DALLAS - Harris County, Tex., hopes to reach a preliminary agreement with the Texas Turnpike Authority to acquire the Houston Ship Channel toll bridge during a meeting scheduled for today, the head of the county's toll road authority said.
Under the county's proposal, Harris County would take over the bridge and, by issuing bonds, defease the debt obligations of the Texas Turnpike Authority, which is attempting to head off default of junk-rated junior lien bonds. The authority floated the junk bonds about eight years ago to cover revenue shortfalls on the bridge, which has lost money since it opened in 1982.
"We finalize the agreement Monday with the TTA," said Wesley Freise, executive director of the Harris County Toll Road Authority, last week. "Right now, I don't see that the deal won't be consummated."
If approved, the plan would go to the Texas Turnpike Authority board for possible action when the agency meets in Dallas on Dec. 16. "I fully expect that we will be able to recommend to the Texas Turnpike Authority a proposed contract that will effect the transfer of the bridge," TTA Chairman Luther Jones said.
However, some industry sources are not as optimistic that the deal to transfer the debt-laden Ship Channel bridge is firm. The transfer depends on a finalization of other agreements, including one to obtain federal funds for connecting toll roads, the sources said. Failure to get federal funds could stall the transfer.
"If s a credible plan, but I think it might be premature to say this is the final plan," said Peter D'Erchia of Standard & Poor's Corp. "We have looked at number of restructurings and refinancings for the Ship Channel Bridge, and they haven't occurred."
Freise said the Harris County Toll Road Authority would defease the junior lien debt as well as the senior lien debt on the bridge by issuing $260 million to $270 million in general obligation bonds.
Currently, there is about $85.74 million in senior lien debt, and $74.108 million in junior lien debt, a turnpike official said. The debt service on the junior lien bonds will more than double between 1995 and 1996 when it rises to $21.45 million from $9.36 million, said Harry Kabler, secretary-treasurer of the turnpike.
Under the Harris County plan, the general obligation bonds would be issued in the first quarter of next year when a final deal could be approved, Freise said. The proceeds would be used to buy U.S. Treasury bonds to be put in escrow to pay the debt service.
Harris County already has authorization to sell the bonds, Freise said. In 1983, voters approved expenditures of $900 million to build toll roads, and the county has $350 million left, part of which will be used to defease the bonds.
"The issue of the bond referendum was to complete Beltway 8 and the bridge is part of Beltway 8," Freise said.
As part of the plan to acquire the Ship Channel bridge, Harris County is planning to complete 28 miles along an eastern and southern section of the Beltway 8 toll road. The road is intended to provide a critical link between the county's east and west sides, relieve traffic congestion, and provide additional traffic and revenues to the Ship Channel bridge.
As a result, Harris County has made the receipt of federal or state funds to complete the Beltway 8 project a condition of taking over the Ship Channel bridge.
This fall, the Texas Transportation Commission agreed to try to secure up to $90 million in Federal Highway, Administration funding, which helped clear the way for the transfer of the bridge.
Freise said Harris County, federal highway, and state Department of Transportation officials are hammering out legal aspects of the agreement, and he expects the final deal to be signed in 60 days by all three parties.
Initially, a sticking point had been that, Harris County needed to repay the federal funds from toll road revenue, but that has been cleared up. "We have been told that Harris County does not have to repay funds," Freise said.
If the federal funds are approved, Freise said the county intends to proceed with the $300 million toll road project. It is now determining specifics on how to pay for its $210 million share of the project if or when the $90 million in federal funding is received, he said.
In general, a combination of revenue and general obligations bonds could be used to finance the project, in addition to the drawing of an unspecified amount from $120 million in surplus funds in the authority's account, Freise said.
Rating agency officials said they would want to study the specific repercussions of the plan before making comments. But Standard & Poor's D'Erchia said. "Based on what they did discuss, this purchase would not be sole reason for a rating change."
Recently, Standard & Poor's affirmed its AA-plus rating of Harris county,s general obligation debt and assigned its AA-plus rating on the county's $116.4 million road and refunding bonds and on $39.8 million permanent improvement refunding bonds.
However, the rating agency revised its outlook from stable to negative. "The negative outlook reflects the countys significantly reduced financial reserves," a CreditWire release said. "For the current rating to be Maintained, Standard A Poor's would expect a ready increase in the county's fund balance reserves."
