Legislation that would reduce New Jersey Turnpike Authority tolls prompted a conference call Friday between the agency and Moody’s Investors Service.
The conference took place after an institutional investor with more than $50 million of turnpike debt contacted the agency last week regarding a potential reduction in tolls on the New Jersey Turnpike and the Garden State Parkway, Gov. Chris Christie spokesman Michael Drewniak told reporters during a press conference on Friday.
“The reason they called is because of all the hubbub about this and obviously they had concerns [about] the scheduled turnpike toll hikes being rolled back,” Drewniak said.
Democratic lawmakers are seeking to roll back toll hikes to reflect $1.25 billion of spending the turnpike authority no longer needs to allocate. The agency would have had to allocate $1.25 billion from 2012 through 2018 to help pay for a now-cancelled mass transit tunnel dubbed the Access to the Region’s Core. Christie, a Republican, terminated the ARC tunnel last year, saying the state could not afford the potential cost overruns. The tunnel would have connected northern New Jersey and Manhattan.
Drewniak said the conversations addressed Moody’s and the institutional investor’s questions. He declined to identify the investor.
“It is our view that we were able to allay their concerns,” Drewniak said.
Moody’s declined to comment on the issue or even confirm or deny that the conference call took place.
Wilentz, Goldman & Spitzer PA last week reviewed the potential impact to the turnpike authority if it were to reduce its tolls. The firm is bond counsel to the authority. It believes the agency would need to decrease its planned $4.55 billion of borrowing from 2012 to 2017 to absorb the potential reduction in toll revenue and maintain a debt-service coverage level of 1.5 times or face a possible downgrade of its credit rating.
“Based upon comparisons to the debt-service coverage ratios achieved by other toll-road bond issuers throughout the nation and the conversations the authority had with the various rating agencies, debt-service coverage ratios at that level are required for the authority to maintain the current ratings on the authority’s outstanding bonds,” according to the firm’s review of the legislation.
The agency could also face possible legal suits from bond trustees, bondholders, and a potential investigation by the Securities and Exchange Commission based upon the authority’s financial projections and disclosures regarding toll increases set for 2012, according to Wilentz Goldman .
The authority has $8.4 billion of outstanding debt.
Senate President Stephen Sweeney, sponsor of the bill to reduce toll on the two roadways, said last week that the agency can implement a rollback and still maintain sufficient debt-service coverage. An analysis by the non-partisan Office of Legislative Services found that the system would maintain a 1.2 times debt-service coverage level if the authority were to reduce tolls by $1.25 billion. Debt-service levels must be at least 1.2 times.
Christie last month released a funding plan for the state’s Transportation Trust Fund Authority that includes $4.4 billion of proposed borrowing. The TTFA will run out of available funding this year. Christie said a portion of the $1.25 billion originally pegged for the ARC tunnel would be used for the TTFA.
“It is amazing how hard this administration will turn to any and everyone they can find to continue their bait-and-switch on New Jersey drivers,” Sweeney spokesman Chris Donnelly said in an e-mail. “No matter how many lawyers they pay to tell them what they want, it doesn’t change the fact that the only thing stopping the Christie administration from going out and selling the public on its plans to use Turnpike and Parkway tolls for the TTFA is the Christie administration.”
Tolls on the New Jersey Turnpike and the Garden State Parkway are set to go up by 53% and 50%, respectively, on Jan. 1, 2012. Tolls last went up in December 2008 by 40% on the Turnpike and 43% on the Parkway.