The New Jersey Turnpike Authority will not be able to certify by Dec. 1 that it can meet the debt service coverage levels necessary to maintain its ratings without the increased revenue from toll hikes proposed last week.
"As the authority approaches its next fiscal year, by Dec. 1 it must affirmatively certify its ability to meet debt coverage ratios memorialized in its existing bond covenants. This year the authority will be unable to issue this certification," according to the authority's Sept. 4 letter to Gov. Jon Corzine.
"Under section 713 of the authority's general bond resolution, the authority's inability to certify the adequacy of its projected 2009 revenues to meet its debt coverage obligation will automatically trigger a process by which the authority's traffic engineer will be automatically engaged to fix a toll schedule to satisfy the revenue shortfall," the letter said.
The NJTA's bond covenants stipulate that debt service coverage must not fall below 1.2 times. To maintain its current ratings, coverage needs to reach 1.4 times. Currently the authority's debt service coverage is just below 1.4 times, according to officials.
The authority wrote that tolls for passenger cars on the 146-mile Turnpike would need to increase by 60 cents in 2009, 90 cents in 2012, and another 30 cents in 2023. The average cost for passenger cars on the 173-mile Garden State Parkway would increase by 15 cents next year, 25 cents in 2012, and eight cents in 2023, according to the letter.
Those increases would raise the toll in 2009 for an average 23-mile trip on the Turnpike to $1.80 from $1.20 and bring the average passenger trip on the parkway to 50 cents from 35 cents. The NJTA last increased tolls on the Turnpike and the Parkway in 2000 and 1998, respectively.
While motorists and Republican legislators balked at the proposal, officials say the authority must find a way to increase revenues in order to maintain debt service coverage of 1.4 times while at the same time moving forward with road-widening plans on both highways and on its bridge repair and replacement projects. It must also help the state, through the New Jersey Transit Authority, meet a $1.25 billion investment commitment in a new passenger-rail tunnel through the Hudson River between Newark and Manhattan's Pennsylvania Station.
On Friday, the governor fielded questions from reporters after a meeting at the New Jersey Water Supply Authority in Clinton where officials approved the Highlands Regional Master Plan. Corzine said he is still evaluating the toll increase proposal.
"I will be reviewing it this week," Corzine told reporters. "We will be out next week with the details. I am not going to respond to it until I have gone through it in light of what is appropriate with regard to what we are financing."
The authority's board will meet tomorrow where it may set public hearings on the toll increases. The authority must hold public meetings before the board can vote on toll hikes. Changes in the authority's tolls do not require legislative approval.
While the toll-hike proposal would address the authority's immediate financing needs, it remains unclear how the state will fund the New Jersey Transportation Trust Fund Authority, which runs out of money in fiscal 2012. In January, Corzine proposed increasing tolls on the turnpike, the parkway, and the Atlantic City Expressway, with those additional revenues backing up to $38 billion of debt that would pay down nearly half of the state's $32 billion of outstanding debt and sustain the TTFA for 75 years.
Last week's toll-hike plan is much smaller than Corzine's strategy for addressing the state's overall debt. Yet Corzine stressed that his administration will continue to look for ways to decrease New Jersey's debt without relying on toll revenues to pay down the long-term obligation.
"We are going to continue on a very aggressive pattern of recurring revenues matching recurring expenditures, which should lead to our ability to generate additional pay downs at different points of time when the state is ... not saddled with an economic recession," the governor said.