Although discount highway toll tokens may be a hard habit for New Hampshire drivers to break, maintaining discounts on top of the states soon-arriving E-ZPass system could risk jeopardizing the turnpike systems finances, according to state Treasurer Michael A. Ablowich.
Im just trying to make sure people understand that we have to meet coverage ratios, Ablowich said, referring to the minimum required ratio of revenue to be generated beyond the turnpike systems operating and maintenance costs. He outlined his concerns in a March 31 letter to Gov. John Lynch and made that letter public earlier this week.
A Lynch spokeswoman said the Democratic governor shares the treasurers concerns. Still, no one has yet decided to reduce or eliminate the discounts. The governors executive council, which sets the level of toll rates, held off from a decision at its meeting yesterday.
Ablowich said a deteriorating financial position could risk a downgrade of the turnpikes credit rating, which is in the single-A category. Fitch Ratings and Standard & Poors both rate the turnpike debt A with a stable outlook. Moodys Investors Service rates the debt A1.
Even if current operating coverage ratios are maintained, investing in future turnpike expansion would be impossible, said Ablowich, who uses the discount tokens. Nearly half of the turnpikes 100,000 annual toll transactions use tokens.
If discounts are maintained in spite of rising costs and slower growing revenue, theres potential that the debt service coverage ratio could violate its bond covenant, Fitch senior director Cherian George said.
Such a violation would create a technical default and could give bondholders the right to take charge of the turnpike and charge sufficient tolls to bring the system back into compliance with the covenant, according to Ablowichs letter.
At minimum, the turnpike must maintain a 1.0 times debt service coverage ratio, which is derived from comparing net operating revenue to total obligations. The turnpike has about $294 million of outstanding revenue bonds, and is repaying about $10.8 million of outstanding general obligation debt.
Last years 1.18 times coverage ratio was the turnpikes highest since 1999. The turnpike reaped $39.7 million of revenue in 2004, which helped cover $33.7 million of debt service and other obligations.
In addition, maintaining E-ZPass would cost $6 million annually, and personnel savings would be minimal, as most toll operators would remain at least during the first year of E-ZPass operations.
The states Department of Transportation which operates the turnpike is studying various potential scenarios, such as if the token were maintained, or phased out, or if E-ZPass will offer the same or reduced discount.
Lynch has publicly said that he will not get rid of the tokens, though the House passed a bill to end tokens last month. Eliminating the use of tokens would save the state $750,000 per year, according to DOT spokesman Bill Boynton, who warned that the state could face contractual penalty fees if the debate over discounts stalls the E-ZPass system, which is scheduled to begin by Memorial Day.
Robert E. Paaswell, director of the University Transportation Research Center at the City College of New York, said E-ZPass most likely will generate more revenue for the turnpike since it makes it easier to fine-tune toll prices and introduce variable rate tolls depending on the time of day, congestion, and for out-of-state drivers.
Toll-rates apparently have little impact on how people drive, according to Paaswell. The number of trips taken is almost independent of the cost of driving, Paaswell said.
