DALLAS -- The Texas Turnpike Authority on Friday voted conditionally to sell all three of its projects in a surprise move that officials say signals a new role in the future for the agency in statewide transportation planning.
Under the plan, the authority would have no direct control of its existing projects, and would not be involved in future transportation needs in Dallas or Houston -- the state's two most populous areas.
The authority voted to proceed with a plan to transfer the troubled Houston Ship Channel Bridge to a Harris County-created corporation that would issue $230 million of bonds to finance the acquisition by Dec. 1. The revenue debt would be underwritten by Dillon, Read & Co.
At the same time, turnpike officials voted to sell the Dallas North Tollway and the Mountain Creek Lake Bridge to a separate county-created agency. Dallas County Judge Lee Jackson was at the meeting and expressed support for the plan, which has not yet been fully outlined.
If successful, the plan would effectively put the Turnpike Authority out of business in the state's two largest metropolitan areas.
Turnpike Chairman Luther Jones said the transfer of those projects depends on an arrangement that would ensure continued funding of the agency.
"The end result has to be that the Texas Turnpike Authority remains a viable state agency," he said in an interview. "I did not become chairman to watch over the dissolution of the" authority.
At Friday's meeting in Houston, turnpike officials said the move comes as they reassess their role in future transportation projects in Texas.
"It's not the intent of this resolution to gut this agency," said Jere Thompson, a turnpike board member from Dallas.
Ray Stoker, a board member and chairman of the Texas Highway Commission, said the sale of the two projects would enable the turnpike to play a greater role in transportation needs around Texas.
"I personally feel like local control is better than having a statewide agency, which allows another level of bureaucracy," he told the Houston Chronicle in an interview after the meeting.
Turnpike officials plan to meet this week with Texas Attorney General Dan Morales to discuss a new plan that would allow the authority to sell the Houston bridge.
Earlier last week, turnpike officials said they would likely back a plan by Harris County officials to use a rare provision known as the Texas Bond Validation Act to execute the transaction. Under the plan, a judge would be asked to rule that the authority could sell the project after Mr. Morales' office declined to say if the bridge could be sold.
However, officials have since dropped plans to seek a declaratory judgment in favor of a plan to effectively transfer ownership of the bridge to the newly created Beltway 8 Transportation Corp. through a never-used licensing procedure.
An investment banker familiar with the proposal said the authority would legally retain ownership of the bridge, but would transfer its management and obligations to the new authority.
Here is how the plan could work: The country-created corporation would purchase $100,000 of the Turnpike Authority's outstanding debt on the bridge and then use bond proceeds to defense the rest. The project has $88.5 million in senior debt and junior lien bonds that will be valued at $95 million in 2020 when the capital appreciation bonds mature.
As the sole bondholder, the country corporation could authorize the redrafting of the indenture to give the remaining, nominal amount of debt a final maturity that exceeds the life of the $320 million to be sold by Beltway 8.
The Turnpike Authority "would keep the bridge and keep the ownership," said Texas Assistant Attorney General Jim Thomassen, chief of the state's public finance section. "They would sell some kind of operating franchise to another party."
Such a move would apparently not require the approval of the Texas Bond Review Board, since the new debt would not be sold by a state issuer. However, the Texas attorney general's office would still have to sign off on the issue.
The idea of selling projects started as a solution to averting a default in 1996 on junior debt sold seven years ago as part of an earlier
bailout of the Houston Ship Channel V
Bridge. Ironically, the sale of projects may now encompass the authority's strongest project, the Dallas North Tollway.
The Dallas project had surplus revenues in excess of $9 million last year, which is a stark contrast to the $1 million-plus deficit the Ship Channel Bridge has run in recent years.
It is not clear whether the sale of the Dallas North Tollway would use the same licensing mechanism to transfer control of the project. Moody's Investors Service said the tollway has approximately $326 million in outstanding debt with a final maturity of 2020.
The Mountain Creek project has approximately $7.06 million of outstanding debt to be retired by 2007.
Wall Street analysts were surprised by the Turnpike Authority's vote on Friday. Robert Stanley, vice president and assistant director at Moody's, declined to comment on the plan, saying, "Until we get a chance to talk to them, we would not have any reaction."