Mass Pike toll hike 50% - to raise $90m/yr extra

In a bold move to put the Massachusetts Turnpike on a sounder financial footing the board today voted 4 to 1 for big toll increases. They are designed to increase revenues of the metropolitan Boston section (Turnpike Metro) by around 50% or from around $175m/year to $265m, officials said. Some toll rates are doubled.

The one dissenting voice was Mary Connaughton, a finance consultant, who has previously been one of the strongest voices for action to increase tolls, but who thought the toll increases voted today are too much. She favored a plan that would have raised about $70m extra.

Bernard Cohen state transport secretary and chairman of the Turnpike board said today: "I am concerned that if we don't take action today, we could be triggering problems with the credit rating agencies. If that happens, that (would be) catastrophic. We have to avoid that at all costs. The Turnpike's bonds are rated just above junk bond status now. If their rating goes down, the Turnpike (will) have to pay even higher interest rates the next time it wants to borrow money."

Without toll increases debt service coverage was projected to drop to as low as x0.83 by 2011 versus the x1.15 cover required in the Turnpike's bond covenants - and x1.00+ to make debt service. Termination of swaptions and a call on the turnpike to repay was also on the cards if failure to raise toll rates led to a downgrade of its ratings.

There will be public hearings on the toll increases which are formally a proposal now and subject to reconsideration. The board will have a final vote probably in December with the new toll rates to go into effect probably in February.

Details of new proposed tolls - 30c/mile

Cash tolls at the two major tolling points on the Turnpike's Boston section at Weston (near MA128) and Allston (across the river from Harvard) will rise 75c for cars from $1.25 to $2.00 or 60% for cash, and from $1.00 to $1.50 (50%) for transponder users. Mass Pike issues an IAG-compliant Mark IV transponder brandnamed FAST LANE but interoperable with E-ZPass and other IAG brands issued outside the state.

Tolls for transponder users passing two mainline toll points and going the full 10 mile (16km) length of the Metro Turnpike will be paying 30c/mile or 19c/km and those paying cash will pay 40c/mile (25c/km.)

For commercial vehicles the toll will rise from $1.25/axle to $2.25 (80%) at these two points, so a tractor trailer (most are 5 axles) will now pay $11.25 at each toll point or $2.25/mile and $1.40/km.

Tunnel tolls double

At the Sumner and Williams harbor tunnels toll rates for normal cars are doubled from $3.00 to $6.00 for cars with transponders and from $3.50 to $7.00 for cash payment. Tolls are due only for westbound travel.

The tolls for taxis rise from $5.25 now to $9.00 (71%) while other commercial vehicles will pay $3.50/axle, up from $1.75/axle, a doubling.

A share of the tunnel traffic gets a special Boston resident discount toll of 40c enrolled with a transponder. That toll is controlled by law and stays the same.

There are no toll rate changes on the Turnpike West (west of MA128/I-95 on the outskirts of Boston). This ticket system portion of the Turnpike extending all the way to the New York state line has separate financial accounts and is not in the same financial crisis as the Boston segment. Also it has been slated for de-tolling within two years by the Governor, except for new toll points he proposes on the Connecticut and New York borders.

Cash flow calculations for the Turnpike Metro were done in-house to save money, an official said, although they made use of the traffic and revenue consultant's data.

An official told us that the extra revenue expected with the toll rates adopted today will be in the range $85m to $95m (we used $90m above) rather than the $100m in CEO Alan LeBovidge's presentation to the board because there were some last minute revisions.

Assume tolls continue to support Big Dig I-93

The projections assume:

- no capital reserve fund

- Massport raises tolls at the Tobin Bridge in line with Turnpike harbor tunnels to prevent diversion

- no transfer of western turnpike costs to Turnpike Metro

- conversion of IC15 toll plaza at Weston to a simple 2-way barrier plaza on removal of ticket system tolling

- a variable rate refunding to hedge UBS swaption

- tolls to support all untolled Big Dig roadway costs

- potential bond financing of $200m of capital projects (30 years at 5.5%)

Dissident says I-93 should not be supported by Turnpike

Board member Mary Connaughton objected to the last two above saying tollpayers should not pay for the Big Dig operations costs which don't benefit them (I-93). She has said these maintenance costs plus untolled Big Dig debt service costs should be paid either with tolls on I-93 or by other state revenues. Today she mentioned an increase in the state gasoline tax as a fairer way to pay for the expenses of the  I-93.

I-93 goes north-south through Boston whereas the Turnpike Metro (I-90) is east-west.

The majority of the board argue however that toll increases are so difficult politically they should err on the high side of revenue so they don't have to revisit toll rates for a while.

Chairman says "seeds of crisis" planted a decade ago

Turnpike chairman Cohen said today the seeds of the present Turnpike crisis were "planted ten years ago" and have been ignored ever since. He's referring to the decision by the state and the USDOT in the late 1990s to have the Turnpike fund major portions of the Big Dig without giving it the right to collect tolls to service the debt and pay operating costs.

COMMENT: The Turnpike board had no alternative but to increase tolls substantially given the financial mess it's in.

The Governor's plan to substitute border tolls for ticket system tolls is unworkable and won't fund the costs of the Turnpike West. An expert reader made the point also, today, that de-tolling the Turnpike West doesn't take account of the need to widen it between I-84 at Sturbridge and MA128/I-95 at Weston from 6 to 10 lanes because of major development alongside.

Neither the Governor nor the Turnpike have addressed the need to upgrade Turnpike Metro toll collection to all-electronic highway speed tolling. Neither have they considered the possibilities of variable pricing on the metro section to manage traffic flows and eliminate congestion. Transferring the metro turnpike to Massport is a shell game and won't produce serious savings. Those are only obtainable by a single-purpose public toll agency with authority to modernize the toll system and extend tolls to I-93, or it needs to be unburdened of the Big Dig by a gas tax increase. Privatization under a longterm concession would also offer the opportunity for major savings.

Eventually the I-93 Big Dig and other major inner area highways will have to be managed with variable toll rates. The days of free urban highways are numbered and promising them to the public is a dishonest pander.

TOLLROADSnews 2008-11-14