CHICAGO — Bonds issued to fund Ohio Gov. John Kasich's transportation plans survived a legal challenge this week.
A federal judge dismissed a lawsuit that challenged the state's authority to use Ohio Turnpike revenue bond proceeds to fund projects off the toll highway.
U.S. District Judge Dan Polster, in a 14-page opinion released on Aug. 23, sided with the state when he ruled that turnpike revenues benefit Ohio Turnpike drivers even if they are not used on the 241-mile toll road itself.
The ruling dismissed a class-action lawsuit filed in March. The state's turnpike commission in June asked Polster to dismiss the case.
The move protects roughly $930 million of bond proceeds used to finance various transportation projects across the state.
The judge, however, let stand the lawsuit's claim that increased tolls amount to an illegal tax, sending the matter back to the Cuyahoga County Common Pleas Court.
The Ohio Turnpike and Infrastructure Commission floated $1.1 billion of turnpike revenue-backed bonds in 2013. Pushed by Kasich, the new credit was an effort to plug a shortfall in road funding.
Kasich had considered privatizing the toll road, but ending up crafting a new credit pledge with a junior-lien trust agreement that allows the commission to issue bonds against future toll revenue projections. Proceeds on senior-lien bonds are restricted to projects on the 241-mile turnpike itself.
As part of the deal, the commission approved a series of toll rate increases that raise rates by 2.7% every year for the next 10 years.
In crafting the enabling legislation, lawmakers required that projects financed by the toll-backed bonds have "a transportation-related nexus with and relationship to the Ohio turnpike system and the Ohio turnpike and infrastructure system."
Polster agreed with the state that the non-turnpike projects financed with toll revenues met the criteria of being part of the transportation nexus.
The lawsuit, filed on behalf of resident and turnpike driver Melissa Ullmo, argued that the use of toll revenue for non-turnpike projects was a "gimmick designed to avoid increasing taxes of general application."
Ohio attorney James DeRoche, who works at a law firm run by the chairman of the Cuyahoga County Democratic Party, filed the suit in March. DeRoche told a local newspaper that he was happy that the judge did not dismiss the illegal tax claim and said he would win the issue in state court.