For Mission, majority stake in Madero bridge may not be worth the price

For the Mission City Council, a majority stake in the Madero bridge project may not be worth the price.

The City Council tabled a new version of the Madero bridge agreement Monday, concerned Mission can’t afford the $114 million project.

City of Mission logoUnder the agreement, McAllen and Hidalgo would cede control of the Madero bridge project to Mission. In exchange for a 37 percent stake, Mission would cover all construction costs. McAllen and Hidalgo wouldn’t pay Mission back until construction is completed — and only with cash from bridge tolls.

The City Council peppered Mayor Armando “Doc” O’caña with questions Monday night, asking how Mission would pay for the bridge and manage the risk.

“The only thing I can tell you: That if this inter-local is not approved, then we’re probably going to have to start reapplying for our permit,” O’caña said. “Because it is what it is.”

The U.S. State Department approved the Madero bridge project in 1978, awarding the city a presidential permit. Mission, though, delayed the project for decades.
To keep the permit, Mission must demonstrate progress on the Madero bridge.

McAllen, Mission and Hidalgo, which worked together on the Anzalduas bridge, hired Houston-based S&B Infrastructure to study the Madero project.

“Through the analysis performed by S&B Infrastructure, Ltd. and the members of the project team, it is our opinion that not only is the project feasible, but that in time the project will be necessary to accommodate the ever changing climate of the region,” according to the 425-page report. “It is however expected that there will be challenges associated, however each of the challenges can be managed and mitigated with proper planning.”

Building the bridge and key infrastructure would cost $144 million, according to the report.

To lock down about $70 million in federal funding, Mission must secure support from U.S. Customs and Border Protection, the U.S. General Services Administration and the Federal Highway Administration.

Mission must also convince the Mexican government to champion the bridge. Without support from the state of Tamaulipas or key decision-makers in Mexico City, the project would become a bridge to nowhere.

“We can’t extend the permit without the Mexicans having a positive cost-benefit ratio,” said Daniel Rios, the president of S&B Infrastructure, during a meeting with the Anzalduas bridge board on Jan. 14. “It’s like you want to get married but you don’t have a bride. We don’t have somebody on the other side that’s capable of moving forward. So we both have to move forward together. And right now they’re behind us. We’ve got to get them caught up. It’s not a priority for them.”

McAllen and Hidalgo would help Mission lobby for the bridge on both sides of the border.

While they seek federal funding, Mission would front $44 million for the project. Where that money would come from remains unclear.

As part of the Madero bridge study, S&B Infrastructure hired a Boston-based consulting company called Steer Davies Gleave to produce a financial analysis.

Steer Davies Gleave determined that toll revenue probably wouldn’t cover debt payments on the Madero bridge.

“While toll revenues should more than offset ongoing operating, maintenance and renewal costs, there is some doubt whether the surplus revenues can fully repay the initial capital costs,” according to the financial analysis.

To reduce the red ink, Steer Davies Gleave suggested delaying the bridge project.

Waiting until 2032 to start operations would boost the bottom line, but tolls still wouldn’t generate enough revenue to pay off the debt within 30 years, according to the financial analysis.

Borrowing the money poses additional challenges for Mission.

McAllen, which maintains a strong financial position and an excellent credit rating, would still need to borrow a significant amount of money to build the bridge.

“The City of Mission on the other hand, does not appear to be in a similarly strong position,” according to the financial analysis. “In fact, they are at a deficit with their unrestricted funds, and have a negative net position.”

Moody’s Investors Service, which downgraded Mission’s debt rating twice last year, had similar doubts about the city.

“Mission, TX’s credit profile is constrained by a trend of operating deficits which have materially reduced reserves in both the general and debt service funds,” according to a credit opinion Moody’s published July 24. “The city’s decision to maintain property tax rates despite rising operating expenditures associated with stable growth has ultimately hindered its ability to attain structural balance.”

McAllen and Hidalgo would wait until construction ended to start paying Mission back.

“The Cities of McAllen and Hidalgo shall not be liable for any costs or expenditures related to the construction of the Madero Bridge until the completion of the bridge,” according to the agreement. “Upon completion of the Madero Bridge, McAllen and Hidalgo shall begin repayment of costs expended by Mission, in proportion to its allocation, but such repayment shall come only from the revenues of the operation of the Madero bridge.”

The McAllen City Commission approved the new agreement Monday afternoon.

“Really, what this agreement is doing is removing liability from the city of McAllen and the Anzalduas bridge board and placing it completely on Mission,” said McAllen City Manager Roy Rodriguez, explaining the agreement to the City Commission. “So we discussed it at the bridge board meeting. It’s kind of like: ‘Well, ok.’”

Under the agreement, Mission would hold a 37 percent stake in the Madero bridge and control three of five seats on the bridge board. McAllen would hold a 33 percent stake and Hidalgo would hold the remaining 30 percent.

Mission, which is concerned about the presidential permit, wants to accelerate work on the Madero bridge project, Rodriguez said. Members of the Anzalduas bridge board considered that work premature.

“They want to take that on and, therefore, they’re willing to pay for it,” Rodriguez said.
Hours later, however, Mission balked at the agreement, revealing an apparent disconnect between O’caña and the City Council.

“I kinda just look at it the way whenever somebody comes to the bank and applies for a loan,” said City Councilman Ruben Plata. “During the construction period is the most risky part of any project.”

Plata and City Councilwoman Norie Gonzalez Garza repeatedly asked O’caña how Mission would pay for the project.

“How can we commit to something that we’re not sure where we’re going to get the funding from?” Gonzalez Garza said.

City Councilman Gus Martinez also had reservations about Mission assuming all the risk.

“It’s time to pump the breaks on this,” Martinez said, adding that he would prefer Mission, McAllen and Hidalgo share the risk.

When neither O’caña nor city staff could explain how Mission would fund the bridge project, the City Council tabled the agreement.

During an interview, O’caña said he’s working on five options to fund the bridge but couldn’t discuss them.

O’caña said the S&B Infrastructure analysis also included good news for Mission, including the lack of any environmental obstacles. Traffic projections show the Anzalduas bridge may hit capacity in 2034, pushing commercial traffic to other ports of entry.

Mission must commit to building the Madero bridge as part of the presidential permit process, O’caña said. Without a signed agreement, Mission could lose the permit and the opportunity to build a second border crossing.

“And I’m going to lay it down real quick,” O’caña said, describing what he plans to tell the City Council about the agreement. “If they want to lose the presidential permit, we can lose the presidential permit real quick.”

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