FISCAL NOTE

Date Requested: January 21, 2020
Time Requested: 04:12 PM
Agency: Parkways Authority, WV
CBD Number: Version: Bill Number: Resolution Number:
1449 Introduced HB4083
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 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. Please also see the Memorandum section of this Fiscal Note, below, which notes that this bill would cause operational problems and inefficiencies and safety concerns for the Parkways Authority and the Turnpike, involve significant costs, and raise significant legal and constitutional issues and concerns, as discussed further below.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2020
Increase/Decrease
(use"-")
2021
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 operational, safety, and legal concerns with the amendment contained within this Bill. Legal Concerns Under WV Code Section 17-16A-13a Governing Toll and Fee Increases • This statute raises significant issues with WV Code 17-16A-13a, which was part of the Authority’s enabling statute when it issued its $166,370,000 Senior Lien Turnpike Toll Revenue Bonds, Series 2018 as part of the Roads to Prosperity highway program in August 2018. • WV Code 17-16A-13a thus constituted part of the legal arrangements with bondholders who purchased the Bonds at the time they were issued and sold. (Please note that there are other pertinent legal requirements and legal issues implicated by this bill that are discussed further, below.) • WV Code 17-16A-13a is the normal WV Code section that applies when tolls or fees are increased on the Turnpike and it requires notice ahead of time by publication, public meetings in every county that the Turnpike traverses, and a public comment period during and after public meetings. Mandating a fee or toll increase without running through the statutory process would violate this provision of the WV Code. Operational and Safety Concerns and Related Inefficiencies • The Authority’s Toll Consultants (HNTB Corporation) are in the midst of a toll system upgrade study for the Turnpike. • The Toll Consultants and the vendor for the Turnpike’s toll collection system (Transcore) have reviewed the bill and advised that it would not be feasible to replace and/or retool existing hardware and software to provide fully automated debit/credit card “swiping” transactions at some or all Turnpike toll booths within the 18 months prescribed by the bill. • They also have advised that trying to set up a “manual” credit/debit card payment system at the toll plazas, similar to how a merchant takes debit/credit card payment, would entail significant expense and require installation of new hardware, communications lines, software, etc., and would entail security risks not present with the present toll collection system which involves cash and E-ZPass transactions. • They further have advised that such a payment system would pose significant operational and safety concerns, and related inefficiencies. Examples include, without limitation: (A) it would, in their judgment, frequently take longer to process such payments than it now takes to process cash transactions; (B) consequently, such a system likely would involve significantly greater delays, and resulting longer lines, at toll plazas compared to the present system of cash and E-ZPass toll payments; and (C) this, in turn, would pose greater safety risks to the driving public on the Turnpike, both from potential driver confusion as to how to pay and/or which lanes to use, and from likely longer lines. • Other inefficiencies and operational problems from this approach likely would include training issues and security concerns, as well as significant risk of wasted investment in such a system if toll system upgrades (being studied now by the Toll Consultants) would not utilize such an approach in the future, i.e., would replace it, because it would not be the best overall approach to follow based on available technologies and cost and efficiency considerations. Legal Concerns Relating to Potential Violations of Legal Obligations to and Covenants with Bondholders • On August 14, 2018, the West Virginia Parkways Authority (the “Authority”) issued its $166,370,000 Senior Lien Turnpike Toll Revenue Bonds, Series 2018 (the “Bonds”) in connection with the Roads to Prosperity highway 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”), containing a number of contractual obligations and covenants 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. However, these covenants are not the only ones pertinent to this bill. • Other related contractual obligations specifically require the Authority to operate the Turnpike at all times in an efficient manner and to keep it in good repair and working order at all times. • Related covenants deal with retaining and following the recommendations of professional experts, including a Consulting Engineer, for example, in meeting these legal requirements. • As noted above, H.B. 4083 raises significant issues as to Turnpike operations, inefficiencies and waste, and safety concerns. • These contractual obligations of the Authority for the benefit and protection of the holders of the Bonds and are consequently important to bondholders. They are also very important to the rating agencies that rated the Bonds and would rate any future Turnpike toll revenue bonds of the Authority. • 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 future borrowing costs and reduce its future bonding capacity, potentially by millions of dollars. • The Bonds were approved and issued under existing West Virginia law, which vests sole legal authority to set tolls, rents, fees and other charges in the Authority. The resulting independence of the Authority, especially on matters affecting net Turnpike toll revenues and the efficient and safe operation of the Turnpike, is an issue of significant importance to rating agencies and holders of the Bonds. This issue likewise is the focus of some of the contractual obligations for the benefit and protection of the holders of the Bonds. • As noted above, H.B. 4083 would put the Authority in the untenable position of having to choose between (i) violating State law or (ii) violating its contractual obligations to the holders of the Bonds. Legal Concerns as to Violations of the U.S. and State Constitutions (No-Impairment-of-Contract Provisions) • Passage of H.B. 4083 thus 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 4083, 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