All About Debts

Debt Help Governor McGreevey's plan to divert some of the proceeds from a proposed increase in the gasoline tax to pay for the removal of tolls on the Garden State Parkway could violate the state constitution and be more expensive than officials thought, according to a study obtained by The Record on Wednesday.

Increasing the gas tax by 15 cents a gallon was expected to bring in $49 billion in the next 10 years. Plans called for part of that money to be used to eliminate tolls on the Garden State Parkway, but administration officials said that with the gas tax increase now off the table, the tolls would remain.

Counseling Debt And those aren't the only roadblocks to the plan.

The elimination of Parkway tolls became a prominent issue in the 2001 gubernatorial campaign when McGreevey's opponent, Bret Schundler, promised to eliminate all Parkway tolls during his first nine months in office. At that time, McGreevey said it could be done within seven years, but his administration has since backed away from that goal.

Consolidation Consumer Debt Transportation and environmental groups have also attacked the proposal in recent days, saying it would let parkway drivers off the hook while saddling other commuters with higher costs at the pump.

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Debt Settlement But McGreevey isn't shying away from the idea. He expected some hurdles and still views taking down the tolls as a good way to make a tax increase palatable, said Micah Rasmussen, the governor's spokesman.

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Debt Free "We think the people are sick and tired of hearing excuses about why things can't be done," Rasmussen said. "These are the same things people said about the toll road consolidation - that it would never get done."

Capt. Daniel Cosgrove, commander of Troop E on the Parkway, and Maj. Richard Gilbert, commander of Troop D on the Turnpike, said the reduced ranks have curtailed the amount of "proactive police work" on the toll roads, like speeding patrols and seat belt checks. Instead, the State Police on the Parkway and Turnpike mostly have spent their time handling calls on accidents and motorists' requests for assistance.

Consolidation Debt Service The report, drafted last month by the Office of Legislative Services, the non-partisan research and legal arm of the legislature, is an updated version of a study the office conducted two years ago.

Company Consolidation Debt The plan to use gasoline tax revenues to replace parkway tolls was first touted last week by Assembly Majority Leader Joseph Roberts, D-Camden, as a way to persuade lawmakers from both parties to accept an unpopular tax increase in the waning days of the current lame-duck legislature, when outgoing or retiring lawmakers are counted on to cast their votes for a politically risky measure. The session ends on Jan. 13.

Consolidation Debt Online The study reviewed by The Record was produced independent of Roberts' request that the OLS analyze the proposal.

Consolidation Debt Free Roberts floated his idea on the same day a blue-ribbon commission recommended boosting the state's tax of 10.5 cents per gallon on gasoline sales to as much as 25 cents a gallon to pay for repairs to New Jersey's roads and bridges. Proceeds from the tax pay for road and rail construction throughout the state.

Debt Problem By the 2006 fiscal year, however, the tax will not generate enough money for new projects, and all of its proceeds will go to paying off debt on existing work. New Jersey's gas tax is the third-lowest in the nation.

Credit Debt Roberts and others have discussed diverting 3 cents of a proposed increase from regular road projects to parkway operations. But the OLS report says an increase of more than 4 cents, and possibly more, might be necessary to adequately replace toll revenue.

Advice Debt The parkway raises $200 million a year from tolls. Paying toll collectors and running toll plazas costs less than $40 million - money the parkway wouldn't have to spend if the tolls were removed. That means proceeds from the gas tax would have to make up for the remaining $160 million that pays for parkway operations.

Card Credit Debt Eliminate Because each penny from the tax raises around $50 million, diverting 3 cents from it would give the parkway $150 million - $10 million less than what's needed, the report says.

Debt Recovery And that assumes toll collectors and other employees wouldn't be rehired in other state agencies. If those workers remained on the state payroll, McGreevey would still have to pay their $40 million in salaries. That's equivalent to almost another penny in gas taxes, the report says.

Counseling Credit Debt The parkway's debt may be a thornier problem. The road owes $574 million in bonds to creditors who have contracts saying tolls will provide their investment with a steady source of revenue. Eliminating the tolls would break those contracts, the report found.

Consolidation Debt Uk The state could refinance the bonds and negotiate new contracts that don't require toll revenue for repayment. But that might involve shifting responsibility for the debt from the independent agency overseeing the parkway, the New Jersey Turnpike Authority, to the state, the report says. Under the state constitution, the Legislature and voters have to approve debt assumed by the state. Whether lawmakers and voters would go along with McGreevey's plan remains to be seen. But even if they did, refinancing would not come at a modest cost.

Debt Reduce The state's toll road agencies refinanced and consolidated $2.48 billion in parkway and turnpike debt this summer to pave the way for the merger of the parkway with the New Jersey Turnpike Authority. It's not clear whether the agencies would save any more money from refinancing again, because the cost would depend on the interest rates at the time, and there are other costs associated with refinancing. Bond fees and expenses from consultants incurred in merging the two toll roads were expected to reap $16.4 million to refinance and consolidate the debt.

Get Out Of Debt The study also does not outline the cost of removing tolls barriers, which was pegged at about $100 million, according to a report commissioned a few years ago by the New Jersey Highway Authority when it was exploring the idea of high-speed toll collection.

Debt Destroy Roberts argues that the concerns raised in the OLS report could be tackled easily. Eliminating the tolls could be phased in over time, allowing the parkway to lose employees by attrition or early retirement, he said. Roberts also didn't foresee a problem backing parkway bonds with new gas tax revenues. "If you do that, I would argue you're making the bonds even safer for the bondholders," he said.

Debt Negotiation The OLS report isn't the only place where concerns about McGreevey's plan have been raised.

Debt Elimination The Tri-State Transportation Campaign, an advocacy group, calls the toll removal plan a "short-term political gimmick" that would use nearly 40 percent of the gas tax increase to benefit just 9 percent of the state's drivers - those who use the parkway.

Consolidation Debt Mortgage McGreevey officials are spending roughly $45 million to add high-speed E-ZPass lanes at seven interchanges around the state, including four on the Garden State Parkway, the group notes. Each of the plazas cost $8 million to $10 million apiece to upgrade.

Collection Debt "We're really in favor of non-stop tolling, and it's kind of ironic that they're unveiling this toll and tax plan at the same time that drivers will be able to cruise through Hillsdale using the express lanes," said Jennifer Siegel, New Jersey coordinator for Tri-State.

Card Consolidate Credit Debt Jeff Tittel, executive director of the New Jersey chapter of the Sierra Club, said he didn't want the tolls removed either, because he wanted to make sure drivers bore an extra cost for polluting the environment.

Consolidation Debt Help Tittel also feared McGreevey would gain support for the plan by promising to build new roadways in reluctant lawmakers' districts, a giveaway that could lead to more sprawl.

Consolidation Credit Debt By John Dyer and Pat R. Gilbert
Bergen Record - 12/4/2003

Topic: Transportation

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