NEW JERSEY:Turnpike ET delayed but Garden State Pwy halfway

Big Raritan Plaza fired up

Meanwhile on the sister toll road, the Garden State Parkway (GSP), which tolls point by point, ET is being fired up plaza by plaza, southward. They reached the halfway point in implementation of electronic tolling March 31. That was when the Raritan mainline plaza went live. It is one of the largest toll plazas in the country with 46-toll lanes, in staggered configuration, taking 188k tolls/day. Ten toll lanes each direction are being wired for ET now. (Later the contractor Adesta will work back over the system completing ET installation in all toll lanes.)

Joseph Buckelew, chairman of the NJ Highway Auth (NJHA) which operates the toll parkway says ET is “revolutionizing” the NJ commute because of the way it eliminates backups. The GSP has roll-through ET at regular toll plaza lanes with the posted speed of 5mph that is a standard in the northeast. But it has consultant Vollmer working with senior staff on plans for express electronic tolling. There is strong legislative pressure on the authority to retrofit its plazas with the barriered diverge/merge zones needed for safe mixing of full-speed ETX and manual toll payment to safely co-exist.

Unidentified angel with $90m

The NJHA says the regional consortium has issued 130k new ET tags supporting 77k ET accounts since the GSP began ET in December. The GSP ET readers also read the large population of E-ZPass tags issued in support of the Triborough Bridge and Tunnel Authority (1,780k tags), the Port Authority NYNJ (400k tags) and the NY State Thruway (800k tags).

Meanwhile Adesta (formerly MFS), the troubled MCI Worldcom spinoff which has the big NJ Regional Consortium ET job, says it has $90m in “financing commitments” from unidentified investors to allow it to carry on. It had previously reported that it had insufficient liquidity to service its debt, and its auditors had issued a “going concern” warning.

Billy Ray, the president of Able Telecom which controls Adesta, has said the company has been “continually plagued by the original acquisitions financings and a number of inherited situations,” also by “distractions, false reports and rumors.” The company has churned staff at a rapid pace.

The fiber side of Able has ongoing disputes with the NY State Thruway and the Alyeska Newtork in Alaska, while the tolling side has major litigation pending with Sirit and ATS, and long overdue work for Caltrans, E-470 and RMA, and is subject to an ongoing SEC investigation. It has not been bidding for new toll integration work.

Bonds

Meanwhile the NJ Turnpike has sold $1,460m bonds and plans to sell another $400m. This will go to refinancing some of the Turnpike’s debt and support a $917m capital improvement program. The bond sale was led by Salomon Smith Barney and yields fixed rates varying between 4.8% to 5.5%. The Turnpike’s ratings have improved lately thanks in part at least to the wide political and public support for the two rounds of toll increases proposed by exec-director, Ed Gross.

Fitch IBCA raised the Turnpike recently from A- to A on the basis of acceptance of the Turnpike’s financing plan and toll increases. These include a peak-hour premium toll for cars and premiums for cash compared to ET.

“The upcoming rate hikes and associated variable pricing scheme should continue to maximize revenue and adequately enhance the authority’s financial margin,” said Fitch.

The rating agencies downrated the Turnpike 1996-98 because of the NJTA’s diminishing margins, rising debt, and use of reserve funds for ongoing operations expenditures. At the same time they were impressed by its ability to drive costs down – at an average of 2.2%/yr. 1993 to 2000 the workforce was dropped from 2,005 to 1618 and the Turnpike’s labor union agreed for the first time to temporary collectors.

State Control a Concern

The rating agencies remain concerned about the extent of political control:

“State control over the (NJTA) authority is stronger than for most US toll roads, and this relationship is a major credit consideration,” writes Fitch ICBA in a comment dated 3/28/00.

Fitch ICBA also thinks that the Adesta (MFS) plan for financing E-ZPass with violations revenue is unlikely to balance its books: “Given the delays in system implementation, the projected increases in installation and operating costs, and the uncertainty associated with the realization of violation revenue projections, some deficiency is reasonably likely in 2008. The authority will have to account for this expected deficiency in its annual reports and will need to make the true-up payments from either accumulated reserves or additional debt.”

The authority has a 48% share of the Consortium liabilities and a gross $600m cost of services will be accumulated by 2008. To the extent that amount is not covered by fiber optic leasing revenues and violations fee revenues, each participant will be due for their proportionate share of ‘true-up’ payments needed to balance the books. Fitch ICBA says however this is a “minor risk” to the Turnpike’s financial plan. (Contact jpangallozi@fitchicba.com)