Massachusetts Turnpike Authority officials may postpone a vote on proposed toll hikes to give incoming Transportation Secretary Jim Aloisi time to review the agency's books.
Aloisi will begin his new position in early January after current Massachusetts Transportation Secretary Bernard Cohen vacates the post. MassPike executive director Alan LeBovidge said while the Jan. 15 agenda includes a vote on the proposed toll increases, Aloisi may opt to wait and analyze the authority's finances further.
With a $12.1 million deficit in its current budget, MassPike is in need of additional revenue. It did reduce its derivative risk recently when officials last week paid Lehman Brothers Special Financing Inc. $3.4 million to terminate five fixed-to-floating-rate SIFMA swaptions that had yet to be exercised. The authority had already received premium payments totaling $35 million from Lehman over the past few years.
"I felt we had to act because Lehman is trying to get these swaptions transferred to another party that's not in bankruptcy and say that we don't have the right to do what we're doing," LeBovidge said. "So you have to strike while the iron's hot."
In 2002, MassPike entered into the Lehman swaptions to help offset five floating-to-fixed-rate swaptions based off of the London Interbank Offered Rate with UBS Securities LLC. UBS has exercised its right on all of the swaps, costing the authority additional interest payments. MassPike now plans to refinance in early 2009 $800 million of fixed-rate debt into variable-rate mode to better match the five UBS swaps.
Citi and JPMorgan will structure $229 million and $207 million, respectively. Morgan Stanley and Merrill Lynch & Co. will price $185 million each. The state has extended its appropriation pledge on the deal. LeBovidge said removing the Lehman swaptions from the authority's books will help MassPike at pricing.
"Hopefully by then we'll have a traffic and revenue report, we'll have this off our plate, and hopefully we'll have a toll increase passed and with a guarantee from the state," he said. "We should hopefully be able to get a decent interest rate on the variable-rate debt."
Aloisi, who is partner at Goulston & Storrs PC and a member of the state's Transportation Finance Commission, is a controversial choice for the position. Aloisi helped draft the 1997 legislation that framed the current funding structure of the Central Artery project, called the Big Dig.
Many believe that framework is inequitable as east-west motorists on I-90 pay tolls while users of I-93, which runs north-south through the greater Boston area, do not. The Central Artery project and I-93 are part of the Metropolitan Highway System, which has roughly $2.2 billion of debt outstanding.
"I think the flaw has been-and this has nothing to do with Jim Aloisi-that the political leadership of this state has never stepped forward and given the go-ahead to have toll increases sufficient to pay for the debt and maintenance obligations," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, which reviews taxation and public policy in the Bay State.
Others question why someone who was involved with creating a problematic financing structure should then be called in to repair and reform that system.
"My concern with this appointment is not with the individual - Aloisi's a talented person," said Sen. Mark Montigny, D-Second Bristol and Plymouth, who chairs the Joint Committee on Bonding, Capital Expenditures, and State Assets. "It's that he's made a lot of money off of the creation and then demise...There's a feeling in the public that any firm or individual connected to that is now blemished."
Yet Widmer stressed Aloisi's knowledge and political savvy.
"I think in the questioning of his affiliation of the Central Artery and tarnishing him with that, I think his policy strengths have been ignored," he said. "And I think the intersection of policy and political skills is exactly what we need at this point in time in terms of our transportation mess. And it's a mess."