“What experience and history teach is this — that people and governments never have learned anything from history.”

– George Wilhelm Hegel, German philosopher.

With the 2011 collapse of New Jersey’s Transportation Trust Fund (see MTR #556) and Governor Corzine’s secret “asset monetization” of the Garden State Parkway and NJ Turnpike menacing the horizon, Tri-State decided to look back and examine the big picture of New Jersey transportation funding. As we set about our research, it became increasingly apparent that the history of transportation in New Jersey is plagued by poor planning and underfunding, largely caused by a lack of political will. The first article in A Pattern of Failure, a series exploring the current state of transportation funding in New Jersey, examines how the New Jersey Turnpike Authority racked up its monumental debt and how it relates to the upcoming monetization.

Recently, Governor Corzine stated that in lieu of forming a public-private partnership, his “asset monetization” plan would likely raise tolls and divert the increased revenue to a newly formed public corporation, which would then issue bonds backed by that money. While this may seem fiscally responsible, when coupled with the planned $2 billion widening of the New Jersey Turnpike from exits 6 to 9, NJTA’s financial history would show otherwise.

No one wants to pay more tolls; but, even more than that, no one wants potholes, collapsing bridges or congestion. Unfortunately, New Jersey has not learned this lesson. In fact, the State has only been willing to raise tolls on the New Jersey Turnpike at ten-year intervals, and only once ever on the Garden State Parkway – despite borrowing plans based on more frequent hikes. In terms of the larger transportation funding structure, tolls contribute very little to the Transportation Trust Fund. In fact, they are not constitutionally dedicated to the TTF and are often diverted to the General Fund – a practice that has certainly contributed to the TTF’s skyrocketing debt.

Scanning more than twenty years worth of newspaper articles relating to tolls on the Garden State Parkway and NJ Turnpike, a clear pattern emerges. In an effort to avoid the political pain of toll increases, the state bonds large sums of money under the expectation that tolls will increase. However, when it comes time to raise tolls as outlined in bond documents, politicians become frantic, and either bond further against toll increases or employ another fast-cash scheme, forcing NJ further into debt.

In 1985, New Jersey bonded $2 billion for the proposed widening of Turnpike exits 11-14, and assumed a 135% toll increase over 7 years would retain solvency. However, the massive plan was scrapped and by 1990, the widening took place only between Exits 8A and 9, costing about $300 million. Then Transportation Commissioner Tom Downs told public finance journal The Bond Buyer that NJTA had moved forward with unstudied projects and arranged financing before the plan was approved. Despite the diminished project, NJTA had bonded $2 billion and not raised tolls – and was headed for default in April 1990.

Instead of raising tolls as planned, New Jersey decided to meet debt service requirements by taking $30 million from construction balances in the Authority’s Capital Program to pay interest on the outstanding bonds – despite protests from the Turnpike Authority’s Treasurer, Dolores Prideaux and former Chair, Ralph Loveys.

Finally, in 1991, NJTA had to raise toll rates to cover the debt service; however, tolls were only raised by 40%, instead of the 70-80% recommended by NJTA Executive Director Donald Watson and the Governor’s Transportation Executive Council. Instead of learning a lesson in sustainable funding, NJ continued the pattern of bad financial planning when in 1992, Governor Florio forced the Authority to purchase the Bergen County section of the New Jersey Turnpike for $400 million in attempt to pay down general state debt. Subsequently, NJTA had to float $2.9 billion in new bonds in order to refinance the 1985 debt and pay for the one-exit widening in 1986. Sound familiar?

As we travel even further down the rabbit hole, we find out that the 1992 bonds had anticipated a minimum 50% toll increase by 1995. Unfortunately, NJTA didn’t raise tolls in 1995, or by 50%. The Authority opted instead to increase tolls in 2000 as part of the EZ Pass roll out – 20% for cash-paying customers, and off-peak discounts for EZ Pass users, followed by a 17% hike passed in January 2003.

Nearly five years have passed, and NJTA has only mentioned raising tolls because it doesn’t have funding for the planned addition of six new lanes between exits 6 and 9. To the frustration of transportation advocates and fiscal watchdogs, Gov. Corzine and NJTA Chairman and NJDOT Commissioner Kris Kolluri are focusing on these widenings despite an abundance of stalled smart growth projects focusing on the maximization of existing infrastructure, such as Route 29 in Trenton and Route 21 in Newark.

Stay tuned for articles on a glut of poorly executed, expensive NJTA projects and the consistent raiding and under-funding of the Transportation Trust Fund!