FISCAL NOTE
Date Requested: February 06, 2023
Time Requested: 11:27 AM |
| Agency: |
Parkways Authority, WV |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 2993 |
Introduced |
HB3258 |
|
|---|
| CBD Subject: |
Roads and Transportation |
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|
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.
House Bill 3258 appears to be nothing more than a re-introduction of HB 3163 from the 2013 regular session. That may explain the technical defects in the bill itself. This Bill did not become law in 2013, and the West Virginia Legislature rejected the concepts in this Bill during the 2017 regular session when it authorized the bonds that provided proceeds in the amount of almost $600M for qualifying projects in the 10 counties surrounding the West Virginia Turnpike.
This Bill does not affect the general revenue of the State of West Virginia, but the removal of the tolls would (i) eliminate substantial toll revenues realized by the West Virginia Parkways Authority (the “Authority”), 76% of which are derived from out-of-state travelers and commercial vehicles, that are currently used to pay the operation and maintenance, renewal and replacement, and capital improvement expenses of the West Virginia Turnpike, (ii) shift the burden of such expenses to the State of West Virginia and its taxpayers and (iii) result in employment uncertainty and the layoff of a significant portion of Authority’s 429 employees. By way of example, for Fiscal Year 2023, the West Virginia Turnpike’s operation and maintenance expenses will be approximately $52,952,000, renewal and replacement expenses will be approximately $22,615,000 and capital improvement expenses will be $67,970,000, not including the toll and travel plaza expenses. Further, the Authority previously received a $750,000,000 estimate for the cost of removing the toll plaza’s and reconfiguring the existing roadways to conform to interstate standards without the toll plazas. All of the expenses provided above would be expected to significantly increase due to inflation between now and implementation of this Bill and, because of the elimination of toll revenues, all such expenses would be borne by the State and its taxpayers.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2023
Increase/Decrease
(use"-") |
2024
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 3258 contains technical defects throughout, including references to West Virginia Code sections that have since been amended and repealed.
• House Bill 3258 proposes numerous amendment to Section §17-16A-4 of Chapter 17, Article 16A of the WV Code, which amendments provide, among other things, that (i) on or before February 1, 2030, all debt obligations held by the Authority shall be satisfied, (ii) upon a proclamation of the Governor, all obligations, indebtedness and other liabilities pertaining exclusively to the West Virginia Turnpike and other assets expressly described in the amendments, as of the date of the proclamation, will be assumed by and transferred to the Division of Highways, (iii) upon such proclamation, all the Authority employees dedicated to highway maintenance and upkeep shall be transferred to employment by the West Virginia Division of Highways, (iv) the Division of Personnel shall maintain lists and develop procedures addressing the Authority employees that are transferred or laid off as a result of this Bill, (v) there shall be established special funds known as the “Turnpike Transition Fund” and “Parkways Authority Future Trust Fund” and (vi) the Authority shall transfer all remaining assets relating the to the West Virginia Turnpike to the Division of Highways on January 1, 2042 and, on such date, all obligations and responsibilities of the Authority for any part or portion of the West Virginia Turnpike shall cease.
• Passage and enactment of House Bill 3258 would likely put the Authority in the untenable position of having to choose between (i) violating State law or (ii) violating Federal law, violating its contractual obligations with the Federal Highway Administration, Department of Transportation and violating its contractual obligations to the holders of the Bonds.
• The Authority is restricted by Federal law and the Tri-Partite Agreement (as defined below) as to the expenditure of toll revenues. The Authority has entered into that certain Amended and Restated Agreement dated June 1, 2018, among the West Virginia Division of Highways, the Authority and the Federal Highway Administration, Department of Transportation (the “Tri-Partite Agreement”). Under Section 4 of the Tri-Partite Agreement, the “toll revenues from the operation of the West Virginia Turnpike will be used on the West Virginia Turnpike for amounts necessary for operation and maintenance; debt service; reasonable return on investment of any private person or entity that may be authorized by the State to operate and maintain the facility; and any cost necessary for improvement, including reconstruction, resurfacing, restoration, and rehabilitation. Further, Section 5 of the Tri-Partite Agreement states “that the use of excess toll revenues (i.e., the toll revenues in excess of the herein stated costs in item number 4, above) are authorized to be used for any other purpose for which Federal funds may be obligated under Title 23 of the United States Code, provided that the [Authority] and [DOH] certify annually that the West Virginia Turnpike is being adequately maintained and is in compliance with the audit requirements in section 129(a)(3)(B) of Title 23 of the United States Code.”
• Accordingly, the Authority is restricted by the Tri-Partite Agreement with the Federal government and by Federal law from depositing toll revenues to the special funds to be known as “Parkways Authority Future Trust Fund” and the “Turnpike Transition Fund”, as required under House Bill 3258.
• As proposed in House Bill 3258, the cessation of tolls and the transfer of Authority assets will effectively transfer the burden of operations, maintenance and capital improvement expenses on the State and its taxpayers.
• Currently, 76% of tolls revenues come from out-of-state and commercial vehicles. Individuals and commercial passengers who have accounts with the customer service center operated by Authority currently enjoy a series of significant toll discounts available only to those account holders, including the Single Fee Discount Program that allows unlimited travel for Class I vehicles on the West Virginia Turnpike for a single annual fee that is currently $26.25. Ultimately, the West Virginia taxpayers will absorb the cost of removing the tolls from the West Virginia Turnpike.
• For Fiscal Year 2023, the West Virginia Turnpike’s operation and maintenance expenses will be approximately $52,952,000, renewal and replacement expenses will be approximately $22,615,000 and capital improvement expenses (less toll and travel plaza expenses) will be approximately $67,970,000. The Authority’s five (5) year program recommendations for such expenses provided by its consulting engineers are set forth in the chart below:
WEST VIRGINIA PARKWAYS AUTHORITY 5 YEAR PROGRAM RECOMMENDATIONS
(In Thousands)
Operation & Maintenance:
2023 = $ 52,952
2024 = $ 53,984
2025 = $ 55,150
2026 = $ 56,061
2027 = $ 57,228
Renewal & Replacement:
2023 = $ 22,615
2024 = $ 24,092
2025 = $ 26,783
2026 = $ 27,004
2027 = $ 28,413
Capital Replacements & Improvements (less Toll System Upgrade & Travel Plazas redevelopment)
2023 = $ 67,970
2024 = $ 39,310
2025 = $ 36,320
2026 = $ 48,410
2027 = $ 38,520
• Further, the Authority’s consulting engineers projected that for Fiscal Year 2052 (when the Series 2021 Bonds would mature and be no longer outstanding), West Virginia Turnpike’s operation and maintenance expenses will be approximately $92,000,000, renewal and replacement expenses will be approximately $58,900,000 and capital improvement expenses (less toll and travel plaza expenses) will be approximately $82,100,000, adjusting for inflation. If tolls are not being collected at this time, presumably the State and its taxpayers would bear the burden of such costs.
• The Authority has received relatively recent estimates for the cost of removing the toll plaza’s and reconfiguring the roadways to conform to interstate standards without the toll plazas and that figure is $750,000,000.00. The work involved includes not only removing the visible structures but filling in the tunnels underneath that emanate from each Plaza Administration Building and go out to the far toll booths. If tolls are not being collected at this time, presumably the State and its taxpayers would bear the burden of such costs.
• At Barrier C, without the Toll Barrier, that curve will not meet the requirements and specifications of the National Interstate’s Highway System it will have to be reconfigured which, because of the narrow passage of the roadway, will obviously require additional right of way be acquired by purchase or by condemnation. The toll barriers at Barrier B and Barrier A and North Beckley are elevated for drainage purposes so that water does not pool where the vehicles stop to pay tolls. As a result, those will have to be removed completely and the underlying right of way brought back down to roadway level. The widened areas where the toll barriers are currently located will have to be reconfigured to eliminate the extra lanes that now exist.
• There are at presently 429 employees of the Authority, most of whom live in the counties served by the West Virginia Turnpike, such as Kanawha, Fayette, Raleigh and Mercer County. Even with the portions of House Bill 3258 that address current employees of the Parkways Authority, the layoff of a significant portion of such employees will be necessary upon the elimination of the toll revenues.
• Eliminating tolls and then attempting to reinstate them is a complicated and costly undertaking, as evidenced by attempts made in other jurisdictions. Allowing the Authority to participate in the Roads to Prosperity Program for the 10 surrounding Counties required an amendment by Congress to amend Section 1012(e) of Public Law 102-240 by adding subsection (2), which allowed the Administrator of FHWA to modify the Original Tri-Partite Agreement that allowed tolls on the West Virginia Turnpike.
• The Authority maintains more than 100 bridges on the West Virginia Turnpike, a number of which have been replaced, but many of which predate the interstate upgrades that took place in the 1970s and 1980s. Many of these bridges are still viable because of the robust bridge maintenance program operated by the Authority. If the West Virginia Turnpike is turned over to the State Department of Transportation, Division of Highways (“DOH”), the DOH’s bridge replacement and maintenance program is not as intense as the Authority because it already has responsibility for many additional bridges statewide and has different budgetary constraints. As a result many of the bridges which now are maintained will have to be replaced sooner than they would be if the Authority was operating the Turnpike. There are two original bridges remaining on the Turnpike, Bluestone Southbound (1952) with a total replacement cost of approximately $45,000,000 and Yeager Southbound (1952) with a total replacement cost of approximately $60,000,0000, without adjustments for inflation. The average bridge, depending on length, costs from $2,400,0000 to $13,200,000 to replace. These are just some of the significant extra costs that would be incurred by the DOH and eventually passed on to the taxpayers of West Virginia.
• The U.S. Department of Transportation, Federal Highway Administration provides the State with certain federal matching funds (“FHWA Matching Funds”), calculated by the number of lane-miles of interstate in the State, including the West Virginia Turnpike, to be used for maintenance expenses. The West Virginia Department of Transportation currently receives such FHWA Matching Funds for the 444 lane-miles of the West Virginia Turnpike, but the Secretary has discretion regarding the allocation such funds as long as West Virginia Turnpike is kept in good repair. Currently, because the West Virginia Turnpike is supported by toll revenues and kept in good repair, the Authority (and by extension, the West Virginia Turnpike) does not receive any such FHWA Matching Funds; rather, they are allocated by the Secretary for other interstate maintenance projects across the State. By eliminating the tolls as proposed by House Bill 3258, a significant portion of such FHWA Matching Funds would have to be allocated by the Secretary to keep the West Virginia Turnpike in good repair and would further strain the federal dollars received by the State to maintain its interstate highways. In other words, those funds that would go to the West Virginia Turnpike for maintenance would have to come from funds previously allocated to other interstate highways in the State.
• The projected increase in the market penetration rate of electric vehicles (EVs) between now and implementation of this Bill will likely result in decreased gas tax revenues available to the State to pay for the operation and maintenance, capital improvement, renewal and replacement, and toll plaza reconfiguration costs of the West Virginia Turnpike.
• 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.
• Passage of House Bill 3258 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 3258, 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