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Up until a few months ago, only a dozen New Jerseyans
knew who owned the New Jersey Turnpike, even fewer
cared. In the public’s mind the Turnpike meant just
two things: oppressive traffic and tolls that seemed
to increase every year. For most New Jerseyans the
turnpike, like
Mt. Everest, was always just there.
Let’s begin simply: the State doesn’t “own” the
Turnpike as most of us understand that word. The State
controls the corporation that was specifically created
to build finance and operate the roadway. The governor
appoints the board of directors (Commissioners) and
can stop any act the board is thinking about just by
vetoing the commission’s minutes. Toll revenues go to
the Turnpike authority, not to the state.
Second, turnpike debt isn’t state debt. All estimates
of state debt don’t include the hundreds of millions
of debt the turnpike has accumulated. The turnpike
handles its debt by applying its revenues. Not one
single dime of toll revenues belongs to the state.
When the state created the Turnpike Authority there
was a lot of doubt about the concept of toll roads.
The financial markets in
New York
wouldn’t finance this crazy idea and the US Department
of Highways was totally against toll roads. Just as
today,
Trenton
politicians didn’t want to be even twenty miles near a
failure; they created a clear separation between
government and the turnpike.
State government gave the NJ Turnpike Authority a
total monopoly on building a road from the
George Washington Bridge to the Delaware Memorial
Bridge. The authority was also charged with financing
the road, under the significant provision that
authority debt wasn’t state debt. It would have to be
financed from toll revenues. There wasn’t a lot more
direction in the original legislation and,
significantly, the authority wasn‘t given any other
duty – just finance, build and operate the road.
Nobody even specified what “the road” meant.
And that’s just what the authority – with a vengeance!
For the next half century – it built and built and
built; it borrowed and borrowed and borrowed and
became the worlds’ leading expert at leveraging toll
revenues to finance construction. The authority wound
up with a 12-lane, high speed, incredibly complex
system we call the Pike. Is there really any room for
further expansion? Perhaps, perhaps not. What’s all
this worth today? $10, $20, $30 billion – no one
knows, and your guess is as good as any expert’s.
Once
Trenton realized the turnpike was something it could
sell or lease and raise anything near this kind of
money, every politician saw economic Nirvana. With
that much cash in the till,
New Jersey
could spend whatever it wanted, hold public circuses,
give out loaves and fishes and not have to pay the tax
piper, not even once. $10, $20 or $30 billion sounds
like a lot? How quickly did the schools construction
corporation take to run through $8 billion? Five
seconds, five months? The windfall the state would
enjoy from leasing out the turnpike would run through
it like grease through a goose.
The plans for selling or leasing the turnpike, parkway
or anything else should be different; they should
represent zero-sum changes. Any value gotten out of
these assets should be immediately applied to
New Jersey’s
outstanding financial obligations to financial
markets. Do you think this is what’s going to happen?
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