After a year of speculation, New Jersey residents finally got to hear details of Governor Corzine’s “asset monetization” plan during his State of the State address yesterday afternoon.
Briefly, Corzine proposes to establish a nonprofit Public Benefit Corporation (PBC) to collect tolls and manage and maintain the toll roads. The PBC will issue its own bonds (expected to be $40 billion worth) and will pay the state for the right to collect tolls. The debt incurred by the PBC would be paid down with toll revenue. Immediately, the PBC bonds would be used to pay down half of the state’s accumulated $32 billion in debt. That would cut the annual deficit by about $1 billion. Corzine’s plan dedicates the remaining bond revenue to pay for 75 years of multi-modal transportation improvements, with any additional revenue also slated for transportation projects. Corzine pledged significant toll hikes – 50% every four years, and adjusted for the cost of living in between – on the Turnpike, the Parkway and the Atlantic City Expressway, with new tolls on portions of Route 440.
Aside from the enormous scale of the plan and the creation of a new entity to take responsibility for the debt, the proposal sounds a lot like previous plans to issue bonds on the promise of future toll hikes, as detailed in our special series on New Jersey’s transportation financing woes. Unless the toll hikes materialize, the state could incur even greater debt.
Certainly a new stream of transportation revenue is necessary. The state has no transportation funding starting in 2011. As Corzine noted, the Parkway hasn’t had a toll hike since 1989. (It’s worth noting, however, that the first toll hike won’t go into effect until after Corzine is up for reelection in 2009, assuming he runs again.) Unfortunately, an increase in another source of transportation revenue, the state’s gas tax, was not part of the Governor’s plan. But at least the Governor is attempting to find a solution to state’s chronic transportation funding problems.
However, the plan raises several red flags. First, the Campaign worries that the creation of a PBC with “the right to operate, maintain, [and] expand the roads…” would give the entity unprecedented authority to embark on new roadway projects without being subject to legal requirements for environmental review and public involvement. While it might be easier to raise tolls through the politically-shielded PBC, it seems a bad idea to leave the public out of a decision-making process with potentially huge quality of life impacts for the state’s residents.
There is also the issue of whether toll revenue from a few roadways should be used to pay for general state debt reduction. While Corzine has promised that he will fully fund the Transportation Trust Fund for a generation, transportation capital coffers are already raided annually to pay for transit operations and other operating costs. Unless Corzine and the legislature can find a sustainable long-term source of operating funds, this pattern will surely be repeated.
