A new front opens in Florida 'war on tolling'

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The state lawmakers from the Miami area who targeted south Florida's local toll road agency for termination last year are now trying to ban tolls on some express lanes managed by the Florida Department of Transportation.

Efforts by to roll back or eliminate tolls that financed projects in a specific area could be harmful to road projects being developed in other areas of the state, said Robert “Bob” Poole, director of transportation policy and Searle Freedom Trust Transportation Fellow at the Reason Foundation.

If Florida creates a climate that politically threatens toll projects, toll revenue bond ratings across the state will be affected, said the Reason Foundation's Robert Poole.

“The Legislature has got to stop doing this assault on tolling," Poole said in an interview with The Bond Buyer. "It's going to be seen as a statewide issue.”

In the Sunshine State, toll roads are common in larger metropolitan areas like Miami, Orlando and Jacksonville, while others are being planned. Highway planners see no other means of paying for new roadways, but tolls are generating criticism from drivers in population-dense south Florida.

Poole described a series of actions by Florida lawmakers and the governor in recent years as a "war on tolling" in a February newsletter.

For the Miami-Dade County Expressway Authority, the legal fight to remain intact after Gov. Ron DeSantis signed House Bill 385 last year to dissolve the locally run agency isn't over, and neither are rating downgrades as a result of the legislation.

On Tuesday, the First District Court of Appeal hears oral arguments on a motion by FDOT and the state House of Representatives for a writ of prohibition against the authority, also known as MDX.

If a three-judge panel approves the writ, a lower court case won by the authority may be tossed out. In that case, Leon County Circuit Judge John Cooper ruled Aug. 29 that HB 385 violated the state constitution by violating Miami-Dade County's home-rule authority.

“MDX is a dissolved state agency that lacks both the legal capacity to maintain its lawsuit and the requisite standing to assert its claims that the challenged legislation is unconstitutional,” FDOT said in a Jan. 2 filing supporting the writ. “Because the trial court lacks subject matter jurisdiction as a matter of law, this [appellate] court should issue a writ of prohibition requiring dismissal of the proceedings below.”

The Florida House passed HB 385 on a vote of 80-33 on April 17, 2019, while the Senate passed the measure on a vote of 23-16 on May 2.

HB 385 disbanded the MDX and replaced it with the Greater Miami Expressway Authority, giving a new board of directors orders to reduce tolls while placing a moratorium on increasing toll rates. It also imposed greater state oversight of the new agency’s budgeting and debt issuance.

On May 6, 2019, before the governor signed the bill, MDX filed a complaint for a declaratory judgment challenging the constitutionality of HB 385, as well as bills passed in 2017 and 2018 in which lawmakers ordered various toll reductions.

DeSantis, a Republican, signed the bill on July 3, 2019, saying that he was pleased to approve the measure sponsored by Rep. Bryan Avila, R-Miami Springs. A similar bill was filed by Sen. Manny Diaz Jr., R-Hialeah Gardens.

MDX “has existed in a state of uncertainty since the bill passed, and in the intervening months the authority’s governance has now switched hands three times,” MDX’s attorneys said in a Jan. 7 filing that requested expedited consideration of the writ. “As the days and months during which the authority has been without a governing board progress, the impacts upon the authority become ever more detrimental and deleterious.”

The filing said the impacts include the potential for negative cash-flow issues that could force MDX “to make financial decisions that will directly impact toll customers,” by reducing emergency road assistance, consulting contracts, and maintenance expenses.

Several key contracts are expiring in mid-2020 and need to be re-advertised, and the MDX continues to operate in violation of its trust indenture, which requires the appointment of a board chairman, vice chairman, and secretary, the MDX document said.

If the writ is approved or denied, the ruling may be appealed depending on the language of the decision.

The uncertainty over MDX’s governance and “the ambiguity in regards to strategic direction and oversight during the course of the potentially lengthy legal proceedings,” led Fitch Ratings to downgrade MDX’s bond rating Feb. 20.

Fitch cut the rating on MDX’s $1.43 billion of outstanding revenue bonds to BBB-plus from A-minus due to the lack of clarity regarding the legal outcome and management of the expressway authority, which currently doesn’t have a board of directors.

“While a hearing on the writ of prohibition is scheduled for March 10, continued legal proceedings are expected and may be prolonged,” said Fitch analyst Stacey Mawson. “There is also the possibility that the outcome of the March hearing may leave the authority without a board through fiscal year end,” and MDX may be unable to execute or enter into contracts.

“The rating also takes into account the acute level of political interference into the authority's governance and rate-setting, along with the potential for a weakened pricing framework due to House Bill 385, which places a prolonged moratorium on rate increases,” she said, adding there also is uncertainty around the authority's capital planning and investment strategy in the wake of the legislation and legal proceedings.

The political and legal battles enveloping the MDX since HB 385 was signed have resulted in six downgrades, including Fitch’s initial rating cut to A-minus from A on May 8, 2019, five days after lawmakers passed SB 385.

Moody's Investors Service lowered its ratings to A3 from A2 on July 5, and to A2 from A1 on May 10. S&P Global Ratings cut its rating to A from A-plus on July 16.

The rating actions cited the state's political interference in the operation of what had been an agency with independent rate-setting authority. All ratings have negative outlooks.

FDOT and the House have also filed an appeal of Judge Cooper's ruling, a step that promises to prolong litigation against the MDX if the appellate court denies the request for a writ.

During this year’s legislative session Avila and Diaz — the same two lawmakers who pursued abolishing MDX — filed bills that would have prohibited the FDOT from operating any express lanes or imposing any tolls on State Road 826, a bypass around Miami also known as the Palmetto Expressway.

FDOT, which began studying the addition of express lanes on SR 826 to manage congestion since at least 2012, opened the first 13-mile section of toll lanes in September. There were plans to extend the lanes further, but the initial project generated numerous complaints from drivers and south Florida lawmakers who argued that the express lanes made traffic worse.

Diaz’s SB 1090 passed two committees and was on its way to a third when the legislative process suddenly stopped and the governor announced that FDOT at his direction had adopted a new plan for SR 826.

“Leaders in Miami-Dade, including Speaker [Jose] Oliva, Sen. Diaz and Rep. Avila, expressed concerns to me about congestion on the Palmetto Expressway,” DeSantis said Feb. 24, adding he requested that FDOT Secretary Kevin Thibault work with lawmakers on a solution.

FDOT, he said, agreed to add a new southbound general-purpose lane on SR 826, to reduce the northbound managed lanes to one from two, and to create a new entry point along the system.

While FDOT said it will suspend toll collections to zero from a minimum of 50 cents, the agency didn’t immediately respond to a request for clarification on how long the tolls will be lifted or whether they will be eliminated permanently.

Diaz told the Miami Herald that the tolls could be suspended for more than a year.

Poole, the Reason Foundation's transportation expert, said that he was “dismayed” at the agreement reached on the Palmetto Expressway, although he felt it was better than killing tolls altogether as proposed in SB 1090 and a similar bill filed by Avila.

The Palmetto toll issue this year coupled with last year’s legislation terminating the Miami-Dade County Expressway Authority and other measures by lawmakers capping toll rates signals the wrong message to the bond market and rating agencies especially in light of Fitch’s recent downgrade of the MDX, Poole said.

“The implications in terms of the financial bond market and rating agencies should be a big wake up call to the governor and the Legislature,” he said.

While Florida has built many of its transportation systems using toll bond financing, Poole said tolls have even greater importance because the governor and Legislature along with support from Florida’s business community passed a bill last year ordering the construction of three new major toll roads across the state.

With gas taxes becoming less effective as numbers of higher-fuel economy and electric vehicles increase, he said Florida needs to continue to rely on tolls as supplemental funding for projects like express lanes, especially when road capacity is limited.

“The point is if you create a climate in Florida that politically threatens toll projects it’s going to affect not just the MDX’s rating but potentially all bond ratings,” Poole said. "It's foolish to cut back on tolling."

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Toll revenue bonds Transportation industry Lawsuits Miami-Dade County Expressway Authority Florida Department of Transportation Florida Ron DeSantis
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