MassPike OKs Delay in Toll Hike

The Massachusetts Turnpike Authority yesterday approved delaying a toll increase set for Thursday with the stipulation that the legislature must allocate at least $100 million to MassPike by July 1 or face a toll hike at that time.

The postponement follows an announcement last week by Gov. Deval Patrick and legislative leaders that they had come to a general agreement to address the authority’s troubled finances with reforms and pledged to allocate funds by July 1. For months, the governor has said MassPike needs more revenue through toll increases or a gas-tax hike. Senate leaders have stressed “reform before revenue.”

Instead of using additional toll revenue, the board agreed to dip into its cash reserve fund of $54 million to help meet operating costs, including debt service payments, by the end of fiscal 2009, which is June 30. Executive director Alan LeBovidge said the authority may need to use roughly $13 million of reserve funds, with the amount to be determined at the end of the fiscal year. Officials were expecting the agency to gain about $13 million of additional toll revenue from March 29 to July 1.

“We won’t know what the number is until operating results for the year are finished because the more money we can squeeze out of the system, the less we’ll have to dip into reserves,” LeBovidge said.

It is not clear how the rating agencies may respond to MassPike’s toll postponement and drawing upon cash reserves. Fitch Ratings on March 5 removed $2.1 billion of Metropolitan Highway System debt from negative watch and affirmed its BBB ratings, with a negative outlook, after the board voted on Feb. 24 to increase tolls on March 29. Analysts at Fitch and Moody’s Investors Service said they will need to review MassPike’s finances before discussing the possible credit impact of the toll delay.

“It’s something that we’re going to have to look at, understand the rationale, and get into some of the assumptions on their numbers going forward,” said Moody’s analyst Maria Matesanz.

Meanwhile, MassPike officials are keeping their fingers crossed.

“Hopefully they will understand what we’re doing, why we are doing it, look at what’s going on in the world today, and say this is a prudent thing to do for a short-period deferral and it’s not a long-period deferral,” LeBovidge said. “And hopefully, they’ll stand pat and let the legislature and the governor come up with a plan to deal with the whole transportation reform program, which is desperately needed in the commonwealth.”

Fitch rates $1.2 billion of MHS senior bonds at BBB-plus and its $960 million of MHS subordinate debt at BBB. Moody’s assigns a Baa2 to the MHS senior-lien bonds and a Baa3 to the MHS subordinate debt with a developing outlook.

While dipping into cash reserves isn’t ideal, LeBovidge said he supports the plan now that state officials have promised to work together to develop a transportation financing plan. LeBovidge said the board needed to approve the toll hikes in February when the two branches of government were at a standstill.

“At that time when we did it, there was not a consensus between the executive branch and the legislative branch to do something on transportation reform,” LeBovidge said. “Now there is. So when you see that light at the end of the tunnel you have to say let’s give the elected officials the chance to once and for all solve this issue. And so given that new framework that we didn’t have when the board took the vote in February, I think it’s a good thing to do.”

 

 

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