Massachusetts Turnpike Authority has "no authority" to pay staff or vendors Nov 1 to 15 - board member

The Massachusetts Turnpike Authority (MTA) runs out of legal authority to pay staff, vendors or anyone else midnight Oct 31. The Turnpike has been running on monthly budgetary approvals since it failed to produce an annual budget in the summer.

At the September board meeting they voted a budget for October  - as they had in previous monthly meetings since July. But with the October board meeting postponed by the Turnpike chairman and state transportation secretary Bernard Cohen from Oct 28 until after the elections the Turnpike has no legal authority to make any payment of funds for any purpose from midnight Friday October 31.

Board member Mary Connaughton who strongly opposed cancellation of the board meeting this week has written to the Turnpike chairman saying that since no budget has been approved beyond the end of October "it is her opinion" (ADDED 10-30) that there is no legal authority for any expenditure of funds in November before the board meets and approves new spending. In her letter she asks the chairman to halt all payments by the Turnpike from Monday until the board can meet to approve a budget.

"I can't see that there is any legal authority (for expenditures) beyond the end of the month," she told TOLLROADSnews.

Connaughton says she was told that a staff attorney thinks there is legal authority and has been promised the opinion in writing, but she has not received anything.

"If there is legal authority to spend independent of a vote of the board, then I don't understand what we are doing coming to meetings and voting a budget," she told us this morning.

Also, Connaughton says, the chairman's cancellation of the October board meeting is in contravention of the bylaws: "The bylaws say that there shall be a monthly meeting unless a majority agrees otherwise. Two of us favored the cancellation, two of us opposed it. There was no majority of the board required for cancellation. We were evenly split so the meeting was not properly cancelled."

A fifth board member, John Jenkins was announced by the Governor last Friday after the meeting was cancelled by Cohen.

Cohen was quoted: "Though he (Jenkins) had not been sworn in yet, he had been appointed by the governor, so it was my belief that his opinion counted."

Jenkins agreed to the cancellation of the October meeting.

The ghost of Matt haunts the Mass Pike this Halloween

Connaughton says that since the board has been voting monthly budgets the past several months it has no budget beyond October 31, and seems to her to be no legal basis for issuing checks until there is a board meeting to extend that authority. The 1600 staff of the Turnpike are paid weekly and checks go out to vendors every day.

The Turnpike, Connaughton says, is taking risks (AMENDED 10-30) with its precarious bond ratings. Under covenants on swap-options it faces the imminent possibility that $240m could be called, if the failure to pass a credible budget gets the Turnpike downgraded to 'junk' status. This short term credit of the Turnpike is callable if the raters declare the Pike's bonds junk.

"Grey area of the law... reminiscent of Amorello days"

Connaughton says the Turnpike is "getting into a very grey area" of the law.

"Unfortunately this is very reminiscent of the Amorello days," Connaughton says in reference to the summer of 2006 when then Turnpike chairman Matt Amorello refused to hold board meetings, claiming he had the discretionary power to decide when and if the board would meet, as well as to set the agenda for meetings.  That was in a stormy June 2006 meeting of the Turnpike board.

Board members, including Connaughton, petitioned the state high court which in September 2006 handed down an order for monthly board meetings. Virtually the same day the court also ruled that the then Governor, Mitt Romney had a right to hold a hearing for dismissal of Amorello, and he resigned.

Bernard Cohen has said he put off the October meeting until November 14 because state officials need time to complete legislation to restructure the Turnpike and other transportation agencies of the state.

This makes no sense.

Cohen and other state administration officials have been talking about such a restructuring of the turnpike and other transportation agencies ever since they came to power at the start of 2007.

They have supposedly been at restructuring for 22 months now. Suddenly a monthly meeting has to wait two weeks on some legislation they've been at for almost two years?

Even if restructuring legislation is finally produced in the next week or so in time for the Nov 15 Turnpike board meeting, it will take time to be considered by the legislature and to be passed into law, and more time to be implemented.

Meanwhile the Turnpike has to have legally authorized budgets, whether monthly budgets, quarterly, or whatever. The October 28 meeting could have passed a budget for November, or through the end of the year based on previous months' budgets.

How to defease $2.2 billion of debt?

Major difficulty in absorbing the Turnpike into other agencies of the state will be how to defease $2.2 billion of Turnpike debt incurred on behalf of the Big Dig so that the Turnpike can pay its way within the highways department or wherever it is put.

In the present state of the financial markets the defeasement of the Turnpike debt will be at the least very expensive and perhaps impossible without a major new state revenue stream.

Most likely a big increase in the state gasoline tax to support defeasing the Turnpike's Big Dig debt  has to be an integral part of the restructuring, suggesting Chairman Cohen's real motivation is to defer announcement of that bad news until after the November election.

TOLLROADSnews 2008-10-29  CHANGES Thursday 10-30 12:15