and the price of gasoline is even $4 a gallon, it might bite just as  
hard (remember that we're bidding against other countries not in  
recession for a fixed world supply).

Electric cars? Forget it. The economic pattern is that it will take  
more than a decade to get most of the existing cars off the road. The  
percentage of hybrids on the road is still a small percentage of the  
total, and widespread adoption of plug-ins is more like a twenty year  
option, whereas the oil crunch is hitting now, and harder next year,  
etc.

It doesn't take a rocket scientist to line up this evidence and  
debunk the foolish economics of borrowing money to serve sprawl while  
ignoring fuel costs. In another two years everyone will be aware of  
the fuel price/driving demand problem, although TxDOT is attempting  
to ignore it as best they can.

Likewise, Austin's Mayor Wynn is a "green" mayor who is trying to  
champion reducing fossil fuel carbon footprint at the same time that  
he votes for a vast expansion of new road capacity using borrowed  
money. You can't wear both hats at the same time. Somebody needs to  
sit down and calculate the total greenhouse gas emissions that the  
vehicles on the toll roads would emit, assuming TxDOT's toll revenue  
numbers are right, and given the fastest replacement of the existing  
vehicle fleet and its replacement by greener fleets (powered by  
electricity made from coal?).

Anyhow we have another two years to take a closer look at the CAMPO  
plan and try to get public responses from CAMPO on to the tough  
questions.

It all amounts to a tall stack of good scientific evidence that we  
need to change course on transportation philosophy as soon as  
possible, versus a skinny little pile of self-serving claims that we  
need to bend over backwards to ignore global warming and current  
transportation economic trends so as to provide roads for people who  
don't live here now and may never come.

Unless, as the special interests are presumably hoping, we lure them  
here with publicly funded toll roads.

-- Roger