Toll hike serves as wedge issue as Hill vexed over transportation

Boston, Mass. - Lawmakers on Tuesday urged Gov. Deval Patrick’s top transportation aide to stall a steep toll hike backed by the governor and expedite plans to overhaul the state transportation bureaucracy. Patrick administration officials resisted calls to back off the toll increases, saying the resulting revenues are needed quickly to avert potentially explosive fiscal problems stemming from Big Dig financing agreements.

The Mass. Turnpike Authority is facing roughly $423 million in potential payments for a debt refinancing deal that has soured, an estimate about $75 million higher than three months ago, according to its executive director.

The Massachusetts Port Authority’s chief told lawmakers that a restructuring of the transportation system that shifts responsibilities to Massport would require new revenue to support the agency.

In a muggy State House hearing room that belied the mid-December chill, legislators from various regions of the state offered a glimpse of the challenge Patrick will face to push through a promised transportation agenda featuring toll hikes but lacking critical details nearly two years into Patrick’s term

Sen. Steven Baddour, co-chair of the Transportation Committee, urged Patrick administration officials to go back to the Turnpike Authority board, which the governor controls, and push for a "much smaller increase" in turnpike tolls and to file a long promised transportation bureaucracy reform bill, which some lawmakers would like to use as a vehicle for a gas tax increase.

“The time is now for a full comprehensive reform,” Baddour said.

Baddour told Transportation Secretary Bernard Cohen that turnpike users might not be facing toll hikes estimated to generate $100 million – with $7 tolls planned at Boston tunnels - if the Patrick administration had filed its promised transportation legislation months ago.

Lawmakers met privately with Patrick Friday to express opposition to toll increases.

“I want to ask you to consider no toll increase at this point,” Sen. Anthony Petruccelli (D-East Boston) said Tuesday. “It might be naïve to think that this could be a possibility. But this picture is so cloudy right now. We have great concerns about what this means, but we have no details.”

Rep. Joseph Wagner (D-Chicopee), the House chairman of the committee, suggested other lawmakers shared his concerns about the administration’s plans.

“If I’m skeptical, a few of my colleagues are probably going to be skeptical as well,” he said.

Sen. Karen Spilka (D-Ashland) said rather than a toll increase, she hoped that the administration’s long-term plan would be to eliminate tolls. “I was hoping it would be sooner, rather than later – like next year,” she said.

Sen. Bruce Tarr (R-Gloucester) asked Cohen to pledge to put aside toll hikes until the administration presents a comprehensive transportation plan.

Cohen never backed down from the administration’s sense of urgency but said requests to delay the tolls would be considered during four hearings on the toll increase scheduled to begin tomorrow. He said any revenue increases would be coupled with a consolidation of transportation bureaucracies, including the collapse of the Turnpike Authority, which Patrick plans to legislatively recommend next year.

Turnpike authority officials are worried about expensive termination costs associated with turnpike financing deals that could be triggered if credit ratings are downgraded. If the rating of turnpike insurer Ambac is downgraded one more level, the turnpike would face a $423 million “termination” payment to UBS, according to turnpike chief Alan LeBovidge. In written testimony, he said the toll hikes are intended in part to bring up the turnpike's junk bond rating and prevent any termination payment to UBS.

“The concern is that the bond rating agencies, if there was a significant backpedaling from what was proposed, I don’t believe would look kindly on that,” he said.

As of January 2009, swaptions with UBS, which helped the MTA raise $29 million, will cost about $24 million annually in additional interest payments, according to LeBovidge. A downgrade of the MTA’s bond status would require the agency to pay Lehman about $45 million, he said.

LeBovidge pointed to $31.7 million in savings during the first 10 months of 2008 compared to the same period in 2007, including $21 million by reducing outside consultant expenditures, $4.8 million in salary cutbacks, $2.4 million in overtime costs, and $2.2 million in electricity costs. The toll increases would put the turnpike "on a road to financial stability," but additional toll hikes may be required in five years.

Saying “it's taken so long” for the administration to file its plan, Baddour said lawmakers are convinced they can address the toll inequity concerns long registered by turnpike users, who feel they consistently pay a disproportionate amount towards paying off the $15 billion Big Dig.

“This is complicated,” Cohen said, adding that the administration has all along intended to “get this right” and aimed to prevent a replication of the actions of prior administrations, which he said had tried to force solutions on state agencies.

Asked by Baddour why the administration had not investigated public-private transportation partnerships more fully, Cohen said the administration had met over the past year with individuals knowledgeable about privatization efforts and is actively looking at public-private partnerships in non-toll areas, such as real estate.

As some lawmakers push a gas tax hike as an alternative to toll hikes, Baddour also asked about the size of a gas tax that would be necessary to replace all the toll revenue collected by the state. Cohen said that while he was “not advocating” a gas tax hike, an increase of “a little over 10 cents” would be enough. Sen. Robert Hedlund (R-Weymouth) said that Cohen’s figure failed to account for the cost savings that tearing down the toll plazas would bring and estimated that a hike of about seven cents would be adequate.

Rep. David Linsky said a gas tax would be “sellable” to his colleagues in the House. Speaker Salvatore DiMasi endorsed the idea recently after Patrick’s toll hike proposal stirred anger among commuters.

While many of the state's transportation funding problems grew over the past decade, when the Democrat-controlled Legislature had numbers that allowed it to easily outmaneuver Republican governors, Cohen, in his written testimony, blamed "previous administrations" for saddling the turnpike authority and the MBTA with $4.5 billion in Big Dig debt.

To underscore the "unsustainable financial resources" supporting transportation in Massachusetts, Cohen noted it costs $2.70 to drive from the New York border to Rte. 128, only 25 cents more than it cost in 1957. As is, Cohen said, the turnpike authority has no access to the capital markets and no funding available for capital improvements.

At a rally last week, former turnpike board member Christy Mihos, a once and perhaps future gubernatorial candidate, told toll hike opponents that the Legislature, as an alternative to the toll hikes and by the end of this year, should pass legislation earmarking $100 million of the $458 million settlement with Big Dig contractors over faulty work on the project. Mihos said tollpayers are “frightened” and it’s not the time to raise the gas tax or tolls or to privatize turnpike operations, which he said would let a private company to “raise tolls all the time on us.”

MBTA SEES “SUBSTANTIAL DEFICIT” IN FISCAL 2010

To meet a statutory funding commitment, the Legislature will likely have to redirect roughly $80 million this fiscal year to the T, due to underperforming sales tax collections, MBTA General Manager Daniel Grabauskas said at the hearing Tuesday.

In fiscal 2010, Grabauskas said, “We are anticipating a substantial deficit.”

Nearly all fare revenues pay for the 26 percent or 27 percent of the T’s budget dedicated to debt service, Grabauskas said.

Responding to Sen. Robert Hedlund’s complaints that the state budgets to construct but not to maintain rail construction, Grabauskas acknowledged that the new Greenbush Line runs an estimated $10 million operating shortfall and costs roughly $2 million annually in debt service. He said, “It’s like giving me a gift certificate for a dessert at a very expensive restaurant.”

Hedlund, a longtime critic of the state’s handling of Greenbush, pointed to the planned South Coast rail and doubted whether that expansion would make fiscal sense. The Patrick administration has said it plans to begin construction of the $1.4 billion buildout in 2012 and finish by 2016.

“At some point, this administration and this Legislature have to be honest ... rather than go down to the South Coast and make a speech and throw a little environmental permitting at it to buy some more time,” said Hedlund.

Baddour told reporters after the hearing that all the documents provided to the committee would be made public.

On Nov. 12, Patrick asked the public's support for providing new revenues for transportation, while promising he would take steps immediately to eliminate the Mass. Turnpike Authority, restructuring Big Dig debt and redistributing the agency's roadway oversight to the Mass. Port Authority and the Highway Department.The outline of his proposal, published in an op-ed, called for higher tolls, unspecified Massport revenues, registry fees, savings, and "a centralized transportation agency." Patrick said the state would remove Turnpike tolls west of Route 128 while raising fees at the remaining tollbooths and seeking modernized toll collection methods.

Massport CEO Thomas Kinton told lawmakers that a restructuring should include a new revenue stream dedicated to maintaining Massport’s fiscal health. Answering a question he posed to himself regarding whether Massport could assume the “massive new undertaking” and maintain performance, he gave “an emphatic maybe.”

Kinton said, “There must be sufficient funding built into the proposal to sustain the new structural arrangement – over the long haul. We are not interested in some short-term fix.”

Logan Airport and the Port of Boston also have to be held harmless, Kinton said.

“If we don’t get it right, we’re just going to have another Turnpike Authority,” Kinton said.

After Kinton’s testimony, Baddour said he expected the authors of transportation reform would be unlikely to meet Kinton’s specifications before the toll increase.

“I just can’t see things changing between now and January [enough] to get you to a point where you’re at a comfort level that this makes sense,” Baddour said, adding that lawmakers had been “absent” from the administration’s deliberations.

“If we don’t get this done in January or February, we might as well scrap it today,” he said.