Threatened by debt default New Jersey Turnpike proposes big toll increases REVISED REPORT
By Peter Samuel
The New Jersey Turnpike Authority board in a 3-page letter to Governor Jon Corzine says it cannot meet debt service obligations next year, nor fund capital projects without a substantial toll increase. They propose an increase in Turnpike car tolls of 60c in 2009, and 90c in 2012, and of 15c and 25c on the Garden State Parkway. The decision is unanimous and supported by the the Authority chairman Kris Kolluri who is also Corzine's secretary of transportation.
This is something of a charade. The toll increases are based on traffic and revenue studies commissioned by the state Treasury Department, which seems to be driving the process. South Jersey Transportation Authority are also raising tolls on their Atlantic City Expressway.
The Turnpike and Parkway numbers quoted above (+60c, +90c, +15c, +25c) are the only numbers given officially. Everything else is calculation by reporters, and this is our second effort.
Those increases represent, by our new calculations, increases in toll rates of 36% on the Turnpike and 30% on the Parkway next year, and in 2012 40% on the Turnpike and 38% on the Parkway. (We can't see the basis for 50% increases in 2009 and 2012 reported by some local media. Two 50% increases would be a 125% increase 2012 vs 2008.)
Overall increases in toll rates 2012 vs 2008 are about 90% for Turnpike tolls and 80% for the Parkway, by our calculation. Since the Turnpike is so much important as a revenue earner ($551m vs $203m) the weighted average has to be around 87%.
Truck and other vehicle class tolls would be raised proportionately.
If traffic suffered 10% loss from the toll increases then revenue would be up 68% or $512m/yr from $765m in 2007 to $1267m in the first full year after 2012.
Tolls last increased on the Turnpike in 2000 and on the Parkway in 1989, apart from elimination of the E-ZPass discount in around 2003.
The 2009 and 2012 increases would take the tolls on the Turnpike from 5.2c/mile for cars to 10.1c in 2012, and on the Parkway from 2.2c/mile to 4.0c/mile, we calculate.
(The letter also talks about toll increases in 2023. Absurd. No official can make commitments on setting toll rates beyond their term of office, and no one can possibly foresee costs and needs more that 4 or 5 years out. We'll ignore this silliness about toll rate increases in 2023. TRnews)
The most striking part of the letter is the least publicized so far, the very first sentence: "As you know, the New Jersey Turnpike Authority cannot certify, as required under its bond covenants, that next year's revenues will be sufficient to meet its debt service obligations."
It would be nice if the Turnpike published annual budgets, but it doesn't. Revenues last year were $863m and are probably down this year a bit, but might recover to say $840m next. Operating expenses $471m in 2007 will probably be up 10% by 2009 to $518m, shrinking their operating surplus from $392m to about $322m.
In 2007 the Turnpike reported total debt of $5212m. Debt service was $297m (5.7%), but if by 2009 it has risen by just 10% then at $327m it fully absorbs the Turnpike's operating surplus.
The letter by the Authority points out that by December 1 it must certify its ability to meet debt coverage ratios specified in bond covenants. If it can't do that the Authority loses control and their traffic engineer is required to fix a toll rate to satisfy the revenue shortfall. A trustee for the bondholders has the power to monitor compliance. By this point all the Turnpike's capital programs are at a standstill.
The Turnpike Authority letter expresses reluctance to increase tolls but says they can no longer be deferred.
NJ Treasury Department driving toll increases
The Turnpike Authority is not driving this.
The New Jersey Treasury department is in charge of working out what toll rates are needed. Doing traffic and revenue work on the state's tollroads is Steer Davies Gleave, working to the NJ Treasury, apparently under an extension of the contract they had to do the number crunching for the the Governor's grand monetization scheme that was announced early this year and subsequently dropped for lack of legislative backing.
A Treasury spokesman told us today the traffic and revenue work supporting the planned toll increases isn't written up fully yet, but will be released soon.
Capital projects need the extra revenue
The letter to the Governor from the Turnpike board says that major capital projects to benefit from the enhanced revenue will be:
- widening the New Jersey Turnpike between Interchanges 6 and 9
- widening the Garden State Parkway between Mileposts 30 and 80
- providing $1.25b for the Access to Region's Core rail transit project to midtown Manhattan, a new rail tunnel under the Hudson River
The rail upgrade is justified as providing alternatives to commuters from driving on the congested northern portions of the Turnpike.
"This could preserve capacity for commercial and interstate traffic, and prevent the need for expansion, at tremendous economic and environmental cost, of this section of the Turnpike," the letter to the Governor claims.
The letter spells out economies achieved on the cost side:
- elimination of 403 positions from 2,768 to 2,356, at a savings this year of $30.1m
- overtime reduced 20% since 2006
- reduced turnpike vehicles by 117
- eliminated free E-ZPass for past and present board members
The 3-page letter to the Governor is here:
Atlantic City Expressway hiking tolls too
The South Jersey Transportation Authority Friday announced toll rates hikes on their Atlantic City Expressway. They plan a $1.00 increase at the Egg Harbor mainline plaza from $2.00 cash and $1.28 for frequent users with E-ZPass. Those are increases of 50% and 78%.
Pleasantville car tolls are now cash 50c and E-ZPass 34c. They will go up by 25c to 75c and 59c, or by 50% and 74%.
Ramp tolls will go up by 15c to 25c. They are presently 50c/30c, but one is 25c/15c.
Tolls haven't increased since 1998 on the Expressway.
The extra revenue will allow the SJTA to:
- repair structurally deficient bridges
- widen 23 miles (37km) of the Atlantic City Expressway from the Garden State Parkway to the Route 73 interchange
- develop the Atlantic Avenue and Pacific Avenue One Way project
- improve North Shore access into Atlantic City
- implement new tolling technology
The SJTA will also use some toll funds for improvements to the Atlantic City International Airport.
NOTE; This report replaces one published yesterday 2008-09-04 based on less solid information.