West Virginia US35 tolling blocked in state Senate
By Peter Samuel
The state Senate in West Virginia recently voted down enabling legislation for toll development of US35. The legislation SB606 sponsored by the state governor would have provided authority for sale of $80m of toll revenue bonds plus a backup pledge of up to $8m/yr lottery monies. It passed the finance and transportation committees but was defeated on the floor of the Senate by a 21 to 12 vote.
The West Virginia Highways Department says it now has no financing plan for the project which is a $190m, 14.6 mile, 23km missing gap in US35 as a 2x2 lane expressway.
US35 is northwest of Charleston WV and follows up the Kanawha River into Ohio where the route continues -as a 2x2 lane expressway - to Dayton and makes direct connections via I-70 to Indianapolis and via I-65 to Chicago.
17.3 miles, 28km of the 32 mile, 51km 2x2 lane expressway has been constructed using grant anticipation (GARVEE) bonds in two segments - on an approach from I-64 on the southeastern end and on the northwestern or Ohio side.
The project, put under the West Virginia Parkways Authority (WVPA, operator of the WV Turnpike) was ready to go. All permits were obtained, both counties in which it was located had voted for the tollroad, an agreement was in place for tolling with the FHWA, a traffic and revenue study was to hand and a plan of finance, plus the WVPA had a design-build contract for $187m with an Ohio construction company.
What went wrong?
There was and is almost unanimous support in the area for construction of the road. Old US35 here is a 2-lane surface road that is both main street to scores of little settlements along the route and a long-distance arterial with 3k trucks/day - slow and accident prone.
But toll financing was locally unpopular.
We got about 40 minutes on the telephone with the leading opponent of tolling - Senator Mike Hall the Republican representing the senate district in which US35 is located and also minority leader of the Senate. 63 years old he worked in finance and insurance before going into politics in the early 1990s. He had five terms in the state house and is in his fifth year in the state senate.
Hall has also been a Presbyterian and a Methodist minister, and that is reflected in his speaking style - forceful and fluent with lots of appeals to right and wrong. We exercised restraint and asked questions and listened most of the time but the conversation burst into a spirited argument once or twice.
"Loaded with money"
Hall's most surprising claim is that the finances of the state of West Virginia are in great shape - this from a Republican leader about a Democrat-dominated state government!
"We're loaded with money," he told me. "We don't have to toll it (US35)."
We checked that out later. The current administration in West Virginia does have a balanced budget this year.
State and local government debt in WV is $10.5b and at 15% of gross product is 37th in the country (the average is 19.4%). So the financial situation of the state is certainly less dire than many places.
The West Virginia Center on Budget & Policy says of the budgetary situation: "Although there are no budget gaps in FY 2012, projections show a growing funding gap in the years ahead. Current estimates show a shortfall of $122m in FY 2013. By 2016 the shortfall is projected to be over a quarter of a billion dollars."
There is also discussion that the real state and local debt is obscured in West Virginia - as in many other places - by gross underfunding of retirement and health benefit obligations to state and local workers by some $8b, making the real debt load $18.5b rather than $10.5b.
But those are wonkish points.
If a major political leader like Senator Hall, and a supposed conservative, is saying the state's financial situation is hunky dory a lot of people will go along with that.
We pressed Hall on how he'd fund the upgrade of US35 without tolls. He listed a whole bunch of funds against which he'd borrow the money - various future revenues and fund balances he said still provided the the basis on which borrowings could be made.
Not a cent would anyone have to pay now in any tax or fee.
We let him have it: "So Mr Hall, you're telling me you're one of those low politicians who wants to kick the can down the road, you're telling the voters you can get them their road for free, that other people will pay for it. You are saying you'll take all the credit for getting the road built, and you'll leave it to future legislators after you've gone to find the revenues and impose the pain to pay for the road you've delivered. Your legacy will be increased debt that you won't be around to take responsibility for."
We thought he might take some offense at this assault, a bit more the normal reporter's challenge.
But it was water off a duck's back.
After a pause of a couple of seconds the senator was onto another theme - how completion of this highway was crucial to the competitiveness of the two counties, Mason and Putnam (Sen Hall's district) through which it passes.
But why we asked should the whole state get more indebted on behalf of one region?
"This is the most important highway in the whole state and it will contribute to the economy of the whole state. Most of the traffic will be through traffic, passing through," he told us.
Tolls to damage economy
In that case why not have that traffic contribute to the cost of the project with tolls?
"Because tolls will do terrible damage to the economy of this already poor area," he responded.
But wait, we said, the valley will still have the existing 2-lane highway for free rides for motorists who don't want to pay tolls on the tollroad. And it will also have the tollroad for those prepared to pay for the quicker trip.
How is anyone disadvantaged by that?
Hall had two responses, first that the valley is competing with other areas, and other states with free expressways and the presence of tolls would turn businesses off.
Second people were fearful that the state highway department would allow the existing 2-lane surface road to deteriorate, that allowable weights on bridges and speed limits would be reduced over time to get traffic on the tollroad.
So Hall could swing hundreds of millions of state money for a new freeway, but he was politically incapable of getting the state highway department to devote a few million dollars every now and again to maintenance of the surface road?
His constituents, he said, were worried that with the coming of the expressway, especially if it was tolled, the present surface road would be neglected and downrated. His job was to represent his constituents and they were firmly opposed to tolls. This included smart businesspeople in the valley, and they were in strong opposition. As their representative in the legislature his job was to put their views.
He said that earlier he'd bought the line out of the administration in the state capital that there was no money for the road without tolls, and so reluctantly supported toll financing. But he was now convinced the funds could be raised to have it built without tolls.
We wished him good luck getting the money from people whose plans he had just sabotaged.
But he wasn't done.
Senator Hall added that US35 was very poor as a tollroad. Tolls were hardly going to cover half the cost of the missing segment, $80m of $190m total cost. And the administration had discovered recently that even the $80m needed to be backstopped with the earmarking of $8m a year of lottery revenues in case interest rates were higher or toll revenues lower than projected.
The backstopping with lottery money had been sprung on the legislature by surprise, he said, creating resentment among legislators.
Traffic and revenue
Senator Hall has a point that the toll revenue projections for tolled US35 are weak.
Transactions at two mainline toll points are projected by a Jacobs Engineering forecast to be only 3m/year - average daily transactions 8,220 - by 2016. That's a mere 4,100/day per toll point.
Proposed toll schedules are $2 cash for cars, $8.50 for tractor trailers, with a 5% transponder discount. There would also be generous unlimited use with a transponder for a car of $100/toll plaza/year.
Toll rates would rise 25c/cars every four years with other vehicle rates rising in proportion.
Toll revenue in 2016 would be just $7.24m, in 2020 $8.06m, 2030 $10.28m, 2040 $12.1m, Jacobs study said.
Traffic was assumed to grow slowly, most of the increases in revenues coming from the four yearly toll increases.
This is not a busy corridor.
Present traffic on old US35 is around 8,000 vehicles a day, 30% of which are trucks. Construction of a 2x2 lane toll expressway is expected to take about half the traffic from the old surface 2-laner.
Origin-destination study suggests local traffic (an origin and destination within the project area) is 45% for cars and only 18% for trucks.
But with underlying traffic this meager it's tough to justify any 2x2 lane expressway - tolled or untolled.
If you're determined to have the expressway for economic development and safety reasons surely you're better off tolling so you generate some revenue stream and support 30% to 40% of the capital cost, than none.
Senator Hall disagrees.
Of course if the state treasury really is "loaded with money" as he says then suddenly untolled roads become attractive.
Count us skeptical.