FISCAL NOTE
Date Requested: January 11, 2024
Time Requested: 03:23 PM |
| Agency: |
Parkways Authority, WV |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2278 |
Introduced |
HB4167 |
|
|---|
| CBD Subject: |
Roads and Transportation |
|---|
|
FUND(S):
Toll Road Revenues
Sources of Revenue:
Other Fund Toll Road Revenues
Legislation creates:
Fiscal Note Summary
Effect this measure will have on costs and revenues of state government.
Summarize in a clear and concise manner what impact this measure will have on costs and revenues of state government.
This bill does not affect the general revenue of the State of West Virginia. The West Virginia Turnpike is operated and maintained by the West Virginia Parkways Authority with Turnpike toll revenues paid by the users of the highway. Thus, no State tax or general revenue dollars are used in the maintenance or operation of the Turnpike or in paying debt service on Turnpike bonds issued by the Authority.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2024
Increase/Decrease
(use"-") |
2025
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 |
0 |
0 |
0 |
Explanation of above estimates (including long-range effect):
Please explain increases and decreases in personal services, current expenses, repairs and alterations, assets, other costs and revenues, including assumptions and data sources and delineation between start-up and ongoing costs. Please also include a long-range schedule of costs and revenues if fiscal impact is expected to vary in future years.
See Fiscal Note Summary above for information regarding the fiscal impact of this bill on the State of West Virginia.
Memorandum
Please identify any areas of vagueness, technical defects, reasons a bill would not have a fiscal impact, and/or any special issues not captured elsewhere on this form.
The following contains the Authority’s concerns with the amendment contained within this Bill.
• House Bill 4167 proposes an amendment to §17-16A-13(a) of the WV Code, which amendment would mandate that credit card payment be accepted at toll booths in lieu of a cash payment, with no additional fees related to processing.
• As of the date of submission of this Fiscal Note, and as explained further below, the Authority is in the midst of a comprehensive overhaul of its toll collection system and related technology and is nearing completion of that overhaul. Once completed, it will fully integrate and allow for payment by credit card.
• However, in the meantime, and as of the date of submissions of this Fiscal Note, the Authority’s current toll collection system does not yet support the technology to fully integrate credit cards without requiring additional steps by toll collectors (presently, manual steps and actions) to properly process for classification tracking and auditing purposes, which would result in a slow-down of traffic and create a significant safety concern. Further, under House Bill 4167, the Authority would be obligated to pay credit card processing fees for each credit card transaction, which would decrease the toll revenues realized by the Authority. Credit card processing fees vary by card type and immediate implementation under this Bill, as opposed to implantation through the toll system upgrades that are currently underway, could result in further uncertainty, inefficiencies and delays.
• It would therefore be problematic in several ways (and raise significant safety and convenience concerns for the traveling public) if the Authority were to be forced to accept credit card payments before the nearly-completed toll system upgrade and overhaul is completed. In this regard, the Authority (together with its professional advisors) previously analyzed the projected credit card processing rates, as compared to other payment methods currently used, and estimated that (i) the average EZPass system processing rate is approximately 700 transactions per hour, (ii) the average cash payment processing rate is approximately 240 to 360 transactions per hour and (iii) the average credit card processing rate (only factoring in a single credit card review) would be approximately 120 transactions per hour. However, the actual processing rates for credit cards, if implemented now (before completion of the above-referenced toll system upgrades), in accordance with House Bill 4167, is expected to be significantly lower after factoring in the necessary time to address the second credit card review process and resolving issues related to damaged and declined credit cards.
• As result of the issues described above, at the time of submission of this Fiscal Note, credit card processing would slow down traffic processing rates and, especially in times of heavy traffic such as rush hour and holiday travel, could create longer backups and wait times at the toll barriers, creating serious operational, efficiency and traffic safety issues on the West Virginia Turnpike.
• Ultimately, as the agency in charge of the West Virginia Turnpike, the Authority must always consider and prioritize the safety and wellbeing of the patrons of the West Virginia Turnpike whenever changes to its payment processing systems and procedures are contemplated. The changes proposed by House Bill 4167, if the Authority is required to implement them before the completion of the above-referenced toll system upgrade and overhaul, will result in an operationally inefficient and potentially dangerous solution to an issue it is attempting to address.
• As noted above, the Authority is nearing completion of a comprehensive toll system upgrade which will, upon full completion, allow for the traveling public to pay tolls on the Turnpike using credit cards. This overhaul process began back in June of 2022, when the Authority approved a toll system upgrade for both the roadside toll collection system (including the ability to accept credit cards in a fully integrated system) and the back-office customer service center operations. Again, as noted above, this toll system upgrade is currently underway. It is presently expected to be partially implemented on or about March 15, 2024, including upgrades to Toll Barrier A taking place from January 8, 2024 to February 13, 2024, upgrades to Toll Barrier B taking place from February 13, 2024 to March 21, 2024, upgrades to Toll Barrier C taking place from March 21, 2024 to April 23, 2024 and upgrades to the North Beckley Toll Barrier taking place from March 25, 2024 to April 30, 2024. The Authority plans to fully evaluate the credit card processing feature using a closed testing environment at certain upgraded toll plazas. After such testing the Authority will be able to confirm and evaluate the real world credit card processing rates, and further implement credit card processing in accordance with prudent industry standards. Currently, the Authority anticipates accepting and processing credit cards in certain upgraded lanes by March 15, 2024, subject to the processing, safety and timing concerns identified above. For example, the Toll Barrier C and the North Beckley Toll Barrier will not be fully upgraded until late April 2024.
• The toll system upgrades described above will also include a license plate recognition camera system that will allow for those who do not have an EZPass or cash to be sent a bill for payment of the tolls (“pay by plate” tolling). This pay by plate method may be utilized during times of heavy traffic through standard operating procedures developed by the Authority to maintain the safest traveling conditions for the patrons of the Turnpike, and implantation of the credit card requirements under House Bill 4167 interfere with the ability of the Authority to proceed in an orderly and legal fashion to adopt credit cards as a method of toll payment.
• In multiple appearances before the Joint Transportation Oversight Committee over the prior 24 months, the Executive Director of the Authority has explained in detail the plan for such toll system upgrades and the potential for the acceptance of credit cards, provided that it is important that the Authority reserve the right to refuse the implementation of credit card processing if it takes materially longer than cash transactions. Over the prior years, the Authority has dedicated significant resources, including collaboration with its professional advisors, to implement the toll system upgrades described above, improve the customer experience and address the issue of credit card processing. However, imposing the requirements of House Bill 4167 on the Authority at this time, before the completion of the above-referenced toll system upgrade and overhaul, 4167 could delay and otherwise jeopardize the imminent implementation of such upgrades.
• On August 14, 2018, the West Virginia Parkways Authority (the “Authority”) issued its $166,370,000.00 Senior Lien Turnpike Toll Revenue Bonds, Series 2018 (the “Series 2018 Bonds”) in connection with the Roads to Prosperity highway program.
• On June 23, 2021, the Authority issued its $333,630,000.00 Senior Lien Turnpike Toll Revenue Bonds, Series 2021 (the “Series 2021 Bonds”, and together with the Series 2018 Bonds, (the “Bonds”) in connection with the Roads to Prosperity highway program.
• Collectively, the issuance of the Bonds resulted in deposits of over $594 Million to the State Road Construction Account that financed the construction, maintenance, improvement and repair of certain parkway projects in southern West Virginia as part of Governor Justice’s Roads to Prosperity program.
• The Bonds are secured by and payable solely from net Turnpike toll revenues, which accordingly are very important to the holders of the Bonds. Net Turnpike toll revenues are thus pledged to secure the Bonds.
• Specifically, in connection with the issuance of the Bonds, the Authority and United Bank, as Trustee, entered into a Master Trust Indenture dated August 1, 2018 (the “Master Trust Indenture”), under which the Series 2018 Bonds and Series 2021 Bonds are issued, containing a number of contractual obligations for the benefit and protection of the holders of the Bonds.
• Importantly, and understandably, some of these contractual obligations are specifically for the protection of net Turnpike toll revenues.
• Thus, any violation, erosion or impairment of any of these contractual obligations and protections may be viewed negatively by the rating agencies. Any negative rating action, in turn, would likely have a material impact on existing holders of the Bonds and could negatively impact the Authority’s and/or the State’s future borrowing costs and reduce their future bonding capacity, potentially by millions of dollars.
• House Bill 4167 would obligate the Authority (before completion of its major toll system upgrade and overhaul) to pay credit card processing fees and restricts the Authority’s ability to pass those fees along to the patrons of the West Virginia Turnpike. Accordingly, because the payment of such processing fees by the Authority at this time would result in lower net toll revenues per transaction, the payment of such fees could be deemed to be a net reduction of tolls and violate Section 512(g) of the Master Trust Indenture, which states “[t]he Authority shall not reduce tolls unless and until the Toll Road Consultant certifies that the Toll Rate Covenant will be achieved, after the application of such reduction, in the current Fiscal Year and all future Fiscal Years Bonds are then Outstanding.”
• Further, the efficiency, operational and safety concerns described above resulting from slower credit card processing, as required under House Bill 4167 if it is implemented at this time, may violate the operation and maintenance covenants set forth in Section 503(a) of the Master Trust Indenture (stating in relevant part that the “Authority will at all times operate the Turnpike, or cause the Turnpike to be operated, in an efficient manner and at reasonable costs; will maintain, preserve and keep . . . the properties of the Turnpike . . .in good repair, working order and condition . . ..”).
• By violating the existing covenants set forth in the Master Trust Indenture, passage of House Bill 4167 at this time would violate the (i) United States Constitution, Article I, Section 10 prohibiting the impairment of contracts, stating in relevant part that “[n]o State shall . . .pass any Bill of attainder, ex post facto Law, or Law impairing the Obligation of Contracts . . .” and (ii) West Virginia Constitution, Article III, Section 4 prohibiting laws that would impair existing contracts, stating in relevant part that “[n]o bill of attainder, ex post facto law, or law impairing the obligation of a contract, shall be passed.”
While we can appreciate the well-intentioned purpose of House Bill 4167, we are legally compelled under the circumstances to oppose its passage for the foregoing reasons.
Person submitting Fiscal Note: Robin Shamblin
Email Address: rshamblin@wvturnpike.com