Gov Corzine releases draft bill to monetize New Jersey tollroads

Under Governor Corzine's draft legislation to monetize New Jersey's tollroads, the New Jersey Turnpike, the Garden State Parkway, the Atlantic City Expressway and NJ440 would be transferred to a New Jersey Turnpike Authority reconstituted as New Jersey Capital Solutions Corporation (NJCSC). NJ Capital Solutions Corp in turn would have legal authority to concession the tollroads to a "domestic nonprofit corporation" called a Public Benefit Corporation (PBC) which would be legally separate and independent of both the state and the Capital Solutions Corp, but would be controlled by a second nonprofit corporation called the Citizens' Board (CB).

The preface to the bill says that as state created independent nonprofit entities the NJCSC and CB will serve "an essential public function."

Transferring responsibility for the Atlantic City Expressway and NJ440 to the NJCSC will allow "a more coordinated and rational organization" of the state's tollroads and allow it to maximize their value.

Transferring responsibility for operating, maintaining, managing, expanding and improving the tollroads to a domestic nonprofit under a longterm toll concession will reduce the burden of government and meet the public need for financing the state's broader transport needs and help the state's economy by retiring state debt, the preface continues.

The New Jersey Turnpike Authority, the bill says is "continued and renamed" the New Jersey Capital Solutions Corporation "in but not of," the New Jersey DOT, indicating that the NJCSC is proposed to be brought into the state department of transportation.

Toll rates "insufficient"

Toll rates have been "insufficient in recent years," the preface says. Tolls in future will be sufficient within the maximums established by the law to maintain and improve the tollroads, and what is called the state's "integrated transportation system" (all the rest of the roads and transit?) without being excessive relative to their value in use, or discriminating against out of state users in violation of the US Constitution.

Surprisingly for a toll concession the bill provides for major bond financing to be performed by the concessionee, the NJCSC, rather than by the concessionaire, the PBC.

ADDITIONAL: the draft bill as we read it says that the NJCSC will issue bonds secured to the toll revenues, but a Fact Sheet on the Governor's website says the PBC will do the big borrowing as in most toll concessions. see

http://www.state.nj.us/governor/home/pdf/080125_pbc.pdf

The concession can provide for annual concession fees to be paid by the PBC concessionaire to the concessioning NJCSC or for the normal large upfront payment.

The legislation says that the NJCSC bonds are not a liability of the state but can only be secured by pledges of toll revenues - no different from present NJTA bonds. At the same time the NJCSC is "constituted as an instrumentality of the state exercising public and essential government functions."

NJCSC will have a board of five appointed by the governor:

- the commissioner of transportation

- state treasurer

- another executive branch gubernatorial appointee

- nominee of the president of the senate

- nominee of speaker of the general assembly

Appointments will for four or five year terms (the text is contradictory) except that one of the first appointments will be for two years and the second for three years to get the terms staggered.

They will only be removable "for cause." Going against the political needs of th governorn of the day is apparently not be considered 'cause' as of now.

The governor will appoint the chairman and vice chair of the board of the NJCSC. Board members will have to bond themselves to the tune of $25k as a potential penalty for bad behavior, the Treasurer $50k.

The NJCSC will have to submit capital spending plans for review by the legislature but will not be subject to control by it.

Concession term of up to 99 years

The concession term between the NJCSC and the PBA concessionaire may be up to 75 years, extendable to 99 years.

Toll setting powers would be granted by the law to the concessionee not the concessionaire - the NJCSC not the PBC. However, and this is where the proposed law has been changed around, nothing will preclude the NJCSC from including toll setting provisions in the concession and delegating them in effect to the PBC.

Power of eminent domain for improvements such as widening the tollroads remains with NJCSC.

Nothing seems to require a concession, just envisages and enables

There is nothing in the law, interestingly, which explicitly requires the NJCSC to do a toll concession, though that is clearly envisioned. It merely authorizes and provides for a concession.

In any case the concessionaire is limited to operations of the tollroads and toll collection. The NJCSC, not the concessionaire will have the statutory power to fix tolls, but may delegate that power to the PBC in the concession.

The NJCSC will be responsible for deciding on and financing capital works and improvements. The concessionaire is envisaged as not much more than a contract operator of the road and collector of tolls.

Major risk is with the NJCSC the concessionee

Major financial risk is with the concessionee - the NJCSC - not with the concessionaire.

The concessionaire will be established by the NJCSC and its initial directors will be named in the certificate of incorporation. The PBC concessionaire will be controlled by the Citizens Board comprising fifteen appointees of the governor, seven of whom will be executive branch officers and eight appointed by the governor from the private sector. The eight private sector people must have expertise or an interest in toll or transportation matters.

The Citizens Board will be the "sole member" or shareholder of the PBC which in turn will have its own supposedly independent directors. They cannot be senior executive branch officers or members of other government agencies, or the legislative, or local government. They get appointed initially by the NJCSC but must meet independence criteria. After their terms have been served the PBC nominates its new directors to be actually appointed by the Citizens Board.

Employees keep their jobs at concessionaire for the term of labor contracts

All employees of the tollroads designated by the NJCSC become employees of the concessionaire PBC on the commencement of the concession. No layoffs will be made by the PBC during the term of the existing labor contracts. Employees of the PBC from the tollroads will be entitled to continue in PERS, the state pension scheme so long as this doesn't jeopardize the plan's status as a government plan under federal law.

PBC contracts must be competitively bid over $75m value.

Tolls will be set subject to the maximum provisions of the law (four 50% increases at four year intervals from 2010 plus indexation) and are explicitly not subject to "supervision, regulation or approval" by any state agency. Except, we add, to the extent the NJCSC is as the legislations says is "constituted as an instrumentality of the state exercising public and essential government functions."

The right to "collect" tolls (as distinct from the right to set or fix toll rates) "shall be treated as a true and absolute transfer of rights," the draft bill states (j, p32). Then a new section is added [11 a (1)] which says the state pledges it won't limit the rights vested in the corporation (NJCSC) "to contract with PBC to establish and collect such charges and tolls" as needed to meet the NJCSC's obligations, subject to the 4x50%+indexation caps on toll rates. All these pledges of non-interference may be included in the terms of the toll concession

Divesting the rock concert stadium

The bill envisages that NJ Arts Center socalled, a huge outdoor stadium concessioned out at present for riotous rock music events will be divested. The NJCSC is prohibited from non-transportation related activities.

State police maintain their role

The state police will continue to be used for policing the tollroads under contract. The corporation (NJCSC) will have the right to make safety regulations such as speed limits and signing of those.

Emergency services are to be exempt from tolls.

The end of the bill from the middle of p76 to p80 is called a Statement and contains a summary of its main provisions and intent.

COMMENT: We sympathize with Gov Corzine's moves to allow tolls to be raised to sensible levels given that the 4x50%+indexation is only a cap - contrary to the reporting. Using the earning power of the tollroads to retire state debt seems a good use of the money. But this bill looks like a Rube Goldberg legal contraption, contriving to move responsibility for the tollroads away from the state while indirectly maintaining control. If passed as drafted, this bill may in time become the object of huge controversy, political intrigue and litigation. This could give toll concessions a bad name.

see http://www.rube-goldberg.com/

The draft bill of 80 pages is downloadable here:

http://www.state.nj.us/governor/home/pdf/080204_draft_bill.pdf

A presentation being given by Gov Corzine

http://www.state.nj.us/governor/home/pdf/1-30websitetownhall12.pdf

BACKGROUND: The Garden State Parkway and the New Jersey Turnpike are presently under the New Jersey Turnpike Authority, while the Atlantic City Expressway is controlled by the South Jersey Transportation Authority and NJ440, presently untolled, by NJDOT.

The Parkway is a north-south highway varying between 2 and 15 lanes width running from the New York State line through the northern New Jersey suburbs of the New York metro area and then along the whole length of the Jersey shore line right down to Cape May at the mouth of the Delaware River. By numbers of toll transactions per day, about 1.2m, it is the busiest single tollroad in America although its revenues are much less than those of the Turnpike.

The Turnpike originates at its northern end by the approaches to the George Washington Bridge, the major gateway to New York City, splits in two routings through the ports and heavy industrial areas of the swampy Meadowlands, picking up connections from the Lincoln Tunnel into midtown Manhattan and the Holland Tunnel from downtown Manhattan, crossing the Parkway and entering one of the world's most intense warehousing and logistics areas from which much of the northeast's trucking is staged.

Just south of the Parkway/Turnpike interchanges in Brunswick, NJ440 acts as an east-west connector to I-287, the closest thing the New York area has to a western peripheral highway or bypass. After its junctions with the two great tollroads it curves north to the Outerbridge Crossing toll bridge into Staten Island NY which in turn leads to the Verrazano Narrows Bridge and the inner boroughs of New York City and Long Island. Carrying longdistance traffic and commuters, and an integral part of three other toll facilities, it is also a logical candidate for tolling.

In the midst of the great logistics warehousing areas in the center of the state the Turnpike narrows from 12 to 6 lanes, from four roads to two, and it loses a chunk of its traffic to a spur heading west to the Pennsylvania Turnike. At that spur it narrows to just 2+ 2 lanes and soon is running alongside the free 6 lane I-295 as it heads past the eastern fringe of the greater Philadelphia area (the southern Jersey suburbs) on its way to the Delaware Memorial Bridge, the Delaware shore, and the great metro areas of Washington/Baltimore. The Turnpike has heavy truck and other interstate traffic in its southern portion and a mix of port/airport related, industrial, commuter and New York traffic in its northern part. It varies between four and 14 lanes and two and four roadways.

The Atlantic City expressway is the major link between the Phiiadelphia metro area and Atlantic City and the Jersey oceanfront. It varies between 4 and 6 lanes with a portion an unbalanced 5 lanes.

TOLLROADSnews 2008-02-05