A plan to increase tolls in Massachusetts is facing resistance from legislative leaders, while Gov. Deval Patrick works on a plan to dismantle the Massachusetts Turnpike Authority even though rising debt service costs necessitate additional revenue for the agency in the short term.
House Speaker Salvatore DiMasi proposed increasing the state's 23.5-cent gas tax as an alternative to toll hikes. In addition, in a opinion article in yesterday's Boston Globe, Senate President Therese Murray and Sen. Steven Baddour, who co-chairs the Joint Committee on Transportation, proposed creating one state agency to oversee all surface transportation systems or potential public-private partnership arrangements.
The governor's plan, which he will file with the legislature in January, involves the Massachusetts Port Authority and the state's Department of Highways taking over control of MassPike's roadways.
Meanwhile, MassPike must generate additional revenue before the end of fiscal 2009, which ends June 30, in order to meet debt service coverage levels stipulated in bond agreements.
Debt service coverage on MassPike's $2.2 billion of Metropolitan Highway System debt cannot fall below 1.15 times. The authority's proposal to generate $100 million of additional revenue via toll hikes would maintain debt service coverage at 1.28 times in the current fiscal year and approximately 1.6 times coverage in future years, according to MassPike chief financial officer Joseph McCann.
Fitch Ratings rates $1.27 billion of senior MHS bonds BBB-plus and $953 million of subordinate debt BBB. Fitch placed the debt on negative watch in early September. Moody's Investors Service downgraded the MHS bonds by two notches last month to Baa2 and Baa3 on the senior and subordinate bonds, respectively.
"The developing outlook that we have on the credit relates to the fact that if there's some support provided by the commonwealth or if tolls are increased, things could get better in terms of the rating," said Maria Matesanz, a senior vice president at Moody's. "However, if those measure are not taken fairly quickly then the rating could deteriorate even further."