Macquarie Public Infrastructure model bleeding red ink on US Toll projects

Brisbane Times - Feb. 27, 2009
http://business.brisbanetimes.com.au/business/battered-n-bruised-20090227-8kbl.html

Battered 'n' bruised
While no one is game enough to predict Macquarie's demise, the global economic downturn is forcing the group to rethink its famed business model, writes Lisa Murray.
Indiana Governor Mitch Daniels basked in the applause as he entered a room full of state officials and reporters to officially announce the close of the state's $US3.8 billion toll road privatisation.

It was June 29, 2006, and Daniels had received the final payment from Macquarie Infrastructure Group and its Spanish partner, Cintra, which had taken over a 75-year lease on the Indiana Toll Road, the so-called "Main street of the Midwest".
Daniels was confident the deal would turn around the state's financial fortunes and he had big plans for the proceeds.

But he was not the only one celebrating.
In Sydney, Macquarie Group executives were riding high. Not only did its investment bankers just rake in $US32.6 million in fees but the group had also officially cracked the elusive US infrastructure market. The Indiana transaction followed deals to buy Virginia's Dulles Greenway and the Chicago Skyway, which was the first US road privatisation.

Together, the three infrastructure plays had netted Macquarie $US74.7 million in advisory and debt arrangement fees and had substantially boosted the assets under management of its biggest fund, MIG. That meant higher management and performance fees for Macquarie.
The stage was set for more deals to come. Despite a public backlash against selling off state assets, Daniels's counterparts, from New York to Alaska, were lining up to flog their roads and bridges to the highest bidder. What had started with a small motorway in north-western Sydney was working its way across the world's biggest economy. The "Macquarie Model" had arrived in the US.

It's a well-told story. Macquarie became a global brand buying up toll roads, ports, airports, car parks and water companies around the world, at times paying over a billion dollars more than the next bidder. The assets were piled with debt, often up to 85 per cent of the purchase price, and then rolled into listed and unlisted funds, which paid Macquarie advisory, management and performance fees. Yes, the group still had its traditional trading, funds management and banking businesses but it was the specialist infrastructure funds which put it on the map and drove earnings growth to dizzying levels.

However, the world changed in September last year, with the collapse of US investment bank Lehman Brothers, which ended any hopes that the subprime mortgage crisis would blow over.
Funding dried up, asset valuations started plummeting and debt became a dirty word, leaving the "Macquarie Model" all but dead and its management team scrambling to avoid disaster.
The US roads, a cause of so much celebration 2½ years ago, are struggling to repay their debts and Macquarie's share price, held hostage to a market awash with capital raising rumours, slumped this week to its lowest level since June 1999.

It is not just day traders and rumour mongers selling the stock; long-term investors, including its biggest US shareholder, Capital Group, have been abandoning ship. The shine has well and truly come off the silver doughnut.

"The strategy of buying an asset and gearing it up to generate returns - that game is clearly up," says Perpetual Investment's head of equities, John Sevior. Perpetual does not own any shares in Macquarie or its satellite funds. "It's an opaque business and it's very hard to understand the level of gearing. The gearing in the group is above our level of tolerance."
Copycats Babcock & Brown and Allco have already disappeared under a mountain of debts. While Macquarie's balance sheet is strong - thanks to a government guarantee on wholesale funding for banks, which has allowed it to raise a whopping $12 billion in offshore markets in just over two months - its satellite funds are struggling. Macquarie's Australian-listed infrastructure funds have had more than $12 billion wiped off
their market value since the start of last year. The local real estate funds have lost a further $5.6 billion.

Total losses for shareholders in the funds over the past 12 months range from 52 to 91 per cent, compared to a 37 per cent drop in the market's main index.
MIG's chairman, Mark Johnson, a former senior executive and deputy chairman of the group, says he "can't understand why prices have been marked down so savagely".
But he acknowledges the "Macquarie Model" will need to change. "Inevitably it must change quite radically because we are seeing the biggest crisis in credit markets since the 1930s," he told the Herald.

"Investors want certainty of survival. Anything that has high leverage is seen as risky and not what investors want. The flagship funds are under great pressure to adapt and to convince investors that their survival is assured and they are appropriate investments."

It was a bad news week for Macquarie. MIG announced that traffic had slumped on the Indiana Toll Road and Dulles Greenway in the US and they were using all available cash to pay back debt. It also wrote down its investment in the San Diego South Bay Expressway from $133 million to $11.6 million.

Macquarie Airports, meanwhile, was forced to dump a share buyback so that it could tip equity into Sydney Airport for the second time in three months to ease its debt burden and Macquarie's media fund, MMG, wrote down the value of its US community newspaper group, American Consolidated Media, by $127 million. Macquarie CountryWide and Macquarie Office Trust have sold US properties to pay down debts, MIG sold part of its stake in the M7 tollway to prove to the market how much it was worth and shore up its balance sheet and MMG slashed its dividend by more than three-quarters.

All of this means fewer fees for Macquarie and more write-downs on its stakes in the funds. The group has already announced an estimated $2 billion of total write-downs for the year to March 31 and it expects to report that profit has halved to $900 million. That is not a bad result given that almost no other investment bank in the world is in the black.
Even so, these debt issues hang over Macquarie as does the March 6 deadline for Australia's short-selling ban, which many believe kept the hedge fund managers at bay at a crucial time for the group. Those same hedge fund managers will no doubt be furiously running the numbers over Macquarie in the coming weeks, ready to pounce on any signs of weakness should the ban be lifted. Even with the ban in place, Macquarie was bruised and battered this week and forced to deny it had any plans for a capital raising.

But the problem for Macquarie is that varying degrees of disclosure among its many funds make it difficult for the market to understand the businesses and their debt positions and how they relate to the group.

That allows rumours to run wild. No one really knows how much debt is held across the group, but some analysts estimate it is more than $160 billion.

Jim Chanos, the president of the US hedge fund Kynikos Associates - who became famous for his early warnings on Enron - has been a vocal critic of the Macquarie Model. He says the model gave the group incentive to overpay for assets because the shareholders in the funds picked up the tab while Macquarie's fees were based on the size of assets under management. The higher the price, the bigger the assets under management, the more lucrative the fees.

Macquarie funds and their co-investors paid over $1 billion more than the next bidder for both Sydney Airport and the Chicago Skyway.

While assets in its funds are struggling with debt payments, there is no doubt Macquarie has always been very good at protecting the bank. Debt is held at the asset level. That means it is non-recourse to the funds, let alone to Macquarie, a clever strategy that essentially ring-fences any problems.

But it is not that simple. As one insider says, if an asset were to fail, while Macquarie may not be obligated to come to the rescue, the reputation risk would be "enormous". Taking action, on the other hand, could spook investors and affect its credit rating.

"At some stage, if a significant fund was in major strife, Macquarie might take the view that they need to protect the franchise," says Sharad Jain, a credit analyst at Standard & Poor's. "That would be a change in financial policy and we would need to consider that at the time as it is outside our expectations."

Macquarie says that will not need to happen as none of its funds is in "major strife". It has already managed $3 billion of refinancing since September. And in terms of its four main listed infrastructure funds, there is no outstanding refinancing for this year and only 12 per cent of debt needs to be refinanced over the next three years. But there are clearly some assets that are stretched.

MIG said at its results this week that the Indiana Toll Road had a debt service coverage ratio of just 1 times. That means that all of its operating income is being swallowed up by debt payments and is a concern given that traffic on the road, a mostly commercial toll road that runs 253 kilometres across northern Indiana, fell nearly 15 per cent in the last half. The ratio for Virginia's Dulles Greenway is 1.1 times.

Chicago Skyway's debt service coverage ratio was a more encouraging 2.1 times. However, a look at its 2007 full-year accounts, the latest available, shows the asset had total long-term debt of $US1.55 billion.

It reported revenues from its toll roads of $US53 million for the year, operating income of $US18 million, while its interest expense was $US95 million.

MIG argues that the US roads make up just 11 per cent of its portfolio by valuation. And it is important when looking at a single asset to keep it in perspective in terms of the size of the fund and the overall group.

"A number of these roads either have already, or will shortly, introduce scheduled toll increases which will see continued revenue grow and the debt service coverage position improve," an MIG spokeswoman said.

Andrew Chambers, from Austock Broking, is less optimistic. But he says the US roads are a small part of MIG's business.

"The US assets are clearly struggling and the outlook is not good but you don't own MIG for the US roads, you own it for its toll roads in Canada and France, which are very good assets."

In the past, sceptics of the "Macquarie Model" said higher interest rates would bring it undone. But the group argued that interest rates typically rose in line with inflation and higher inflation would mean increased tolls on its roads, airport charges and parking fees. As such, the higher revenue would be a natural hedge against rate increases.
But the current situation is different.

Debt is more expensive not because of interest rates, which are falling, but because people are placing a higher value on risk. So the margin that lenders are charging on top of the cash rate, to make it worthwhile for them to take on the risk, has increased.

At the same time, the slump in economic growth means it is harder for Macquarie to raise tolls, water rates and airport charges to offset the increased cost of its debt.

MIG's Johnson says there are no "life-threatening problems" in the funds or at group level.

"Macquarie's balance sheet is very, very sound," he says.
"The question mark is over the earnings trend for the next two or three years, but I think they are very well placed to benefit from the recovery."

Macquarie plays down the significance of the specialist funds business. But it still accounted for 20 per cent of Macquarie's income in the year to March 31, 2008, and just over a quarter of total advisory fee income came from work on the funds, according to its results presentation. Some analysts claim that number might be higher, depending on what you include.
The corporate governance group RiskMetrics calculated that in the three years to 2006, Macquarie's three biggest Australian-listed infrastructure funds - Macquarie Airports, Macquarie Communications Infrastructure Group and Macquarie Infrastructure Group - handed over more than $1.15 billion in fees to the group.
So there will clearly be earnings pressure as those fees drop and in some cases disappear. Despite these concerns, no one is game enough to predict Macquarie's demise. And in fact some even expect the group will thrive in a market where almost every company in the world will go through a restructure.

They've done it before.
Two of the group's business-transforming transactions took place after times of crisis. Macquarie bought its fiercest local competitor, BT Australia, in 1999 after the Russian debt crisis. And in 2004, as Asia was recovering from its financial crisis, it picked up the ING cash equities business in the region.

"Investors will make a fortune out of the recovery and Macquarie is best positioned to do that," one former executive says.
"They have lots of capital, they're smart and they still have a very diverse business. They will ride this out."

While Macquarie's business will change dramatically, Perpetual's Sevior says the bank is unlikely to go the way of its imitators. "They have shown an ability to remake themselves in different cycles in the past but it will be a very difficult environment this time around."
Rob Patterson, the managing director of Argo Investments, a top 20 shareholder in Macquarie, says the group has "done exceptionally well relative to all of their peers in a very difficult environment".
He dismissed any comparisons with Babcock & Brown, noting that Macquarie was a more diversified business, with well-established stockbroking, funds management and private banking arms.
Macquarie's debt is also less concentrated and longer dated (Babcock was mainly relying on one single $3.1 billion debt facility.) And it is widely regarded to have better risk management processes in place.
"B&B is a one-dimensional fund manager and a very different organisation," says one former executive director. "It's like comparing a pushbike to a Rolls-Royce."
Another important distinction between the two is that Macquarie owns a bank.
That means its banking arm is regulated by the Australian Prudential Regulation Authority and it has minimum capital requirements. It also means that the bank has access to funds that other investment houses never had because of the government guarantee scheme introduced in November.
Basically, the Government is handing out its AAA credit rating to Australian banks in return for a fee, allowing them to raise long-term money offshore. Macquarie has raised $12 billion since mid-December in Japan, the US, New Zealand and Australia.
"Macquarie has been one of the most active users of that scheme," said S&P's Jain, adding that the raisings had allayed some concerns the agency had about Macquarie, when it slapped a negative outlook on the group's rating last September.
Macquarie's retail deposits have also benefited from the government guarantee, rising to $18.1 billion at the end of last year, from $13.2 billion at the end of March.
Macquarie executives, including the chief executive, Nicholas Moore, declined to be interviewed.
In response to emailed questions, a spokeswoman for the group said it was "well-funded before the guarantee and has continued to improve its funding position".
She also denied speculation that the group was looking at selling its underperforming property business and talked up potential acquisition opportunities, noting Macquarie's recent acquisition of the US gas trading business Constellation Energy. On the infrastructure side, Macquarie sees more growth in unlisted funds and says governments are likely to turn to the private sector for infrastructure investment in the downturn.
If Macquarie wants to get retail investors interested in listed infrastructure funds again, they would have to be radically different to the funds of old, with reasonable fee structures and transparent corporate governance guidelines.
"It's a new era where investors are much more fee conscious and much more cost conscious," says Hugh Giddy, the managing director of the fund manager Cannae Capital Partners.
"There's a revulsion against greed. The social mood has changed. Investors are saying we need independent directors to say that Macquarie doesn't get to do all of the debt arranging and corporate advice.
"This is more than a cyclical change; it's a structural change in terms of their ability to run their model."

PREMEDITATED MERGER - Controversy erupts over leaser of U.S. toll roads

Foreign firm part of public-private partnerships funding highway network
By Jerome R. Corsi - © 2007 WorldNetDaily.com - July 20, 2007
Investment analysts in New York and Australia charge that Macquarie, the Australian conglomerate leasing U.S. toll roads, is a "house of cards" that has made billions by spinning off the highway assets into over-valuated investment trusts controlled by the bank.

Macquarie has been an active participant in the "public-private partnerships" sponsored by Mary Peters when she was head of the Federal Highway Administration.

As documented on the FHWA website, Macquarie recently concluded long-term leasing deals on the Chicago Skyway and the Indiana Toll Road.

In both projects, Macquarie has partnered with Cintra Concesiones de Infraestructuras de Transporte, S.A., the Spanish investment consortium also involved in financing and leasing the Trans-Texas Corridor.

The criticism of Macquarie can be traced to a paper published last year by John L. Goldberg, an honorary associate at the School of Architecture, Design Science, and Planning at the University of Sydney in Australia.

Titled "The Fatal Flaw in the Financing of Private Road Infrastructure in Australia," the paper argued equity investors in Macquarie investment trusts are likely to suffer heavy losses by excessive valuations Macquarie makes of financed toll roads that are packaged together to be sold to pension funds and other institutional investors.

Goldberg also argued that government guarantees on Macquarie projects are often buried in the confidential part of toll road "comprehensive development agreements," such that the public taxpayer liability only comes to light when a toll road project fails.

Jim Chanos, a founding principal in the New York investment firm Kynikos Associates, has been equally critical of Macquarie.

Kynikos, founded in 1985, specializes in short-selling the stock of companies the firm believes are overvalued by the financial markets and likely to fall in price. Chanos distinguished himself as one of the most active critics of Enron prior to the company's fall.

In a May 30 radio interview with Australian talk-show host Mark Colvin, Chanos charged that the "Macquarie model" was seriously flawed.

"The bank scours the world buying assets," Chanos told the radio audience, "buying assets, everything from toll roads to bowling alleys and selling them into separate trusts that the bank controls. This generates triple fees for Macquarie Bank: one for the up-front purchase; a second for selling the assets into the trust; then ongoing management and performance fees from the funds."

Chanos charged that the loser in the scheme was the investor.

"If you look at the financial accounts of the trusts," Chanos explained to the Australian talk show, "you'll see that in almost all the cases the companies are using Australian re-valuation accounting which is legal under [Generally Accepted Accounting Practices] in your country to write up the value of the asset annually and put that through operating income and into equity."

Chanos argued that the practice only works in a financial environment in which cheap credit is readily available and valuations for infrastructure projects are generally rising.

"You need a credit environment that looks the other way, or you need a credit environment where the people lending are just lending on reputation or not numbers," Chanos said.

Eventually, he contended, the self-dealing between Macquarie and the Macquarie-controlled funds into which the infrastructure assets are sold is likely to crash.

"All I would tell your listeners," Chanos said in the radio interview, "is simply just go to the trusts, the financial statements, and simply extract out the asset re-valuation number, which is basically management's guess as to how much, what the asset's worth and just see what the cash flow looks like. In many cases, the cash flows are diminished or actually go negative. That's the simple litmus test to the Macquarie model."

Still, Chanos argued that despite the problem in the underlying cash flows, Macquarie makes hefty profits.

"Capital gains alone in the fiscal year 2007, just for flipping these types of assets into the trusts, accounted for half of the pre-tax income of Macquarie Bank," Chanos asserted.

Macquarie Bank has hit back strongly against both critics.

According to newspaper reports in Australia, Macquarie Bank executive Warwick Smith complained to University of Sidney Vice Chancellor Gavin Brown, demanding that the university dissociate itself from Goldberg over his critical research.

In response, Brown issued a statement clarifying that Goldberg is not an employee of the University of Sydney, though he has been given the title of honorary associate by the Faculty of Architecture. In his statement, Brown claimed Goldberg "speaks as an individual and the university accepts no responsibility for his comments which it does not endorse."

In the subsequent controversy that erupted in Australia, Goldberg was featured as a case study in "Silencing Dissent," a book critical of the administration of Prime Minister John Howard, published in Australia by Clive Hamilton, the executive director of a prominent Australian think-tank, and his co-editor Sarah Maddison.

In the book, Hamilton and Maddison charged that the Howard government used strong-arm tactics to challenge the tax status of non-government organizations and ruin the reputations of academics who were critical of governmental policies, including the sale of highway infrastructure leasing rights to private investment concerns in Australia.

Macquarie used a similar personal attack to discredit Chanos following the interview on Australian radio.

In a May 31 statement posted on the Macquarie website, the investment group charged that Chanos, "a hedge fund short-seller of equities," had an economic self-interest in advancing "incorrect claims" that could cause the stock price of Macquarie to fall.

When contacted for comment, Macquarie's New York representative referred WND to the company's online statement, in which Macquarie asserts that all assets acquired by funds controlled by Macquarie are valued directly from the market and subject to the approval of independent directors of the funds.

The published Macquarie response to Chanos also cited a May 25 Bloomberg report which quoted Chanos as saying Kynikos maintains a short position on Macquarie.

Short-selling is a Wall Street practice in which an investor borrows and sells stock the investor does not own, anticipating the stock will go down in value. The short-seller profits by buying shares at a lower price to replace the shares that originally were borrowed and sold at the higher price.

Short-sellers lose money if the price of the stock increases and the cost to purchase shares to replace those borrowed is greater than the price for which the borrowed shares were sold.

Macquarie Infrastructure Group is a separate subsidiary from Macquarie Bank.

The website of Macquarie Infrastructure Group bills the company as "one of the largest private developers of toll roads in the world."

Read more in World Net Daily

What is so bad about the “apply market valuation” clause in SB 792?

Q. Does this clause give landowners a better price for land confiscated by eminent domain?
A. No, in this bill, they are referring to market valuation for the ENTIRE INFRASTRUCTURE PROJECT rather than for getting an appraisal on the real estate before they pay the land owner. There are rules that apply to acquisition of land by eminent domain which will not be changed by this phrase in this bill.

Q. What is Market Valuation as used in HB 792?
A. What they are referring to is HOW THEY VALUE the land years after it is acquired, how they VALUE the entire infrastructure throughout the life of the contract.

Q. Is it a common practice?
A. Applying Market Valuation to state highway projects is a new concept. Market Valuation is a private sector practice where an owner of an asset values that asset over time as the value of the real estate escalates. As demand for adjacent property rises, rental and usage fees rise to reflect what the private company would have to pay for that house or business or real estate on the day they lease it to a user. For example, a friend of mine rents a house she purchased for $20,000.00 but which appraises on today’s market for $45,000.00. Years ago she charged $150.00 a month for rent but today she charges $750.00 a month for a tenant to rent the house.
This is a common practice in the public sector because she used her personal funds or credit to acquire the property. She is not a public housing authority which uses public funds.

Q. Why is it a such "big deal" in this particular bill?
A. Until a few years ago, only public toll authorities were legally allowed to build toll roads in Texas. With changes in the law, we now allow private companies to partner with the state to build toll roads. We also have public toll authorities which build toll roads in Texas. Public and private toll companies are in competition for bids on lucrative projects. Public toll companies (like NTTA) have an advantage in the bidding process because they operate on different rules than private companies like Cintra. A private company is supposed to invest private investor capital into the project and the private investors, wherever they live in the world, get a return on their investment and they can spend or invest that money anywhere in the world in any kind of project they choose. A public authority uses taxpayers money as an agent of the people and the return or user fees goes back into the public coffers, not to private investors. The return must remain in the region for use on public works projects for the public good.

Q. What about use of right of way?
A. If a private company use right of way owned by the state, frequently they must pay a today’s value for that right of way when they acquire the right to use it because they are a company of private investors making a profit off of the taxpayer’s assets. A public authority should not have to pay today's value for acquisition of the right of way because they are agents of the people, whose money was used to acquire the asset and who will be the customers who use the finished transportation project. Profit (or return on stockholders investment) should not apply to public works (public toll authorities) projects.

A. Are there any exceptions?Q. In some versions of legislation that have been passed by various houses of the Texas Legislature (but which have not to date been signed by the Governor), there was language to allow private or public toll authorities to utilize the right of way at the same cost or no cost and not include the difference between what it actually cost the state to acquire the right of way and what the right of way costs today (market valuation) into the project cost. The idea is to try to keep project cost down so lower costs would allow lower usage fees to the public. But that language was an EXCEPTION to normal practices in the private market place.

Q. When Market Valuation is applied to a project, does it apply to anything other than the real estate cost?
A, Yes. By applying market valuation to a project means each year value would would be base on what it would have cost to build that project that year, instead of what it actually cost to build it when it was built. That means calculating what supplies would have cost at current rates of inflation, what real estate would cost if acquired during the year when they are computing the current year's market valuation, what labor would cost now vs. during the year it was actually built. Applying market valuation means that building supplies, labor, land cost, engineering fees, studies, actually every project cost is calculated based on the current rate of inflation and cost for those design/build/acquire elements for the project based on the cost in each year of the contract. It is suspected that projects will cost much more 50 years from now than they do today. Applying market valuation to a project means that what it would cost to build that project 50 years from now is the cost that will be used to calcuate the rates in the formula used to calculate user fees and potential buy-back costs.

Michael Morris of the NCTCOG RTC says that every project they have escalates in cost about a billion dollars a year. Applying Market Valuation to a public toll project would mean that instead of the project costs remaining what was ACTUALLY SPENT by the government on behalf of the people to build that project, they will be artificially applying a bookkeeping model to the project cost each year which will include what it would cost should they build that project at different years in the contract.

Q. Why did Gov. Perry insist that this language be inserted in SB 792?
A. That is a good question and the only way to answer it is to speculate. Pushing application of Market Valuation to public toll projects levels the playing field between Cintra and the NTTA. It removes the advantage of using a public toll authority to build the project. Rick Perry received substantial campaign contributions from Zachry and Zachry family members and associates during each election cycle he has been in office. Zachry is Cintra's partner and TxDOT favors Zachry-Cintra as contractor for the lucrative TTC project and for SH121. TxDOT was not pleased when legislation was passed which required allowing public toll authorities have the "right of first refusal" in bidding on projects in their region.

I think that requiring application of Market Valuation to public toll authorities bids is a tool that Perry’s administration is trying to use so that Cintra and private investors will have a better chance to win state highway toll contracts. (Private investors charge the taxpayer twice what most public toll authorities charge the public to use the infrastructure).

Q. Why shouldn't they apply Market Valuation to a public project?
A.MARKET VALUATION OF A PROJECT IN THE PUBLIC SECTOR SHOULD NOT APPLY BECAUSE THE PUBLIC IS BOTH THE INVESTOR AND THE USER.
A public toll authority is supposed to build the project at as low a cost as possible and any return on investment is actually taxpayer’s money and must be invested in other public infrastructure in the region for the benefit of the people or returned to the taxpayer through payments to the government.
The funding for a public toll project is taxpayer funding – either gas money, public bonds, etc.

Market valuation is not something they push so that land owners get more when their land is claimed by eminent domain. It is a technique they are trying to misapply to public toll authorities to make them act like private companies like Cintra. A public company's assets belong to the state/taxpayer and they are supposed to operate at the lowest cost to the taxpayer to use those assets. That is why states and public toll authorities buy right of way years in advance at lower costs than what the market would value that real estate in the year they actually break ground or later in the contract, in the year in which the driver is actually driving on that real estate. After all, it is taxpayer money that pays for the real estate and for the bonds that build the infrastructure.

Q. What is the difference between a private and a public toll authority?
A. In a private company, private investor money is investedto acquire the asset. Their stockowners want as great a return as possible on their investment. They apply market valuation to the project each year they own the asset, modeling what the land and construction costs would be if acquired and built each year instead of what it actually cost them to acquire and build the asset when the land was actually bought and the project was actually built. Each year, market valuation is used to set rental rates and prices charged to "customers" or tenants. This allows the investors, private people, to get the greatest return on their initial investment. The investors are different from the customers.

A governmental (public) entity building an infrastructure project is acting as an agent of the people. Their customer or renter is the taxpayer, and the government as an agent of the taxpayer, invests the taxpayers money as capital to build the project. Market Valuation is not applied to public projects because the taxpayer, (who is also the investor who puts up the capital), is not seeking PROFIT like a private shareholder. The public, or taxpayer, is seeking to have access to the infrastructure at the lowest possible cost.
It is of no benefit to the investor (taxpayer) in a public project to apply MARKET VALUATION BOOKKEEPING MODELING TECHNIQUES to the project each year the road is used. The investor is the user and the user wants the cost to remain as low as possible for him (the taxpayer) to use their public infrastructure asset.

Q. What harm does it do if they track what it would cost to build the project each year if it were built in that year?
A. Knowing what it would cost to build it each year is somewhat different from "Applying Market Valuation" to a project as used in SB 792. Applying market valuation to SH 161 could allow use of inflated building costs and land values to influence the rate of the tolls. It could mean that more public money would be required should the state decided to terminate the contract before the 50th year. Applying Market Valuation means using each year's market valuation in the modeling for toll rates rather than "just knowing" the value of the infrastructure.

A. Why is it so important that we call all the North Texas Delegation and object to their voting to allow Market Valuation to remain in this bill?
B. The cost to the taxpayer to use a public assess constructed by a public toll authority using taxpayers resources should not escalate over time as adjacent real estate escalates n price. Appling MARKET VALUATION to public toll authorities projects as used in SB 792 will force public toll authorities to pretend like they are private entities and they will be raising the cost to the user over time as the real estate costs rises in the market place for adjacent land. Even though the state acquired the land years ago with taxpayer money so that the cost to the taxpayer to use the infrastructure would be low, the rules will be turned upside down and the taxpayer will see their user fees rise as adjacent real estate costs rise.


Q. What is so bad about the “apply market valuation” clause in SB 792?
A. Gov. Perry and TxDOT wants MARKET VALUATION APPLIED because this will generate “more revenue out of the ground” for right of way already owned by the state and paid for by taxpayer dollars without giving any additional benefit to the taxpayer.
TxDOT and Perry and probably the NCTCOG RTC favors applying MARKET VALUATION to public toll projects because it will “justify” higher tolls and enable greater amounts of surplus toll revenue to travel from the project into the TxDOT/RTC coffers for use on other projects. (We’ll see how much of it trickles down and actually gets spent on infrastructure and how much evaporates in transit). TxDOT favors it because it insures lots of transportation engineers will continue getting paychecks should federal funds dry up because we miss air quality attainment standards.

Q. Who loses if SB 762 is passed with language requring application of Market Valuation to public toll projects in it?
A. The taxpayer. Taxpayers pay for the right of way then it is acquired with gas tax money. Applying market valuation to the project gives private investment companies like Cintra an advantage in bidding. It costs the taxpayer about twice more to use a project constructed by a private toll authority than it should cost if constructed by a public toll authority. Then by applying market valuation to the project, the project cost escalates on paper each year with inflation removing the advantage of having used tax money years ago to acquire right of way. The people get charged on paper artificially high prices for the right of way that was already paid for with the people's money when it is incorporated into a toll project. Then each year, as inflation increases and what it would have cost to build that project in each successive year of the contract rises, they get to apply this MARKET VALUATION TOOL to the project, and can use it to possibly charge greater cost to the public when citizen-taxpayers drive on the highway.
On every front, the taxpayer gets gouged. Double taxation. Escalated values instead of real cost. Inflated user fees “justified” by market valuation in different years of the project.

What they are attempting to do is to jack up the COST of the project on paper so that they can "justify" higher toll rates and higher project costs so that they'll be able to justify artificially jacking up the project pay off cost should the state decide to reacquire the project at some time in the future. The higher the project cost, the easier it is to justify billions more of surplus toll revenue.

We purchase right of way years in advance so that it will require less of the taxpayers money when it is time for us to build new highway infrastructure and it will cost less to the taxpayers to use that infrastructure. Because public taxpayer money was used, the public should be able to use that infrastructure at as low a cost as is absolutely possible during every year of the contract or life of that infrastructure. The entire CDA to generate surplus toll revenue to give to the RTC concept turns the entire concept on its head. Instead of doing it so the citizens can use it as inexpensively as possible, it is build it and now APPLY MARKET VALUATION TO IT in such a way that the citizen will be fleeced as much as possible every time they put their tires on the highway.

Someone’s crying, Laura, kumbaya

Dave Levinthal of the Dallas Morning News reports on a call for harmony during the tense dramatic Dallas 2007 city elections. Opposition to the Trinity Toll Road is a hot topic in this year's election. His post on the "education technicans" employed by backers of the Trinity River Tollway Project is worth our attention. Angela Hunt's letter to Laura Miller in response to harassment of signature seeking petitioners is included in the article. Levinthal doesn't mention in this article that the supporters of the Trinity Toll Road, (Laura Miller and many corporate sponsors including Baylor Health Care System, University of North Texas, and Mary Kay) have established a non-profit educational foundation to promote the project. Some opponents charge that there are violations to the election code in using governmental and corporate money to hire consultants who are interferring with petitioners collecting signatures in opposition to the Trinity Toll Way. Things are getting interesting in Dallas. There have always been bodies were dumped near the levee of the Trinity. We'll watch to see if any political skeletons emerge from relationships with this project.

Cintra proposes to use $2.6 Billion in U.S. Federal Money on the $2.8 Billion SH121 Project

Editorial - By Terri Hall

Problem: Spanish company to take taxpayers for 50 year toll ride

Solution: Index gas tax

Wonder why all the fuss over toll roads? Well, we’re not talking about traditional toll projects. Governor Perry and his Transportation Commission are pushing private toll road deals that limit free routes and allow the private operator to charge very high tolls. Take a gander at what the winning bidder, a Spanish company named Cintra, is telling their shareholders about the Hwy 121 private toll deal in Collin and Denton counties:
“Provides a corridor to Dallas on which there is no alternative roads.”
– Page 6, It will connect I-35 with US-75

“No planned proposed improvements to free alternative routes in the long term. Concessionaire is entitled for compensation in case existing long-term planning is modified.” – Page 11

You see, as ex-Transportation Commissioner Senator Robert Nichols, who is a stickler for details and who is also the author of a bill to halt CDAs, has noted the devil is in the details. These private toll contracts called Comprehensive Development Agreements (CDAs) include non-compete agreements like Cintra brags about to its shareholders. This means there will be no improvements made to existing roads nor any new free routes built within a certain mile radius of the toll road. Doing so would compete with or reduce toll revenues, and a private company simply won’t allow that.

Toll rates $1.50 a mile

TxDOT promises toll rates of 12-15 cents a mile, but the reality has been 44 cents up to $1.50 PER MILE on similar projects that just opened in Austin. You see, when TxDOT has admitted it costs 11 cents just to collect the tolls, they can’t possibly cover the operation or maintenance of that road with 12-15 cent tolls much less pay the private toll operator their guaranteed 12% profit. In fact, TxDOT’s mantra is that the private company will charge “market rate,” which essentially means tolls without limit since there will be few if any alternatives. Bottom line: using CDA private toll contracts is THE most expensive option for motorists. Yet the Governor and his cronies claim they’re doing all this without raising your taxes. Who do they think they think they’re fooling?

Dennis Enright, an expert in these public-private partnerships testified on March 1 to the Senate Transportation and Homeland Security Committee that CDAs cost 50% more than traditional public toll roads. He also stated it’s always better to keep these toll projects in the public sector (having a tolling authority or TxDOT do them) rather than to privatize our highways in these monopolistic 50-year contracts.

What’s perhaps even more appalling is that the U.S. Government was involved in facilitating some $2.6 billion of this $2.8 billion project. So who’s really bringing the money to the table? The U.S. taxpayer, not the private company as TxDOT claims. So the taxpaying public will pay billions both on the front end with federally backed bonds and loans and on the back end of this deal through tolls for the next 50 years just to accelerate the construction of a single 10 mile stretch of highway.

This same company won a deal to build SH 130, won the development rights to build the first 600 miles of the Trans Texas Corridor (called TTC 35), and is one of two foreign companies bidding to takeover existing highways SH 281 and Loop 1604 in San Antonio and turn them into tollways. Senator Eliot Shapleigh asked TxDOT in a recent Senate Transportation Committee hearing if giving that much of our state highway system to a single foreign company for the next half-century gave him pause. TxDOT dodged the question.

So what’s the solution?

Pass the CDA moratorium

It’s past time to rein-in TxDOT’s push to privatize and toll our public highways in these very controversial deals that amount to horrific public policy. HB 2772 and SB 1267 have more than two-thirds majority support and would place a 2 year moratorium on CDAs giving the Legislature time to get the details of these contracts right before signing away our public highways for 50 years! Senate and House Transportation Committee Chairmen Senator John Carona and Mike Krusee are tying them up. Let’s get these bills to the floor for a vote in time to override a promised gubernatorial veto.

Index the gas tax

Let’s assume that even though TxDOT’s budget has tripled since 1990 and doubled since Rick Perry took office, and even though TxDOT has $7 billion in bonds available to them, that we are still short of cash for highways. A recent Texas Transportation Institute study showed that indexing the gas tax to inflation is all that’s needed to meet our future transportation needs without tolls. Politicians in the House, in particular, need to have the political will to enact the most affordable, most sensible financing solution. All the options we’re faced with are tax increases of one sort or another since tolls are clearly a tax, an aggressive one in the hands of a private company. The gas tax increase would cost perhaps $50 - 100 more a year versus $2,000-3,000 more a year per motorist in tolls!

However, before adding ONE DIME to TxDOT’s budget, the Legislature must also pass Senator Wentworth’s bill to stop any further hemorrhaging of the gas tax that’s been going to non-transportation sources and frivolous earmarks. The taxpayers won’t tolerate putting more money into a leaky boat. That’s what got us into this mess in the first place. So since an ounce of prevention equals a pound of cure, let’s revisit the gas tax to prevent this shady widespread shift to private tolling and be done with it.

Federal Highway Department objects to NTTA bid for SH121

A letter from the US Department of Transportation to Michael Behrens, Executive Director of TxDOT received April 26, 2007 objects to the procurement methods utilized by TxDOT on the SH121 bid. It also states that CINTRA has applied for a Federal loan for up to $700 million dollars on the SH 121 project. I thought the point of using private partners was that 1. private financing would be used instead funding by taxpayers 2. The DFW area was out of compliance with Federal Air Quality and could not qualify for federal funding.

What is true? What is a misconception? What is the understatement of the truth and what is the overstatement of the facts?

Click here to read the letter.

The Billion Dollar Question

This is the DFW region's 30 year transportation plan. Will this plan make DFW businesses less competitive with companies located in other parts of the state which do not rely on toll roads to raise revenue for state highway construction and maintenance?
[Click on images to enlarge]


During the 30 years (2000-2030) the RTC (Regional Transportation Commission of the NTCOG) and TxDOT propose to add 675 miles of managed lanes (TOLL FREEWAYS and TOLLED HOV LANES on existing Freeways) in the DFW region.

They only propose adding 70 additional miles of NON-TOLLED FREEWAYS! They are planning to sign 50 year contracts for these tolled managed lanes and toll roads! EXEMPTING DFW from the 2 year moratorium is BAD if this is the BEST THEY HAVE TO OFFER!

The legend is hard to read. It says that:


Green is proposed New Toll ways.

Blue is proposed extensions of existing freeways/toll ways
or improving existing highways/freeways
by adding HOV toll lanes.

Black is freeways/toll ways.

Red is non-tolled freeways.

From 2000 to 2030 the Regional Transportation Plan for DFW:

2000	25 miles of existing toll roads built and managed by public toll authority
2030	675 miles of managed lanes and toll road under CDAs (Public private partnerships with 50 year contracts financed at higher rates than public bond and with higher tolls to generate "SURPLUS TOLL REVENUE" for investor return on investment (profit) and up-front payments to the RTC for use on non-toll projects).

Will citizens in this area pay more than their fair share for highway construction?
Will they have to pay their fair share of state gasoline and other taxes which builds roads in other regions while still having to pay high tolls to travel in their own region?
Is utilizing state highway right-of-way (real estate) for tolled lanes adjacent to public highway lanes which are insufficient to handle the traffic the best way to address traffic congestion?

In California, during rush hour traffic, managed HOV toll lanes carry too few cars while public lanes are much too congested. Should we adopt the same model here?

TTC & NAIS Unraveling - part 3

Premise Registration of pets and farm animals is a FEDERAL GOVERNMENTAL initiative that is worming its way through state legislatures across American. In 2005 a one page bill was passed by the Texas Legislature and signed into law. It has not been implemented yet. Texans who are furious about the Trans Texas Corridor Toll Road landgrab are standing with Ranchers who are opposed to the implementation of mandatory microchip ID for animals and premise registration.

Outrage is bridging partisian boundaries. Liberals, progressives, moderates, conservatives, ultra conservatives and even those who are normally politically apathetic united in Austin March 1st and 2nd, sending clear messages.

Don't Tag my pets, Don't register my home or farm as a premise! Don't take my land!

The message was clearly conveyed: Trans Texas Corridor -- Zachry, Cintra, TxDot, Rick Perry: STAY OFF MY LAND! "My Land is NOT Your Land" was the battle cry.

Why should this matter to people who live in Pennsylvania, New York, Oklahoma, and other states? It matters because these "policies" are being pushed from Washington down to the states. The Texas Department of Transportation (TxDot) announced the selection of Cintra, a Spanish based corporation to manage part of an existing State Highway (SH-121) as a private/public partnership toll road. Cintra, with Texas based Zachry Construction, has been chosen by TxDot to build and operate the massive Trans Texas Corridor. Contracts have not been signed. They must be reviewed and approved by the Transportation Committee.

During the past three years, massive portions of the Texas Transportation Code was revoked or amended . Much TTC and private/public partnership toll project language was inserted into numerous bills in both houses of the Texas Legislature. Many of the Senators and State Representatives who sponsored and voted for the changes received generous campaign contributions from Zachry and other businesses and individuals with financial interests in the TTC.

Last week the Texas Senate Committee on Transportation held an eight hour hearing on SH-121 and the TTC. People came from all over the State. They had to open two additional large hearing rooms and connect them with live television feeds to accommodate the hundreds of Texans who drove to Austin for the hearing.
(Videotaped testimony is available at http://www.senate.state.tx.us/avarchive/ (Select March 1 Senate Committee on Transportation & Homeland Security Hearing Regarding the Trans Texas Corridor)

It is challenging to unravel the methodology which was utilized to sell local and State officials on this massive land grab. It is an ill-conceived overly expensive plot. Similar things are occurring in other States. Driven from Washington, legislation to change laws to implement the NAIS and Public Private Toll Road Partnerships have turned Texas into the frontline for national implementation of significant and far-reaching changes in property rights, transportation financing, removal of appropriation control from elected legislative bodies to control of obscure bodies of political appointees. It is probable that Governor Rick Perry's close ties to George W. Bush and Bush's ties in Austin resulted in Texas acquiring the dubious "pleasure" of being selected as the pilot for the Bush Administrations "vision" for revamping the nation's transportation and homeland security. NAIS is definitely Washington driven. National Animal Identification System is a Federal Initiative with joint Agriculture, FDA and Homeland Security oversight!

This is the third in a five part series of journals on the uproar in Texas. Citizens have banded together demanding repeal of legislation which mandates computer chip animal identification and premise registration and of TTC enabling language.


SO HOW DID WE GET HERE? HOW CAN WE INSURE THESE BAD POLICIES CONTINUE TO UNRAVEL?
Rick Perry was re-elected governor in 2006 with the lowest percentage of votes cast for any winning governorial candidate in Texas in modern history. Many more Texans voted for statewide candidates for Agriculture Commissioner and Attorney General who did not win the election than voted for Rick Perry. Incumbents who have been Perry adminstration team players watched massive numbers of their constituents voice disapproval of the TTC at TxDOT hearings all over Texas last summer. They saw support shift from conservative incumbent to anti-TTC populist challengers. Now many who have sponsored TTC enabling legislation or voted in favor of it are back peddlings, saying "I want a do over!"

It takes a lot to get a lot of thousands Texans motivated enough to descend on Austin at one time. Austin is not the easiest place to get to in Texas. Trains only run through Austin once a day. Air service isn't the greatest. Highways are congested and there always seems to be some construction project on the more narrow, overcrowded corridors. It was probably by design. Legislators have historically been viewed by Texans as problems which need to be contained. Constitutionally, State Representatives are "part-time" and the Legislative session is much shorter than in many smaller states with greater population. My College History and Political Science professors all said it was because Texans fear that they'll do too much damage if given more time. Yet last week between 5000 to 6000 people from all over Texas took to the streets. They hauled their horses, chickens, tractors, goats and family pets and marched down Congress Avenue to the State Capitol. It was Texas Independence Day and Texans were declaring INDEPENDENCE over current tyrrany!

Examination of the butcher job they've done on Transportation and Agriculture codes in the past 2 years gives us good cause for such caution. Some of the most far-reaching, radical changes to the Transportation Code were passed in the middle of the night. Much of what has brought us to this particular place occurred in small working groups, at privately funded transportation seminars, in poorly advertised "public meetings" of obscure committees in Councils of Government all over the state. TTC enabling language was presented to Legislative Counsel by attorney's working for various special interest and the language made its way into numerous pieces of legislation in both houses. The clients of these attorneys can hide behind "attorney client privilege", circumventing the ethics rules. The attorneys are able to avoid disclosing who they are representing and these visits are not classified as "Lobbyist" activity! It is not a loophole. It is not even a hole the size of a barn door. It is more like an opening the size of the pasture where the barn should be standing!

A one page bill (C.S.H.B. 1361) passed inro law in Texas September 1, 2005 (but not yet implemented)requires mandatory registration of all premises with animals or poultry, mandatory computerchip ID system, and 24-hour reporting of death or transfer of animal ownership. With only a few paragraphs the way farming, ranching and ownership of horses and domestic pets was reengineered (at least on paper). The cost to implement this program are astounding --on both the bureaucratic level. The shift in privacy rights, property rights, and potential civil rights resulting from implementation of NAIS are mind boggling. We'll explore them in greater detail in journals later this week.

Rick Perry's administration will probably become known as one of the most corrupt administrations in the past quarter of a century. Media doesn't really cover what goes on policy wise in Austin very throughly. Transportation stories usually get buried in obscure places in newspapers. It is difficult to explain complex scenarios in television news bites. Most assignment editors think that the public just isn't all that interested in what the Legislature does. Fortunately the internet and search engines allow us to get some coverage of "our tax dollars at work!" Shame that they are usually not working for us!

The cherry on top is that the folks in public office in Austin are the ones that the majority of Texans (probably) voted for. I say probably because we have had some really big problems with the electronic voting machines -- especially with how accurately they tabulate the votes. During the 2006 Primary, there was over a 100,000 vote tabulation error in Tarrant County and many other snafu's reported in other counties. Few of us are confident that anyone really knows how many people voted for any one candidate. But a lot of people have invested time, and money and faith in the folks in Austin. It is difficult to accept the truth about people you have supported and trusted. Denial reigns supreme in many circles.

When it comes to faith in Texas incumbents, I haven't invested much faith in any of them. There are a few that occasionally get my attention and surprise me pleasantly. Whether Republican or Democrat, I usually try give them a call when I see them do anything good that impresses me. However, I don't have to spend a lot of time on such calls because overall, most of them never rise above C-, even when they "pleasantly surprise" me!

There is nothing that says you have to be intelligent to be elected to the Texas Legislature. There are some who are very intelligent. There are some who are relatively honest. There are few who are both honest and intelligent. They are responsible for that but the voters are the ones who are responsible for selecting them. And we entrust them with setting policies which are complex and have far-reaching consequence to billions of people every day. Selecting the least qualified, academically challenged and intellectually deficient candidates seems to be a pattern of both major parties -- in Texas and elsewhere. (One example is the election of Paula Hightower-Pierson, a high-school drop-out who did not return to school to get a college education, as a Democratic State Representative in 2006). State Party leaders (and the media) tend to rate candidates only in terms of how much money they can access for media buys rather than on credentials, track record, character or intellect!

Once elected, most legislators rely on the Legislative Counsel (and lowly paid staff) to explain the bills and language contained in bills. Counsel frequently relies on contacts from trade groups who come to them on behalf of unnamed entities with language for bills. It is difficult to determine who staffers rely on for their interpretation of complex policies and legislation! Now that there has been consistent, loud, sometimes stringent outcry from Texans from all political parties on the Cintra-Zachry TTC deal and NAIS, many Senators and State Representatives are are saying that they 'didn't understand' what they were doing when they sponsored certain TTC enabling legislation. Many of them probably didn't comprehend the implications in the language of the bills they put their names on as author or sponsor. However, for many, it probably just appears better politically to them right now to try to deny it and distance themselves as far as possible from their previous positions and votes.

A former State Representative told me that he thinks that many of them probably didn't have a clue what language in the TTC Transportation bills really meant. They were told that private public partnerships for toll roads would help them keep gasoline taxes low. Since they'd raided the designated transportation funds and refused to call for bond issues or raises to the gasoline tax for decades for highway construction, they grasp for straws. Legislative session after legislative session for over 20 years, highway and bridge maintenance has been deferred. Population explosions in the major urban centers has resulted in increased urban sprawl and traffic gridlock. Federal funds for rail and mass transit dried up and cities and counties looked for sources (other than local tax money or bond elections) for local transportation projects.

There is a lot of cronyism and out and out thievery in Austin. But the buck really rests with those of us in the hinterlands. We're the folks who allowed them to be elected to office and we're the folks who have allowed them to continue there. There are ways to rein-in errant elected officials. One immediate thing we can do is continue to exert pressure on the Texas Legislature to repeal NAIS. Here is a background paper on legislation that will change "mandatory" to "voluntary".

http://www.capitol.state.tx.us/tlodocs/79R/analysis/doc/HB01361H.doc

Amazing how one short, one page document can raise so much havoc in so very very many lives.

C.S.H.B. 1361 By: Hardcastle
Agriculture & Livestock Committee Report (Substituted)
… Because of its complexity, the United States Department of Agriculture (USDA) plans on phasing in the National Animal Identification System (NAIS). It is vital that Texas develop and implement within the state an animal identification program that is consistent with that of the USDA.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the Texas Animal Health Commission in SECTION 1 of this bill.

ANALYSIS

This bill creates an animal identification program to provide for disease control and to enhance the ability to trace disease-infected animals, which is consistent with the United States Department of Agriculture's National Animal Identification System. The Texas Animal Health Commission (Commission) may require the use of official identification numbers and may establish a date by which all premises must be registered. The Commission may further assess a registration fee on all entities that register for a premises identification number. This bill provides that information collected by the Commission is exempt from public disclosure requirements. The bill authorizes the Commission to disclose information to certain persons, including a governmental entity. The bill provides for penalties for failure to comply with the Commission's order. The bill authorizes the Commission to adopt, implement and enforce rules for the animal identification system.

EFFECTIVE DATE

This Act takes effect September 1, 2005.

CALL TO ACTION ON NAIS:

Status in Texas In 2005, the Texas Legislature adopted HB 1361, codified at §161.056 of the Agriculture Code, authorizing the TAHC to implement NAIS on a mandatory basis in Texas. The TAHC proposed mandatory regulations for premises registration in December 2005, but withdrew them after a public outcry.
In November 2006, the USDA stated that it does not intend to adopt mandatory federal regulations, so there is no federal law or regulation requiring implementation of this program by Texas.
Issues
The NAIS will cause a variety of problems:
• Massive intrusion into people’s lives: individuals will have to provide detailed information about their property, businesses, and their own movements to government and private databases;
• Burden on property rights: the premises registration number will attach to the land forever, and people’s rights to manage their land and animals will be restricted;
• High costs: registration, tagging, and reporting all carry costs in both time and money;
• Loss of small farmers and ranchers: many will be unable to afford the program, or unwilling to accept the government intrusion;
• Damage to the economy: businesses that rely on small farmers, such as sales barns, supply stores, and even tourism, will be harmed;
• Reduced choices and increased costs for consumers;
• Violation of many Americans’ religious beliefs; and
• Increased government bureaucracy and waste of taxpayer dollars. Neither the USDA nor the TAHC has performed a cost analysis of the program. Costs for similar programs in other countries are estimated to range from $37/head to $69/head. According to the 2002 USDA census and a 1998 study, Texans own over 14 million cattle, 1 million sheep, 1 million goats, and 1 million horses, the majority of which are on small farms. The NAIS will likely cost Texans hundreds of millions of dollars.
The NAIS will not provide benefits to justify these costs.
The stated purpose of the NAIS is to provide 48-hour traceback to address animal disease. But the NAIS does not address the critical issues for disease prevention and control:
• the causes of disease, especially differences in management;
• the vectors of disease transmission, including wild animals, insects, and imports;
• testing for disease, including tests for Mad Cow and other food-safety issues; and
• the unique issues posed by each species and each disease Contrary to claims, the NAIS will not protect against bio-terrorism.
Terrorists are unlikely to target hobby animal owners and small farmers. Microchips are vulnerable to cloning and computer viruses. The type of microchip specifically recommended for horses and cattle, the ISO microchip, is designed to be reprogrammable, so anyone can easily change the numbers.
The large databases will provide an easy target for hackers. Indeed, even without intentional tampering, the large databases will be unmanageable, as has already been found in Australia. The USDA has stated that NAIS is not a food safety program. Under NAIS, tracking ends when the animal is killed at the slaughterhouse. Most food-borne illnesses occur because of contamination from poor practices after slaughter. NAIS will do nothing to address these issues. Food safety needs to be addressed by increased standards and inspection of food processing facilities, including testing for Mad Cow Disease.
The final stated justification for the NAIS is to improve the export market. However, there are better ways to reach agreement with Japan and other foreign countries, including allowing those meat packers who wish to export beef to test their animals for BSE.
If tracing is a market benefit, let the market implement it, not a mandatory government program using our tax dollars. The USDA also has a “Process Verified Program,” which allows qualifying suppliers to market themselves as “USDA Process Verified,” including age and source verified. Any such program should be voluntary, non-coercive, allow for true competition, and paid for by the participants so that it does not distort market forces.

Some of the alternatives to NAIS for improving animal health
• Develop educational programs for animal owners, addressing disease prevention through animal management and biosecurity, and identification of diseases requiring the intervention of a vet.
• Improve training for veterinarians in recognizing foreign and emerging animal diseases and develop a protocol for the use of rapid diagnostic tools in the field. (recommended by the United States Government Accountability Office in GAO-05-214 (Mar. 2005))
• Increase inspections of animals and agricultural products entering into Texas.
• Consider existing mechanisms for tracking livestock: brucellosis program, scrapie program, tuberculosis program, brand system, sales and slaughter records, and producers’ records. Analyze the costs and benefits of minor modifications to existing programs and alternative programs, such as a “book-end” system (i.e. no tracking of movements) that uses non-electronic means of identification when the animal enters the stream of commerce.
• Conduct scientific modeling to identify high-risk situations and quantify important factors, such as the level of contagion, the means of transmission, and the severity of the diseases of concern.

Proposed legislation HB 461 would amend the current statute to limit the TAHC’s authority to a voluntary program. HB 637 would also limit the program to voluntary only. HB 637 also:
(1) bars any coercive measures from being used; and
(2) requires full disclosure before any person can be enrolled in the program, and provides an unrestricted right to withdraw from it.
This legislation would allow the TAHC to develop NAIS as a voluntary, market-driven program, consistent with the USDA’s November 2006 announcements.

Crossposted on Daily Kos, Texas Kos and Diatribune.

Them Fires on the Texas Prairie

There's more than one kind of prairie fire

1. Between elected officials and them that "brung em to the dance"
2. Between Aggie Engineers and Aggie Farmers and Ranchers
3. Between Historians and Legislators
4. Between Environmentalist and Legislators and Contractors
5. Between Grassroots Democrats who are looking at turn-coat money grubbing Democrats in office who are voting with big money interests on the TTC and who received donations from Zachry
6. Between Grassroots Republicans who are looking at incumbent Republicans who they helped elect who are supporting the TTC and who took money from toll road special interests
7. Between Local governments and regional transportation planning entities who are endorsing the TTC and local voters who are mad because their officials are endorsing it without listening to the people

We had devastating grass fires in much of this state which left thousands of acres of farm/ranch land charred. Much of rural Texas was declared a National Disaster. The TTC is the defining insulting swipe at those same people. When it is an act of nature (or even arson which got further out of hand) it is devastating. However, the TTC is something that governmental officials are deliberately DOING to the Ranchers, Farmers, homeowners and tax payers of Texas.

"Remember the Alamo" will be mild compared to the battle cry of "Remember TTC" before this is over.