FISCAL NOTE

Date Requested: February 10, 2021
Time Requested: 04:40 PM
Agency: Parkways Authority, WV
CBD Number: Version: Bill Number: Resolution Number:
1258 Introduced HB2203
CBD Subject:


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. Cessation of tolls, as provided in House Bill 2203, would reduce State revenues in excess of $155 million annually This revenue is used to operate and maintain the 426 lane miles of interstate highway, 116 bridges, three travel plazas and one welcome center (Princeton). Most 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
2021
Increase/Decrease
(use"-")
2022
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. Estimated Total Revenue Loss - Fiscal Year - $155,000,000 See Memorandum below for information regarding the fiscal impact of this bill on the State of West Virginia. If $155 million per year in tolls are eliminated, this would reduce future revenues from tolls over the next 30 years by over $7.1 billion, of which over $5.4 billion comes from out-of-state users of the Turnpike.



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 addresses each of the significant issues contained within this bill: Cessation of Tolls on the West Virginia Turnpike – This bill proposes to discontinue tolling on the West Virginia Turnpike on July 1, 2021 and eliminate the ability of the Parkways Authority to implement any future tolls. Agency Response - If the Turnpike tolls are eliminated as proposed on July 1, 2021, the State would lose in excess of $155 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 WVDOH sources of revenue. If $155 million per year in tolls are eliminated, this would reduce future revenues from tolls over the next 30 years by over $7.1 billion, of which over $5.4 billion comes from out-of-state users of the Turnpike. In addition to losing the $155 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 Turnpike related jobs. As a part of Roads to Prosperity Program, in 2018 the Parkways Authority issued $166.37 million in bonds to fund road projects in 10 counties surrounding the Turnpike including Greenbrier, Monroe, Summers, McDowell, Nicholas and Wyoming plus the four counties of the Turnpike, Kanawha, Fayette, Raleigh and Mercer. This bill does not address the payment of the remaining portion of this debt. If not paid, in the absence of the Parkways Authority’s ability to pay. the Trustee has certain rights upon default on the bonds for non-payment. The bill would also effectively prohibit the Authority from issuing any additional bonds in support of the Roads to Prosperity Program for these counties. The Parkways Authority receives no funding from the State of West Virginia or from the Federal Government for 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. Each year, the West Virginia Department of Transportation (“WVDOT”) applies for and receives funds for the maintenance and upkeep of its interstate highway system. The WVDOT 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 WVDOT 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 WVDOT from FHWA. The West Virginia Blue Ribbon Commission on Highways in its May 2015 report concluded that West Virginia needs an additional $750 million a year simply to preserve and improve its other roads and bridges. Another $380 million a year is needed to provide for needed expansion of the existing system. It appears from the report that the annual shortfall with which the WVDOH is currently contending exceeds $1.13 billion. Of the 116 bridges on the West Virginia 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 2022, 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 West Virginia Division of Highways. In 2013, the West Virginia 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 included 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. PERD used a methodology not based on how much will be needed as determined by the Parkways Authority, but rather on a cost derived from what the WVDOH has indicated its costs are for the interstates it currently maintains. At the time of the report, the Authority concluded that it will cost $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 rather than having to replace them before the end of their life-cycle. The $30 million cost identified by PERD and the WVDOH is based more on a “funds available” criteria. Based on the current report and the shortfall in funding, the WVDOH would only have available to it approximately one-half (½) 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 West Virginia Turnpike and its $90 million per year costs. The future of Travel Plaza operations (currently operated by fuel and restaurant concessionaires) at the three (3) Service Plazas that generate significant non-toll revenue is currently undecided and the loss of those Travel Plazas would be a significant reduction in private sector jobs and in the level of services provided by the West Virginia 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 $2.0 million and other post-employment benefits (OPEB) such as healthcare are calculated to be in the range of $8.5 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. There are approximately 360 full and part-time Parkways Authority employees who receive state benefits and a 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 out 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. New Parkways Projects – Regarding section §17-16A-13, This bill reverses the exception of the West Virginia Turnpike from the requirement that tolls may only be charged over an existing roadway with express legislative approval. The 2017 amendment provided, “Provided, however, that an existing road does not include the West Virginia Turnpike…” Accordingly, no bonds may be issued or 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. 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 2021 Budgeted Highway Operations), $34.2 million will go to operating expenses that include maintenance, toll collection and customer service; $4.7 million will repay the State Police for the operation of Troop 7 and its radio operation center on the West Virginia Turnpike); $7.9 million will go toward administration, tourist information center operations, insurance, professional engineering and other non-specific departmental expenses; $10.3 million for debt service on bonds; and, $56.3 million will be allocated to capital expenditures for roadway, bridges and facilities IN SUMMARY, 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 $155 million annually in toll revenues, 76% of which come from out-of-state passenger and out-of-state commercial vehicles. If $155 million per year in tolls are eliminated, this would reduce future revenues from tolls over the next 30 years by over $7.1 billion, of which over $5.4 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 unfunded, unquantified and loosely estimated costs, to maintain the West Virginia Turnpike if this bill were to pass. In addition, if tolls are eliminated from the West Virginia Turnpike, the State of West Virginia will have lost an important independent bonding authority that can issue bonds for various authorized purposes that do not represent obligations of the State of West Virginia (and do not require balloting for approval). It should be noted that the existing Turnpike bonds are the direct and general obligations only of the West Virginia Parkways Authority and payable solely from toll revenues; none of the bond debt is the debt of the State of West Virginia.



    Person submitting Fiscal Note: Robin Shamblin
    Email Address: Rshamblin@wvturnpike.com