When you're driving any of Harris County's 120 miles of toll roads, think about this. You're not just paying tolls, you're also paying off a bet.
We all pay for the privilege of driving on Harris County toll roads. And it takes a financial toll.
Now, we've uncovered you are also paying a hidden fee.
"Everybody that's got a toll tag is paying for this, everybody that's throwing a bunch worth of change into a turnstile," Former Harris County Tax Assessor Paul Bettencourt said.
Bettencourt says a risky financial deal approved years ago by county leaders at the time is now costing you millions.
"We have literally lost our shirt on these deals," Bettencourt said.
You're paying millions to Wall Street banks because in 2006, county commissioners took a gamble while refinancing nearly $200 million in bonds used to build toll roads.
It was a complicated financial arrangement called a swap.
"It's a bad mistake, but it was a strategy that didn't work," Harris County Commissioner Steve Radack said.
Essentially, commissioners made a bet that if interest rates go up, it could make the county money. But when the economy slowed in 2009, the interest rates dropped. Instead of saving money, the county had to pay more money.
So far, it's $47 million.
"It's probably the biggest loss of anything that I even know of in Harris County's history," Bettencourt said.
UH professor Craig Pirrong is an expert in interest rate swaps. He points out that we're not alone. Cities and counties all over the country have lost millions on similar swaps.
"It does appear that Harris County took on unnecessary risks in engaging in this transaction," Pirrong said. "It's in a hole and there's no way of essentially getting out of the hole without paying to get out of it."
"I think it was an OK deal at the time," said Harris County's Chief Budget Officer Bill Jackson.
Jackson was not in office back in 2006, but he defends the deal, saying it was simply an attempt to lock in a fixed interest rate at a time when they were rising fast.
"The world is a different place after 2009 and again we've learned a lot of lessons. That's what history helps us do. And in the future, certainly we would be very cautious about doing this. I personally won't recommend any in the future," Jackson said.
Most county commissioners who put us in this hole are out of office, except for two of them.
Harris County Commissioner Radack says he was simply following the advice of the county's financial consultants and was not made fully aware of the extent of the financial risk.
"It was a strategy that didn't work in that particular time, but I think we will have strategies that do work," Radack said.
The only other current commissioner to vote for the deals is El Franco Lee. We were told he would not talk to us about why he voted for them so we showed up at Commissioners Court.
"We believed in them obviously because there was a unanimous vote on court at the time to do them. The thinking ar the time was to address the financial issues of that time," he said. "Looking back, they can be second guessed in a whole lot of different ways, which is not a productive thing to do. But I stand by the decision that was made."
Commissioner Lee says we shouldn't second-guess his vote that cost you $47 million so far. So let's look into the future. Well, these bets will most likely continue to cost you millions more for years to come. That's be cause interest rates are expected to stay low for a very long time.
You can read a full explanation of the swaps from the county's financial advisor right here.
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