New Jersey Turnpike's $1750m bond sale has big capital program fully financed thru mid-2010 - ED Scaccetti

Diane Gutierrez-Scaccetti executive director at the New Jersey Turnpike Authority says that following a successful sale of an enormous $1,750m in 30 year bonds in recent days the Turnpike's big capital program is fully financed through the middle of 2010. $1375m of the bonds classified as Build America Bonds (BABs) are taxable bonds 35% subsidized by the US Government as part of the stimulus program, the other $375m were traditional municipal bonds. All are pledged by the revenues of the Turnpike and payable in 2040.

The BABs were bid at a premium on the US Treasury and brought 370 basis points (3.7 percentage points) and an actual interest rate of 7.41%.

The cost to the Turnpike after the US Government subsidy of 35% will be 0.65x7.41 or 4.82%.

The regular tax-free municipals priced at 5.35%.

The all-in yield on the $1750m is 4.92%, Scaccetti told us.

NJ Turnpike first to sell BABs

NJTA was the first tollroad in the country to take advantage of BABs, rules for which were only laid down by the IRS April 3.

Scaccetti says the Turnpike Authority needed to raise money to pay off a $160m one year note due May 1 but they were also looking for longterm finance for moving on with their $7 billion multi-year capital program.

"We thought we had a strong case to make and we did a roadshow (presentations). Originally we were going for $650m but we could soon see we were able to raise substantially more at favorable interest rates," Scaccetti told us, "so we enlarged the program."

She said: "We did much better than we expected. We were oversubscribed even with the larger program."

As soon as it became apparent the Turnpike was able to raise funds at favorable rates the decision was made to accelerate movement on capital programs.

The largest item in the capital program is the widening from two to four roadways, and from six to 12 lanes of the central section of the Turnpike between interchanges 6 and 9.

The Turnpike will also contribute to a new rail tunnel connection to New York City under the Hudson River called Access to the Region's Core. There is also a substantial length widening of the Garden State Parkway and many smaller projects to improve pavement and bridges.

Toll increases laid groundwork for capital raising

The Turnpike's strong toll increases implemented December 1 last year and a further increase set for 2012 were the essential factor in enabliing the authority to raise the $1,750m at favorable interest rates.

Tolls for cars by our calculation rose from 5.3c/mile to 7.2c/mile or 36% on the Turnpike proper, and from 2.2c to 2.9c/mile or 32% on the Parkway last December, and are set to rise 40% to 10.1c/mile on the Turnpike and 38% to 4c/mile on the Parkway in 2012. Tolls for other vehicles rise in similar proportion.

Those are increases of 90% and 82% total over three years. Toll revenues should rise from about $750m/yr to at least $1270m/yr or 70% by our calculation. (We're endeavoring to get Turnpike Authority projections and will post them here if we're successful - editor)

BACKGROUND: Along with the Illinois Tollway system the New Jersey Turnpike Authority's NJ Turnpike and Garden State Parkway make up by far the largest toll systems in the US. The Turnpike is 238km (148 miles) and the Parkway 278km (173 miles) for a total of 516km (321 miles). (New York State Thruway and Pennsylvania Turnpike are longer but lack the stretches of great width and four roadways and therefore have fewer lane miles.

Both the Turnpike and the Parkway run the length of the state from north to south.

The Turnpike has 29 interchanges and varies in width from 4 lanes (2/2) to 14 lanes in four roadways (4/3/3/4) and does tolling based on trips, under which entry is recorded and the toll computed on exit based on distance traveled. Truck traffic is heavy on the Turnpike.

The Parkway ranging in width from 4 lanes to 15 lanes has tolls at barrier toll plazas across the mainline and on a minority of ramps, having around 360 entries and exits. All trips on the Turnpike are tolled whereas the Parkway has a significant proportion of trips without a toll. The northern half of the Parkway is light vehicles only.

The Turnpike's southern section caters to travel to and from Delaware and states south, to Pennsylvania via a spur and to the south Jersey suburbs of the Philadelphia metro area, whereas the southern portion of the Parkway serves as the main arterial along the Atlantic coast of New Jersey.

The Turnpike and the Parkway cross one another just north of the Raritan River in central Jersey, the Parkway becoming a more inland commuter road for northern NJ. In its northern portion the Turnpike is the access route to the warehousing and ports of northern New Jersey and a connector to the Hudson River crossings to New York City.

In 2007, the last year for which full accounts are available, the NJ Turnpike Authority did 667m toll transactions (1.83m/day) and 12.5b vehicle-miles (20.1b vehicle-kms) and collected toll revenues of $746m. With other income of $117m its total revenue was $863m.

Earlier reports on the toll increases and finances of the Turnpike Authority see

http://www.tollroadsnews.com/node/3826

http://www.tollroadsnews.com/node/3768

Turnpike website

http://www.state.nj.us/turnpike/index.htm

IRS regulations for BABs

http://www.irs.gov/pub/irs-drop/n-09-26.pdf

TOLLROADSnews 2009-04-21