Sources of Revenue:

General Fund,Other Fund Toll Road Revenues; WV Di

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

Effect this measure will have on costs and revenues of state government.

If the Turnpike tolls are eliminated after re-payment of the bonds in 2019, the State would lose in excess of $80 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 the taxpayers of West Virginia. See Memorandum below for additional impacts to state government.

Fiscal Note Detail

Effect of Proposal	Fiscal Year
Effect of Proposal	2014 Increase/Decrease (use"-")	2015 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):

Under Item 3, the insertion will state: See Memorandum below for information regarding the fiscal impact of this bill on the State of West Virginia.

Memorandum

The funding formulas contained in this bill will not come close to covering the costs of operations of the West Virginia Turnpike without the essential revenue stream derived from tolls. There is a proposal in the bill that also addresses the fate of the 400 current employees of the Parkways Authority. There is no assurance that the majority of them will actually be employed on a permanent basis in other state jobs. House Bill 4263 proposes to set up two separate Funds with toll revenues: 1) Parkways Authority Future Trust Fund (“FTF”): Consists of 25% of all toll revenue received from the date the bonds are paid off (May 15, 2019) until the Governor issues a proclamation that the bonds are paid in full and the Turnpike has been maintained at or above the WV Division of Highways (DOH) standards. Once the Governor issues the proclamation, the Auditor’s Office will disburse the entire balance to the Authority to provide for future operations. On July 1 of the calendar year beginning after the date the bond indebtedness is satisfied (or July 1, 2020), the DOH shall discontinue all toll facilities. 2) Turnpike Transition Fund (“TTF”): Administered by the DOH and consists of monetary assets of the Authority (in excess of $5 million) as well as 50% of all toll revenue received from the date the bonds are paid in full (May 15, 2019) until the date that tolling ceases (July 1, 2020). This Fund will also consist of unidentified revenues provided by the Legislature to assist in the transition to the DOH and the State Road Fund. Upon depletion of funds in the account, the subject roadways shall be supported by the State Road Fund or any other DOH funds available. By January 1, 2035, the Authority shall transfer all remaining assets to the DOH and these funds will be deposited into Transition Fund. The Parkways Authority has estimated that this means a one-time deposit of approximately $23.4 million is to be placed in the Future Trust Fund and made available to the Authority to operate the Turnpike in the future. To preserve and operate the Turnpike in its present condition, $59 million is the amount actually needed annually for paving, bridge painting and retrofit, routine maintenance (snow removal and ice control, mowing, patching & litter), non-routine maintenance, facilities improvements, equipment replacement/maintenance, culverts/drainage, and pavement striping/guardrail/signage – all attributes of a modern interstate system. The Parkways Authority estimates that the one-time deposit contemplated by this bill to the Transition Fund is estimated to total approximately $46.7 million (50% of toll revenues from May 15, 2019 to June 30, 2020). In addition, $22.7 million of monetary assets, primarily from bond reserve funds, in excess of $5 million, would be deposited into this Fund. This would bring the balance in this Fund to an estimated $69.4 million. The money in this Fund, along with monies from an already struggling State Road Fund, would be made available to maintain the “subject roadways” for 15 years until 2035. After which, the DOH will be required to maintain this $1 billion asset, consisting of 426 lane miles and 116 bridges, with no toll revenues! It should be noted that 76% (or $61.7 million annually) come from out-of-state and commercial vehicles. It is readily apparent that this Fund would be woefully short of the amount needed to maintain the West Virginia Turnpike. Additionally, the $59 million needed annually for the maintenance and upkeep of the Turnpike does not take into consideration such things as removing the toll plazas ($23 million), painting the Yeager and Bluestone southbound bridges (in excess of $25 million), and continuation of Tourist Information Centers on the Turnpike. Based upon the description of the two Funds, the following analysis estimates the amount that would be deposited into those Funds and compares the proposed funding with the actual costs required for operation and maintenance of the Turnpike: STEP #1 Estimated Toll Revenues and Operating Costs (in millions) from May 15, 2019 – June 30, 2020 (13.5 months) Toll Revenues: Toll Collected $ 93.5 25% Deposit into the FTF < 23.4 > 50% Deposit into the TTF < 46.7 > Net Toll Revenues Available to Operate the Turnpike in this Period 23.4 Less Operating Costs: Toll Collection < 13.7 > Maintenance < 19.4 > State Police/Communications < 4.2 > Admin/TIC/Non-Depart. < 5.3 > Renewal & Replacement < 12.4 > Paving Contracts, Bridge Decks/Renovation < 28.4 > Total Operating Costs < 83.4 > Operating Deficit: $< 60.0 > STEP #2 Beginning July 1, 2020, the Turnpike Transition Fund will be set up with the following monies (in millions) less $5 million per House Bill 4263: Monetary Assets: Debt Reserve $ 10.8 R&R Reserve $ 9.4 O&M Reserve $ 4.8 Facility Improve. $ 1.7 Insur. Liab. $ 1.0 Total: $ 27.7 Less < 5.0 > Fund Total: $ 22.7 Adding the $22.7 million from the Monetary Assets to the $46.7 million in TTF from Step #1 (50% of toll revenue for the 13.5 month period) brings the total of this Fund to $69.4 million. STEP #3 July 1, 2020 would begin with the following deficit from the May 15, 2019 through June 30, 2020 period: Operating Deficit: $< 60.0 > Use FTF (Step #1): 23.4 Use $5 million (Step #2): 5.0 Revenues from TTF (Step #2): 69.4 Total Remaining Funds in the TTF For the Year Beginning July 1, 2020: $ 37.8 Less Costs for: Removing toll plazas: $23.0 Annual Highway and Bridge Maintenance and Operations: $59.0 < 82.0 > Total Deficit as of (First Fiscal Year Without Toll Revenues) June 30, 2021 - $ < 44.2 > The second fiscal year without tolls will start with this $44.2 million deficit and with another $59.0 million (or $30.4 million if using PERD estimates) added for annual highway and bridge maintenance and operations, the WV Division of Highways will be faced with a deficit ranging from $74.6 up to $103.2 million and both the Future Trust Fund and the Turnpike Transition Fund will have already been depleted by the beginning of FY 2022, 13 years earlier than HB4263 anticipates. The amount of funding in both accounts is not sufficient to maintain the portion of interstate highway that is the West Virginia Turnpike – one of the most highly traveled and challenging stretches of highway in the State of West Virginia. HB4263 anticipates that the West Virginia Turnpike can be maintained on as little as $6-7 million per year. The Parkways Authority currently spends, per year, approximately $1.7 million for roadway salt, $22.0 million for paving and $7.2 million for mill and inlay projects. If limited to spending only $6-7 million annually, no paving and bridge work could be performed on the Turnpike and barely enough funds would be available for snow removal and ice control, mowing and routine maintenance. House Bill 4263 states that “all the Parkways Authority employees dedicated to highway maintenance and upkeep shall be transferred to employment with the WVDOH.” There are 145 employees in the Maintenance Department and with salaries and benefits this would be an additional cost to state taxpayers in excess of $7 million. There is no mention in the bill of how DOH is expected to pay for this additional cost. 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 bill also states that “all employees of the Parkways Authority dedicated to toll collection and toll collection operations shall remain employees of the Parkways Authority until the cessation of tolling.” There are 160 employees (full and part-time) in the Toll Department at an annual cost in excess of $8 million for salaries and benefits. The majority of these employees live in southern West Virginia - and the majority of state government jobs are in Charleston. In fact, the bill says the Commissioner of DOH and the Director of the Division of Personnel will “provide for the evaluation of the skills, education, experience and qualifications” of the full-time employees of the Parkways Authority and they may be “laid off” within six months of the cessation of tolling and placed on an “appropriate reemployment list”. This bill does not take into consideration 55 other jobs for tourist information center counselors, administration, customer service center/accounting, or radio operators. This bill provides for partial funding by the DOH up to $2 million for the 31 State Police officers and their equipment that is currently paid for with toll revenues. This bill does not identify how the DOH would fund this additional cost. 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, and several State Police personnel on the Turnpike could be lost if the Legislature does not appropriate the full $2.7 million in personnel and operational costs currently paid for by the Parkways Authority. PERD also noted that the estimated cost to dismantle toll booths and reconstruct the toll plaza entrances is $23 million. The State would likely have to address whether or not it will continue subsidizing Tamarack the current $1 million per year and the Courtesy Patrol fund could incur additional costs of $420,000 to provide courtesy patrol along the Turnpike, according to the DOH estimates. There is no Federal or State law that requires the Federal Interstate Maintenance monies to be spent on any particular mile of interstate. Congress has chosen a formula based system as a method of dividing up funding between all of the states that have interstates across the country. Interstate miles are part of the formula but not the only factor considered. Federal Highway officials have reported that almost all states do not share any of the Federal Interstate Maintenance funds with toll roads with the only exception being Delaware. Over $650 million dollars of Federal money was spent on the upgrade of the WV Turnpike to interstate standards in the 1970’s and 80’s. In their review of the Parkways Authority, PERD was informed by the Federal Highway Administration that the Turnpike miles are already a part of the apportionment formula for Federal-Aid Highway funding; therefore no additional federal highway funds would be apportioned to the State if the Turnpike becomes a toll-free road. The construction and presence of the West Virginia Turnpike has already significantly enhanced economic development and tourism in southern West Virginia. The West Virginia Turnpike, a $1 billion asset, opened up southern West Virginia to economic development and tourism. Significant development has occurred around the Turnpike (businesses, restaurants, hotels, gas stations, etc.) at Exit 9 Princeton, Exit 44 Harper Road, and Exit 28, Ghent area. The many employees of the Parkways Authority between Charleston and Princeton, the employees at Tamarack, HMS Host (food concessions at the travel plazas) and Petroleum Marketers (gasoline concessions at the travel plazas) live, work and spend their paychecks in the counties in and around the Turnpike. In addition, all of the equipment, materials and supplies purchased from West Virginia companies, as well as highway repairs performed by West Virginia contractors, provide great benefits to the economy of West Virginia. The Turnpike provides citizens with a safe, secure, efficient transportation system including excellent snow removal and ice control operations. The Authority offers discounts up to 90% savings for the high frequency user of the Turnpike and all of this is paid for by over 76% out-of-state users of the Turnpike. In their report, PERD made the Legislature aware that under new federal regulations, if it is decided to continue the tolls on the Turnpike, the State could use excess toll revenues on other state roads for federal Title-23-eligible road work. WV Secretary of Transportation Paul Mattox has said in the past that West Virginia needs an additional $400 million a year just to preserve the roads and bridges in the condition they are in today and every year in which the DOH is not provided with the extra $400 million in funding, the State of West Virginia is losing ground. Tolls are a “user fee”(not a tax) that provide the funds for maintenance, operations and capital repairs and free up tax dollars to be used by the WVDOH for all of the other highways and bridges in West Virginia. There are no “free roads” – only toll roads and non-toll roads. There is a cost to construct, maintain and operate all roads. The key question is who pays? On a toll facility, only those choosing to use the facility and pay the toll benefit from the convenience, safety and higher level of services. A road is like a house. After it’s built, you have to maintain it to extend its life. No funds from the State Road Fund are used in any way to pay for or maintain the West Virginia Turnpike. As a result, no driver that uses the Turnpike is paying for anything twice. In fact, without tolls, taxes would have to be higher. A toll is merely a means to an end – better transportation for everyone.

Person submitting Fiscal Note: Gregory C. Barr, General Manager
Email Address: gbarr@wvturnpike.com