FISCAL NOTE
Date Requested: February 06, 2023
Time Requested: 11:25 AM |
| Agency: |
Parkways Authority, WV |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 3000 |
Introduced |
HB3256 |
|
|---|
| 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 |
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 3256 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.
• The Authority’s current toll collection system does not support the technology to fully integrate credit cards without requiring additional steps by toll collectors 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, 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.
• 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 in accordance with House Bill 3256, 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, 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 3256 will result in an operationally inefficient and potentially dangerous solution to an issue it is attempting to address.
• In June of 2022, 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. This toll system upgrade is expected to be implemented in the first quarter of calendar year 2024. The Authority plans to evaluate the credit card processing feature using a closed testing environment at the toll plazas; and after such testing will be able to confirm and further evaluate the real world credit card processing rates.
• The toll system upgrades also include a planned license plate recognition camera system will allow for those who do not have an EZPass or cash to be sent a bill for payment of the tolls. This 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.
• In multiple appearances before the Joint Transportation Oversight Committee over the prior 12 months, the Executive Director of the Authority 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.
• 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 3256 obligates the Authority 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 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 3256, 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 3256 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 3256, 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