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This is like a statement by Ripley, Believe it or not
. . . as it stands, the Turnpike has little or no
monetary value: tolls are too low, operating costs are
uncontrolled and the covenants in the current Turnpike
bonds restrict the use of toll revenue so that little
or no “profit” would be available to a new owner or
operator. Who would bid on an operation virtually
guaranteed not to yield a profit?
That’s why we have the huge toll increases proposed by
the governor’s office. They are designed to create the
asset value to be monetized, to make it worth
something so that someone might buy it or, even more
important, so that New Jersey can borrow a whole lot
against future revenues.
Why are the proposed toll increases so high? They have
to make the operation profitable and establish a
significant asset value for the Turnpike. Why: Without
the huge toll increases the Turnpike is worthless on
the open market. Without the huge toll increases, no
one will lend money to any successor to the authority.
The size of the proposed transaction is stunning even
for New Jersey. The estimated amount of Public Benefit
Corporation bonds that the markets is supposed to
absorb runs from $32.6 to $37.6 billion. As of July 1,
2008, state bonded debt was $31.3 billion. After this
transaction, state bonded debt is estimated to will
fall within the range of $11.3 to $15.3 billion. The
single largest element is the pay-off of $7 to $12
billion in general fund supported debt.
But the Public Benefit Corporation will do more. The
creation of the Public Benefit Corporation ensures a
buyer/operator who will accept operating costs as they
are, not push to challenge union rules, reduce staff,
etc. The Public Benefit Corporation will accept all
these to ensure a buy-in by unions, construction
companies, etc.
The governor’s comments on contract bonds should be
welcomed and applauded, but one of the key elements in
this proposal is the issuance of around $35 billion in
new/replacement debt to be paid by an instrumentality
of the state by motorists who will not be asked to
vote on it.
Once state bonded debt is halved, there are no
guarantees that it will not return to its current
level or higher. There are always good purposes for
public debt and there are always politicians willing
to buy now and pay later. Our state Supreme Court,
once well respected across the nation, was willing to
ignore the Constitution’s Debt Limitation clause to
achieve its goal in school financing. What will stop
this inferior Supreme Court from doing this to us
again?
Let’s not forget that the increased tolls may create a
costly barrier to entry to New Jersey. It won’t be
just tourists and passers-thru who will pay. You will,
whether you ever go on the Turnpike or not.
New Jersey
has a huge and important goods distribution industry.
It was one of the few businesses to grow in the recent
past; this will kill it. You can actually see this
industry if you ride up the Turnpike – all those new
industrial parks and distribution centers right off
each exit. One of the ways to look at the new tolls is
as a tax on entry into each of those industrial parks.
Who cares? You do!
Businesses will simply stop building those exit-parks
in New Jersey. With the new tolls, there will be even
better places to locate in Pennsylvania, Delaware . .
. wherever. While there’s a lot to the oft repeated
“Location, Location, Location,” it doesn’t mean
location at any price. Each action
New Jersey
takes to make it more expensive to enter or exit the
high-paying, environmentally clean offices and
distribution centers. These huge toll increases will
reduce our location advantage. If you observe long
enough, you’ll see private investment job growth occur
elsewhere.
Have we heard this story before? |
