Toll plan a first-in-the-nation tact

BY TOM HESTER JR. ASSOCIATED PRESS

TRENTON -- Highways built by U.S. taxpayers are being leased to foreign-owned companies by cash-starved states, but New Jersey is weighing another approach amid worry such deals mean states lose control of crucial highways and potential profits.

New Jersey Gov. Jon S. Corzine has rejected the traditional highway leases other states and cities are employing to raise billions of dollars to fund transportation projects.

Rather, the Democratic governor who once led Goldman Sachs has proposed what's been described as a first-in-the-nation tact -- creating a nonprofit corporation to manage toll roads and issues bonds paid back by increasing tolls on some of the nation's busiest highways.

Corzine wants to use money earned from the deal to pay at least half of $32 billion in state debt and fund transportation for 75 years.

"This plan is unique," Corzine said. "We went to school on the experiences of other states and we have improved what we saw wrong with their proposals."

Corzine wants to increase tolls 50 percent in 2010, 2014, 2018 and 2022. Those increases would include inflation adjustments, and after 2022 tolls would increase every four years until 2085 to reflect inflation.

The Atlantic Expressway, Garden State Parkway and New Jersey Turnpike would be affected, with tolls added to Route 440, which links the turnpike with a Staten Island bridge.

Corzine says his plan is different because all money earned by the nonprofit corporation stays in the state and would be used to benefit citizens and motorists, unlike lease deals where the companies who lease the roadways keep the profits.

Carol Rein, the managing director of the Municipal Securities Group for global financial services firm UBS, said New Jersey is the first state to try this approach.

She said it's similar to NAV Canada, which operates Canada's air navigation system, and Britain's Network Rail, which oversees that country's railway.

Maria Matesanz, an analyst for Moody's Investors Service, described the plan as "probably the largest and most ambitious leverage of a toll road asset in the U.S. so far."

That doesn't mean Corzine's plan has been welcomed by legislators who need to approve it.

"This is a very tough lift for the Legislature, so we have to break every piece down to a level where Wall Street is understandable to Main Street," said Senate Majority Leader Stephen Sweeney, D-Gloucester. "Obviously, we're not there yet."

Among their concern is the new ground Corzine is trying to break.

Corzine concedes it would have been easier to seek a highway lease, as other states have done, but said he rejected that approach so the state could continue to own its toll roads and keep all profits earned by them.

That's different from what other states have done.

An Australian-Spanish partnership paid $3.8 billion to lease the Indiana Toll Road and $1.83 billion to lease the eight-mile Chicago Skyway.

An Australian company bought a 99-year lease on Virginia's Pocahontas Parkway.

Texas officials decided to let a Spanish-American partnership build and run a toll road from Austin to Seguin for 50 years.

Robert Poole, the transportation studies director for the Reason Foundation, said such agreements have been common in Europe and has argued private investors can do a better job.

"The private sector is leaner and more efficient than the government," he said.

But Patrick Bauer, the Indiana House's Democratic leader, has decried such deals. He contends Macquarie-Cintra -- the Australian-Spanish consortium -- can make $133 billion over the 75-year Indiana Toll Road lease, compared to the $3.8 billion Indiana received.

"This is really the point that is different about our model," Corzine said. "Any future payments above and beyond operating costs and capital needs of the roadway will be reinvested in transportation improvements across the state."

The nonprofit would be different from the typical agencies states use to run toll roads because it would have an independent, nonpolitical board of directors. Once the agency is up and running, governors and legislators would have no say in its operation.

Richard Raphael, an analyst for Fitch Ratings, hailed parts of Corzine's plans, including keeping the toll roads under state control without a lease.

"But on the other side, one has to gauge what the impact would be of large toll increases economically," Raphael said.

The Garden State Parkway is the nation's busiest toll road and the New Jersey Turnpike is the nation's fifth busiest, according to the International Bridge, Tunnel and Turnpike Association, while the expressway is a key route to the Atlantic City gambling resort.

The state's three toll highways carried 748 million vehicles in 2006 -- the parkway 428 million, the turnpike 252 million and the expressway 68 million.

Truckers contend large, regular toll increases on such roads will do nothing but drive up consumer costs everywhere.

"A proposal that puts an enormous burden on highway users and truckers is a flawed financial solution," says Mike Joyce of the Owner-Operator Independent Drivers Association.