Sunday, September 25, 2011

Rick Perry' s Cintra Problem

Madrid-based Cintra is involved in road construction projects across the globe, including the operation of the Indiana Toll Road. Because of lower than expected traffic on the toll road, speculation is mounting that Cintra may default on its $3.8 billion Indiana operation.

What does this have to do with Rick Perry?

Cintra and its partners are also building in Texas the $2.1 billion North Tarrant Express, which involves the reconstruction of Loop 820 and Texas 121/183 in Northeast Tarrant County. Cintra is also the lead partner in the LBJ Express, which includes the expansion of Interstate 635 in Dallas.

The company is also lead partner in two segments of the Texas 130 toll road project between Austin and San Antonio.

The projects include both toll and free lanes and in total amount to more than  $5 billion in projects in Texas. Rick Perry pushed all these projects through..

A key feature of the North Tarant Express contract is that Cintra is guaranteed a buyback by the state of Texas (aka Texas taxpayers) if the project proves unprofitable, just like the Indiana project is now unprofitable.

No one really knows what financial state the Texas projects are in. According to the Fort Worth Star Telegram:
While nothing indicates that the Texas projects are at risk, transportation officials are privately expressing concern about whether Cintra and other developers will complete the work, considered an indispensable part of Texas' plan to handle population and economic growth over the next half-century.
Bill Meadows, a Texas Transportation Commission member, has asked for an analysis of the state's 52-year contracts with Cintra and its partners -- NTE Mobility Partners on the North Tarrant Express project -- as it relates to default.
If Cintra defaults in Indiana, focus is going to turn to Texas. Among the things that will be discovered are these details:

Perry's former staffer Dan Shelley worked as a ‘consultant’ for Cintra (in 2004), became Perry’s liaison to the legislature during the time that Cintra was awarded the development rights to the multi-billion dollar Trans Texas Corridor (in 2005), then went back to work as a lobbyist for Cintra (in 2006). Shelly's daughter, Jennifer Shelley-Rodriguez, also has a consulting contract with Cintra.

This smells of big time crony capitalism.

Want more? Here's the Rudy Giuliani-Rick Perry-Cintra connection. MySanAntonio has the details:

Perry’s connection to Cintra explains why he endorsed Rudy Giuliani in the last presidential election. At the time, Giuliani’s law firm, Bracewell & Giuliani, was the legal firm representing Cintra in its bid to takeover SH 121 (which eventually unraveled) in the Dallas area. Giuliani’s investment firm was purchased by an Australian firm, Macquarie  another global player in P3s at the same time his law firm was advising Cintra on the SH 121 deal. While many social conservatives were baffled by Perry’s backing of Giuliani, it was no surprise to those following the Trans Texas Corridor [project]...
Bottom line: The Cintra deals looks real bad for Perry. It looks like crony capitalism that may end up with a multi-billion dollar bill being put to Texas taxpayers. It's unlikely that the Texas projects will go publicly ugly between now and the election, but Indiana is another story. That project is surviving on fumes right now. If Indiana blows up before the election, and it could, a lot of people in Texas are going to begin worrying about the Texas projects, and rightfully so.  The justified, scare forecasts about the future billion dollar costs to Texas taxpayers, will be flying on the blogosphere and in MSM, and it is all going to look like some really shady deals done by Perry.


  1. As a Texan, this is very interesting.

    Also, I find this situation a great example of how this is NOT an example of 'libertarianism' in road construction or providing public infrastructure.

  2. simple fact checking would show that the assertions made in that 'article' are wrong. let's start with this: A key feature of the North Tarant Express contract is that Cintra is guaranteed a buyback by the state of Texas (aka Texas taxpayers) if the project proves unprofitable, just like the Indiana project is now unprofitable.

    simply not true. read the comprehensive development agreement. if the developer fails, the state gets the road - which it always owns - gratis. if the state wants to buy it from the developer, it can at any point during the lease.

    what Texans will get is a road valued at almost $2.5 billion - not counting 50 years of maintenance, upgrades and operations that the state won't be on the hook for - for an investment of approximately $500 million.

  3. I wrote about this issue over three years ago:

    The Bush administration pushed privatization, as well: