FISCAL NOTE
Date Requested: February 20, 2025
Time Requested: 02:56 PM |
| Agency: |
Parkways Authority, WV |
|---|
| CBD Number: |
Version: |
Bill Number: |
Resolution Number: |
| 1142 |
Introduced |
HB2645 |
|
|---|
| 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 West Virginia Parkways Authority (the “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.
Fiscal Note Detail
| Effect of Proposal |
Fiscal Year |
2025
Increase/Decrease
(use"-") |
2026
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 concerns with the amendment contained within this Bill.
• On August 14, 2018, the Authority issued its $166,370,000.00 Senior Lien Turnpike Toll Revenue Bonds, Series 2018 (the “Series 2018 Bonds”) in connection with the Roads to Prosperity highway program.
• On June 23, 2021, the Authority issued its $333,630,000.00 Senior Lien Turnpike Toll Revenue Bonds, Series 2021 (the “Series 2021 Bonds”, and together with the Series 2018 Bonds, (the “Bonds”) in connection with the Roads to Prosperity highway program.
• Collectively, the issuance of the Bonds resulted in deposits of over $594 Million to the State Road Construction Account that financed the construction, maintenance, improvement and repair of certain parkway projects in southern West Virginia as part of Governor Justice’s Roads to Prosperity 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”), under which the Series 2018 Bonds and Series 2021 Bonds are issued, containing a number of contractual obligations 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. 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. These contractual obligations of the Authority for the benefit and protection of the holders of the Bonds are also very important to the rating agencies that rated the Bonds.
• 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, together with the current automatic Toll increases described below, were all approved and issued under existing State law, which vests sole legal authority to set tolls, rents, fees and other charges in the Authority, and the resulting independence of the Authority on such matters affecting new Turnpike toll revenues 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.
• The current Tolling Policy and Toll Rate Schedule approved by the Parkways Authority, which was properly noticed and adopted in accordance with existing State law, provided for automatic increases (primarily, to combat inflation) (i) with respect to the toll rates, an automatic increase of 1.60% per year (subject to rounding) and (ii) with respect to the Single Fee Discount Program, an automatic increase of 5.00% every three years, without further action of the Authority, as further described in the Tolling Policy and Toll Rate Schedule (collectively, the “Automatic Increases”). The Automatic Increases have become part of the Master Trust Indenture obligations undertaken by the Parkways Authority; are part of the official statements to prospective bond holders that accompanied both the Series 2018 and Series 2021 Bonds as well as part of the presentation to the rating agencies.
• House Bill 2645 proposes an amendment to subsection (a) of Section 17-16A-13 of Chapter 17, Article 16A of the WV Code, which amendment would require, among other things, certain non-discretionary procedures be strictly complied with by the West Virginia Parkways Authority before tolls, rents, fees or charges may be increased.
• Sections 511(a) and 511(c) of the Master Trust Indenture state as follows:
“(a) The Authority covenants and agrees that it has and shall maintain so long as any Bonds remain Outstanding and until all other obligations under this Indenture have been satisfied, the exclusive right and lawful power to establish, charge and collect Tolls, user fees and other charges for the use of the Turnpike. The Authority further covenants and agrees that it will take all reasonable measures permitted by law to enforce prompt payment to it of such Tolls, user fees and other charges when and as due.”
“(c) The Authority covenants and agrees that at no time will it subject its exclusive right to establish, charge and collect Tolls and other user fees and charges for the use of the Turnpike to the approval or consent of any other individual or entity, governmental or otherwise. None of the State or any other individual or entity, governmental or otherwise, shall have any rights or responsibilities pursuant to this Indenture.”
• The Authority does not believe that House Bill 2645, if enacted, would retroactively impact the Automatic Increases already approved and adopted by the Authority in accordance with State law. However, it is ambiguous as to whether those requirements and procedures would apply to the Automatic Increases already approved and incorporated into the current Tolling Policy and Toll Rate Schedule. To the extent that House Bill 2645 prevents such Automatic Increases (i) from being implemented in strict adherence to the existing Tolling Policy and Toll Rate Schedule (which could result in a reduction of tolls) and (ii) prior to obtaining a toll road consultant certification that the applicable toll rate covenant will be achieved, House Bill 2645 violates Section 512(g) of the Master Trust Indenture, which states “[t]he Authority shall not reduce tolls unless and until the Toll Road Consultant certifies that the Toll Rate Covenant will be achieved, after the application of such reduction, in the current Fiscal Year and all future Fiscal Years Bonds are then Outstanding.”
• In effect, passage and enactment of House Bill 2645 could 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.
• Passage of House Bill 2645 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 the Authority can appreciate the well-intentioned purposes of House Bill 2645, under the circumstances the Authority must oppose its passage for the foregoing reasons.
Person submitting Fiscal Note: Robin Shamblin
Email Address: rshamblin@wvturnpike.com