Massachusetts Lawmakers Abolish MassPike, Create New Issuer

Massachusetts lawmakers late yesterday voted to abolish the Massachusetts Turnpike Authority by the end of 2009 and create a new agency with bonding authority that would oversee most transportation programs in the state and take on MassPike’s $2.2 billion of outstanding debt.

The Senate approved the transportation reform bill in a vote of 27 to 11. The House then passed it by a margin of 130 to 25.

The transportation reform bill does not include revenue or toll increases, although lawmakers claim that folding various transportation systems together and reforming employee health care benefits will generate $6.5 billion of savings over the next 20 years.

The Western Turnpike and the Metropolitan Highway System, which MassPike oversees, would merge with the Department of Highways to form a new authority, the Massachusetts Department of Transportation, or MassDOT. The new authority would have bonding capabilities, including the ability to refinance MassPike’s $2.2 billion of debt. The new bonds would be special obligations of MassDOT secured by the roadways’ toll revenues. Those toll receipts would flow into a new Massachusetts Transportation Trust Fund.

“The department may provide by resolution at one time or from time to time for the issuance of bonds of the department to refinance the bonds issued prior to July 1, 2009, pursuant to chapter 81A and the financing obligations of the Massachusetts Turnpike Authority relating to the turnpike and the Metropolitan Highway System,” according to the bill. “Any such bonds shall be special obligations of the department payable solely from monies credited to the [Transportation Trust Fund]. Bonds issued pursuant to this section shall not be general obligations of the commonwealth or any political subdivision thereof and shall not constitute a debt or a pledge of the faith and credit of the commonwealth or any such political subdivision.”

MassDOT would also take over responsibility for the Tobin Bridge from the Massachusetts Port Authority, with those bridge-toll revenues going into the TTF.

Along with the TTF, the transportation reform bill reconstitutes the state’s Highway Fund, which collects gas tax revenues and motor vehicle fees, into a new Commonwealth Transportation Fund. Surplus CTF revenue may flow into the TTF, but excess TTF revenue would not go into the CTF, according to Jeevan Ramapriya, spokesman for Sen. Steven Baddour, D-First Essex, co-chair of the conference committee that hammered out the compromise bill.

MassPike faces a July 1 toll increase unless the legislature allocates $100 million to the authority, which is currently using reserve funds to meet operating costs.

MassPike board member Mary Connaughton said the board could vote to rescind the toll increase at its June 25 meeting if lawmakers approve the $100 million bailout by then. That $100 million of aid would come from raising the state’s sales tax to 6.25% from 5%, a move included in both the Senate and House fiscal 2010 budget plans.

Lawmakers are set to take up the fiscal 2010 budget today.

Meanwhile, rating agencies said they are waiting to see the fiscal results of the legislation and what revenue help MassPike will receive from the state in the near term, if any. Fitch Ratings analyst Michael McDermott pointed out that the authority may not receive the $100 million from the sales tax increase as soon as it would gain additional toll revenue from the planned  July 1 increase.

“The money’s not available immediately, whereas the toll increase, it’s going to start generating additional revenue for the Turnpike on July 1,” McDermott said. “So there is a cash-crunch period where MassPike would continue to draw into its reserve until it gets the money from the state.”

In addition to MassPike, the Massachusetts Bay Transportation Authority, the state’s main mass transit agency, would fall under MassDOT, yet remain an independent authority with its own board. The reform bill would alter MBTA’s board and decrease its size to five members from the current seven. In addition, the measure eliminates MBTA’s bonding cap.

MassPort. which operates Boston’s Logan Airport, would continue as an independent agency and would take over the Worcester Regional Airport from the city of Worcester within one year of the bill’s enactment.

The transportation reorganization legislation comes after months of debate on different reform proposals from Gov. Deval Patrick and both legislative chambers. The bill changes retirement rules at MBTA, ending the “23 and out” feature, and would require mass transit employees to work for 25 years and reach age 55 before collecting retirement benefits.

In addition, MBTA employees and retirees will transfer to the state’s Group Insurance Commission, with those hired after June 30, 2003, required to increase their health care contribution to 20% from 15%. All retired employees under age 65 will pay 15% of their health insurance premium.

“I think it’s a good piece of legislation,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation. “We have this version, a governor’s version, a House version, a Senate version, and I think this is the best of the four — not without some shortcomings, but on balance I think [it’s] a strong piece of legislation that addresses, for example, health care costs at the MBTA, creates a new authority that I think is structured in a sound way and that will improve the management of transportation in the state and with the greater opportunity to control costs over the long term. And [it] directs transportation revenues to the areas of highest priority and with overall planning in mind rather than just a series of Balkanized agencies doing their own thing.”

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