Dallas -- The Texas attorney general's office has refused in a letter to issue an opinion saying whether the Texas Turnpike Authority can sell the financially troubled Houston Ship Channel Bridge, possibly killing the bailout deal.
On Friday, project officials said they have not decided whether to seek legislative clarification, as the letter advises, or to ask the attorney general's office to reconsider.
Without either action, a senior state official said, the deal would not go through. Assistant Attorney General Jim Thomassen, chief of the office's public finance section, said Friday that without a clear opinion he would not approve a proposed $320 million revenue bond issue by the Beltway 8 Transportation Corp. to purchase the bridge and avert a default of existing junior lien debt in 1996.
"It is my view, based on that letter, that I would not be in a position to approve the bond issue," Mr. Thomassen said of the letter dated last Wednesday from First Assistant Attorney General Will Pryor. "What was needed was a blessing and they were unable to give that."
Under Texas law, such bond issues must be approved by Mr. Thomassen's office before they can be legally sold.
In the two-page letter, Mr. Pryor said those presenting cases both for and against the sale made valid but conflicting arguments as to whether the bridge can be sold or whether it must become state property once the bonds are defeased.
"In short, the Texas Turnpike Act neither explicitly authorizes nor explicitly prohibits the proposed transfer of the Houston Ship Channel Bridge," the letter says.
"In view of the magnitude of the proposed sale involved, we believe the best course of action for the Texas Turnpike Authority would be to seek legislative approval before proceedings with this transaction."
Mr. Thomassen said the letter was not an outright rejection of the plan, as some lawyers interpret it.
"It is in essence not a refusal to issue an opinion," he said. "It says that the attorney general and the opinions committee cannot issue an opinion because the law just isn't clear. The letter is not saying whether it could or could not be done."
But several project officials asserted that they were not ready yet to concede that the proposed buyout is dead, saying they may try again for a ruling.
"It is not dead," said John Crew, managing director at Dillon, Read & Co. in Dallas, which would underwrite the bonds to buy the bridge. "What we are going to do is make sure the attorney general has a full collection of all the facts and make sure they are presented to him."
Senior turnpike officials did not return telephone calls for comment on Friday.
Some advisers to Harris County, Tex., which created the nonprofit corporation, said a second request to the attorney general may be made shortly. Others suggested the next stop may be the Texas Legislature.
Wayne Placide, vice president of First Southwest Co. of Dallas, the turnpike's financial adviser, said the state authority may consider seeking a clarification of its ability to sell the bridge during a special legislative session that may be called after the Nov. 3 elections.
Gov. Ann Richards has said she might call such a session to deal with a court mandate to write a new school finance law. However, other issues, like the turnpike question, could be added to the formal call for a session.
Just last Tuesday, the turnpike authority voted to proceed with a plan that would have Dillon Read underwrite $320 million of junior and senior bonds to defease outstanding debt and build nine miles of new toll-producing roads leading to the bridge.
The board unanimously approved the plan with conditions that include a favorable ruling from the attorney general. Harris County officials have male similar requirements.
Turnpike officials have set a Dec. 1 completion date for the sale of the bridge, saying that if the buyout fails to materialize, the state could then revive its own plan for a $210 million restructuring of outstanding debt.
That plan was developed after two years of study by the authority, its advisers, and its underwriters, Lehman Brothers and PaineWebber Inc. The proposed debt restructuring has been stalled, however, since May.
Officials want to avert a default of the bridge's junior lien bonds. Consultants have determined that traffic and revenues would fall short in 1996 of debt service requirements. The troubled junior bonds were sold in 1985 to fix and earlier revenue problem.
"I don't know if they should wait," said a bond trader who has been following the bridge's dilemma. "If they wait until after the [presidential] election, the interest rates are going to up and that makes any deal harder to do on a project like this."
