Mass Pike wimps out again on toll increases (CORRECTION ADDED)

The Massachusetts Turnpike Authority board has backed away from a toll increase again, this time on the basis that the Governor and legislative leaders will hike the gas tax, and provide up to $100m/year to support its disastrous Big Dig debt. They voted 3/2 not to proceed with toll increases approved and scheduled for next Saturday (Mar 29).

The resolution passed today does provide for the full toll increases approved in February to go into effect as planned for July 1, if the the gas tax subsidy to the Turnpike doesn't come through by that time.

The elimination of phase one of the toll increase will cost the Turnpike an estimated $13m, and to keep afloat they will have to run down reserve balances presently put at $54m to about $41m.

Jim Aloisi chairman of the Turnpike and state secretary of transportation moved for the deferral and was supported by executive director Alan LeBovidge and Michael Angelini. They said the agreement reached between the Governor and legislative leaders for gas tax subsidies required the toll increase to be deferred to allow time to get higher gas tax revenues flowing.

Senate president Therese Murray, House speaker Robert deLeo and state Governor Deval Patrick have jointly agreed to have the gas tax subsidies in place by July.

Major factor in the crisis has been the Turnpike's agreement ten years ago to take on some $2.2b of debt on the Big Dig without any toll revenue stream from the project to service the debt.

The two votes against today's motion were different.

Judy Pagliuca opposed the deferral of toll increases on the grounds that it would delay a start on vital bridge rehabilitation and repairs and would jeopardize safety.

Mary Connaughton said the decision failed to address equity problems in the toll structure.

CEO LeBovidge warned against delay

Executive director Alan LeBovidge has spent the past several months arguing fervently against further delays in toll hikes.

March 16 LeBovidge said at a hearing of the joint committee on transportation in the state legislature:

"1. The Turnpike has been avoiding the fiscal problem it is now in for years, with shortsighted gimmicks like raiding its reserves, gains from one-time revenue generated by selling property, deferring maintenance and entering into swaptions deals.  They have been keeping the finances together with a wad of bubble gum and duct tape. 
Everyone knew this could not last forever.

"I've brought with me a stack of reports from past working groups, commissions and opinion leaders dating back to 1997 which support this point exactly.  No one can say that they didn't see this day coming.

"2. Despite all of the cost savings that we accomplished, we need to focus on increasing revenues now because there are several issues that need to be addressed immediately.

* Bond indentures legal coverage requirements must be met.

* Rating agencies expectations need to be addressed - the rating agencies are tired of waiting!

* With the current condition of the financial markets, we cannot refinance our debt in the near term.

* Assets must be maintained in a state of good repair.

* Remaining reforms and cost cutting opportunities, especially in an organization that has been focused on this exercise for so long, will take time to find and execute - time we just don't have.

"That is why we need a long-term, sustainable solution.  One-time fixes are no longer acceptable.

"It would be irresponsible for me to recommend deferring the problem to another day - to another Executive Director - to another generation.

"Guess what?  Time's up and here's why -

"As you can see from the last two pages of the materials I've distributed and as you've seen before, if the Board had not taken action at the February meeting -

* Below legal coverage ratios would have resulted;

* A ratings downgrade would have been inevitable;

* Our bonds would have junk bond status; and

* No Metropolitan Highway System (MHS) capital program would exist.

"Four of our Board members were courageous and voted to do the right thing - the unpopular thing, but the only thing they could do within their control.

"I've heard from toll payers, non-toll payers, legislators and people on the street -
Don't do anything;
 Put it off a little longer;
 Make it smaller; and
 Have someone else pay for it.

"If we don't have a long-term, sustainable plan that includes both reforms and revenues - the MHS problems everyone has focused on will just grow larger and we haven't even started talking about the Western Turnpike or the increased debt service on MHS in 5 more years.

"A long-term, transportation wide solution is the only way to make sure that there is not another oversight hearing a few years from now to talk about the same old thing." ENDS LeBovidge Talking Points

Full text of LeBovidge talking points as prepared for joint committee hearing:

http://www.masspike.com/user-cgi/news.cgi?dbkey=322&type=Press%20Release&src=news

Our report of February toll increase decision:

http://www.tollroadsnews.com/node/4025

CORRECTION: we initially wrote that Alan LeBovidge CEO voted with the majorityto defer toll increases. This was incorrect. He doesn't have a vote. We apologize for this mistake.

TOLLROADSnews 2009-03-23 CORRECTION 2009-03-26 11:30