FISCAL NOTE

Date Requested: February 10, 2017
Time Requested: 09:37 AM
Agency: Highways, Division of
CBD Number: Version: Bill Number: Resolution Number:
1230 Introduced HB2027
CBD Subject: Roads and Transportation


FUND(S):



Sources of Revenue:

Other Fund State Road

Legislation creates:

Neither Program nor Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


    If the Turnpike tolls are eliminated as provided in HB2027, the State would lose in the excess of $90 million annually(the net collected after all tolls discount programs are applied)now used to operate and maintain the 426 lane miles of interstate highway, 116 bridges, three travel plazas and one welcome center (Princeton). Most of the annual Turnpike toll revenues come from out-of-state passenger and out-of-state commercial vehicles (approximately 76% of all Turnpike toll revenue). Without the toll revenue, the cost of operating the West Virginia Turnpike would shift entirely to the State Road Fund. See Memorandum below for additional impacts to state government.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2017
Increase/Decrease
(use"-")
2018
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues -90,000,000 -90,000,000 -90,000,000


Explanation of above estimates (including long-range effect):


    See Memorandum below for information regarding the fiscal impact of this bill on the State of West Virginia. If $90 million per year in tolls are eliminated this would reduce future revenues from tolls over the next 30 years by over $2.7 billion, of which $2 billion comes from out-of-state users of the Turnpike.



Memorandum


    HB2027 proposed to discontinue tolling on the West Virginia Turnpike on July 1, 2020. If the Turnpike tolls are eliminated as proposed on July 1, 2020, the State would lose in excess of $90 million annually in toll revenues (the net collected after all toll discount programs are applied) now used to operate and maintain the 426 lane miles of interstate highway, 116 bridges, three travel plazas and one welcome center (Princeton). Most of the annual Turnpike toll revenues come from out-of-state passenger and out-of-state commercial vehicles (approximately 76% of all Turnpike toll revenue). Without the toll revenue, the cost of operating the West Virginia Turnpike would shift entirely to other West Virginia Division of Highways (DOH) sources of revenue including the woefully underfunded State Road Fund. If $90 million per year in tolls are eliminated, this would reduce future revenues from tolls over the next 30 years by over $2.7 billion, of which over $2 billion from out-of-state users of the Turnpike.
    In addition to losing $90 million in annual toll revenue, there would be an immediate loss of over 160 jobs related to tolling and uncertainty for the remaining 200 maintenance and other jobs at the WV Parkways Authority.
    The Parkways Authority receives no funding from the State of West Virginia or from the Federal Government for any maintenance, operation or capital repairs needed by the West Virginia Turnpike. Tolls ("User Fees") provide all the funds for the maintenance, operations and capital repairs needed and performed on the West Virginia Turnpike. This permits the use of other revenue and state tax dollars by the DOH for all the other highways and bridges in West Virginia. Each year, the West Virginia Department of Transportation (DOT) applies for and receives funds for the maintenance and upkeep of its interstate highway system, as do all other states that have interstate highways serving their taxpayers. The DOT is allowed to count the 426 lane miles maintained by the West Virginia Parkways Authority within its application to the Federal Highway Administration (FHWA) for yearly maintenance and repair funds, although none of those funds received by DOT are allocated to the maintenance of the West Virginia Turnpike. This formula allows WVDOT to maximize the use of such funding on the portions of the interstate system in West Virginia that are not subject to user fees. Removing tolls from the West Virginia Turnpike will not serve to increase the amount of the funds received by DOT from FHWA.
    The West Virginia blue Ribbon Commission of Highways in its May 2015 report concluded that West Virginia need an additional $750 million a year to preserve and improve its roads and bridges. Another $380 million a year is need to provide for needed expansion of the existing system. It appears from the report that the annual shortfall with which the COH is currently contending exceeds $1.13 billion.
    Of the 116 bridges on the WV Turnpike, it is estimated that 80% of its bridge decks will need to be replaced over the next 30 years with the first bridge deck replacement taking place in 2016. By 2020, the average bridge deck age will be 38 years, 23% of the bridges will exceed their expected deck life of 40 years and 94% of the bridges will be over 35 years old. At the end of the 30 year planning period, if no further bridge decks are replaced, 81% of the Turnpike bridge decks will be over 60 years old. That tremendous cost adds significantly to the current deferred maintenance amount facing the DOH.
    This bill proposes to discontinue tolls on the WV Turnpike once the bonds have been paid in full and turn over the road and all assets to the DOH - free of tolls. All monetary assets and accounts would be deposited into a "Turnpike Transition Fund". Toll collection on the Turnpike shall continue after the bonds are paid off until July 1, 2020 . The proposed fund would also consist of any other funds appropriated by the Legislature to assist in the transfer of assets, powers and duties of the Parkways Authority pursuant to this section to the DOH and the State Road Fund, and the interest of other earnings on the moneys in the fund. This Turnpike Transition Fund will be administered by the Commissioner of the DOH to pay for:
    a)the costs of all WV Turnpike operations and maintenance within the DOH.
    b) all costs and expenses necessary for toll collection and toll collection operations until June 30, 2020 and all administrative expenses and capital costs necessarily incurred by the Parkways for removal of the toll collection facilities;
    c) reimburse the State Police for the costs of police services not to exceed $2 million per fiscal year from the time the bonds are paid until January 1, 2035.
    The bill states that once the funds in the Turnpike Transition Fund are expended the subject roadways shall be supported by the State Road Fund and any other funds available to DOH. All obligations and responsibilities of the Parkways Authority for any part or portion of the WV Turnpike shall cease on June 30, 2020. All property remaining in the possession of the Parkways Authority shall be transferred to the DOH, including Tamarack.
    In 2013, the WV Legislative Auditor's Performance Evaluation and Research Division (PERD)provided a performance review report to the Parkways Authority. In that report there were findings that concluded with the loss of tolls an estimated $9 million of negative economic impact would be felt associated with the loss of up to 231 Parkways jobs, the impact of the loss of funding for State Police Troop 7, an estimated $23 million for the cost of dismantling the Toll Plazas and its attendant highway reconstruction, lack of funding for courtesy patrols and loss of funding for Tamarack. The estimates include in the report (2013) and the Parkways Authority's response set out a detailed estimate of maintenance and capital costs that range between $30 million and $59 million per year based upon engineering analysis which reflects proactive and needs-based maintenance in order to maximize full life-cycle benefits of the highway and bridge assets. This proactive approach obviously saves money in the long term due to extending the life of the bridges and road surfaces rater than having to replace them before the end of their life-cycle. The $30 million cost identified by PERD and the DOH is based more on a "funds available" criteria. Based on the current report and the shortfall in funding, the DOH would only have available to it approximately one half (1/2) of what is currently being spent on maintenance of the Turnpike in the event tolls are removed and the Parkways Authority is abolished.
    Without tolls, alternate sources of revenue may have to be created or increased in order to maintain the WV Turnpike and its $60 million per year costs. The future of Travel Plazas would be significant reduction in private sector jobs and in the level of services provided by the WV Turnpike as well as a significant loss of approximately $3 million of non-toll revenue yearly.
    The unfunded pension obligations for current and former Parkways Authority employees is estimated at $4.444 million and other post-employment benefits (OPEB) such as healthcare are calculated to be in the range of $10.923 million; the future payment of those obligations is unclear without the ability to collect toll revenue.
    There are anticipated additional impacts to state revenues with the removal of tolls and costs which otherwise would have been paid from Turnpike toll revenues such as the extensive painting of the Yeager and Bluestone bridges estimated to be $53 million and providing tourist information services on the West Virginia Turnpike and at the Princeton Welcome Center and other travel plaza locations at a cost of $1.3 million per year.
    It is currently unknown how the WVDOH can budget for all the unquantified and loosely estimated costs, referred to in House Bill 2027, to maintain the West Virginia Turnpike if this bill were to pass.
    This bill proposes that all employees of the Parkways Authority dedicated to toll collection and toll collection operations shall remain employees of the Parkways Authority until the cessation of tolls. It states that all full-time, permanent employees that may be laid off by the Authority of the DOH at the cessation of tolls my apply for other positions filled under the classified service system and shall be given five preference points in addition to the regular numerical score received on examination, having qualified for appointment by making minimum passing grade.
    Due to the uncertainty of the future of the WV Turnpike, morale and retention of its employees have become a pressing issue within this agency. There are approximately 360 full and part-time Parkways Authority employees who receive state benefits and living wage from their employment. Of those employees, 160 represent employees of the Toll Division of the Parkways Authority (132 full time; 28 part time). None of these employees are currently in the classified service of West Virginia, all of them being "at will" employees. There are 145 employees in the Maintenance Department and with salaries and benefits this would be an additional cost to be paid from revenues supported by state taxpayers in excess of $10 million. It should be noted that with 76% of all toll revenues coming from out-of-state traffic, the out-of-state users are paying for 3 of 4 (110) of these jobs. The PERD report states that 231 people could be laid off from the Parkways Authority resulting in a direct loss of income to the local economy of over $9 million.
    The bill says the State Police superintendent may assign members to perform police duties of the highway now known as the Turnpike after it is transferred to the Division of Highways (DOH). It says the DOH shall either partially or fully reimburse the State Police for the cost of providing police services.
    The Parkways Authority's current cost to maintain State Police Troop 7, Parkways Division, to patrol and enforce the law on the Turnpike (including radio operations, vehicles and equipment and full funding of a 31 member State Police Troop) is $4.1 million per year. This bill does not identify any funding source for DOH or for the State Police to pay for this expense.
    regarding section ยง17-16A-10, Parkways revenue bonds generally, the insertion of the statement, "Provided, however, That no bonds may be issued of reissued following the reenactment of this section during the 2017 Regular Legislative Session" will prevent the Parkways Authority from issuing any bonds for future toll road projects in West Virginia.
    Current statute says that when the bonds are paid in full in 2019 or defeased, if the Turnpike is in good condition and repair to the satisfaction of the Commissioner of the state Division of Highways, it shall be transferred to the state Division of Highways and shall thereafter be maintained by the WVDOH free of tolls (West Virginia Code Chapter 17, Article 16A, Section 18). This bill strikes the language regarding the Turnpike's good condition and repair to the satisfaction of the commissioner of the WVDOH and eliminates tolling on the West Virginia Turnpike once the bonds are paid in full.
    The bill also requires that the Parkways Authority bring the Turnpike into compliance with all quality standards promulgated by the WVDOH for interstate highways in the State by June 30, 2020.
    As it is currently configured, the West Virginia Turnpike represents a $1 billion asset owned by the West Virginia Parkways Authority. That asset consists of 88 miles of the West Virginia Turnpike representing 426 lane miles of roadway, 116 bridges, 18 interchanges, 4 toll plazas, 3 travel plazas, 1 welcome center, 2 rest areas, 300,000 square feet of facilities, 6,248 culverts, 4,070 signs, 900 roadway lights, and 595 acres of area mowed within the right-of-way. Of the operating revenues collected (Fiscal Year 2017 Budgeted Highway Operations) in the amount of $89.0 million, $30.5 million will go to operating expenses that include maintenance, toll collection and customer service; $3.8 million will repay the State Police for the operation of Troop 7 and its radio operation center on the West Virginia Turnpike($4.1 million with vehicles and equipment); $5.5 million will go toward administration, tourist information center operations, insurance, professional engineering and other non-specific departmental expenses; $10.7 million for debt service on bonds; an, $38.5 million will be allocated to capital expenditures for roadway, bridges and facilities. following the first toll increase in 28 years in 2009, a ten year paving program began to address essential deferred maintenance and capital improvements. This program included $242 million for paving needs.
    The West Virginia Turnpike is one of the most highly traveled and challenging stretches of highway in the State of West Virginia. If tolls are eliminated, the State would lose in excess of $90 million annually in toll revenues, 76% of which come from out-of-state passenger and out-of-state commercial vehicles. If $90 million per year in tolls are eliminated, this would reduce future revenues from tolls over the next 30 years by over $2.7 billion, of which over $2 billion comes from out-of-state users of the Turnpike. As stated previously, it is currently unknown how the WVDOH can budget for all the unquantified and loosely estimated costs, referred to in House Bill 2027, to maintain the West Virginia Turnpike if this bill were to pass.
    



    Person submitting Fiscal Note: Lorrie Hodges
    Email Address: lorrie.a.hodges@wv.gov