Sources of Revenue:

General Fund,Other Fund Tolls; IMB funds

Legislation creates:

Neither Program nor Fund

Fiscal Note Summary

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

This bill would not only affect the missions and functions of the West Virginia Parkways Authority, but also, have a profound effect upon all the assets and funds of the Authority and upon the obligations of the State of West Virginia. At present, 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. The West Virginia Legislature’s Performance Evaluation and Research Division (PERD) completed an agency review of the Parkways Authority in January 2014. They concluded that the cost to the State to operate the Turnpike as a toll-free road at the same level of maintenance as its other interstates is an estimated $30.4 million per year. PERD used a methodology not based on how much will be needed as determined by the Authority, but rather at a cost derived from what DOH has indicated their costs are for the interstates they maintain. The Authority has concluded that it will cost $59 million per year based upon engineering analysis which reflects proactive and needs-based maintenance in order to maximize full life-cycle benefits of the highway and bridge assets. This proactive approach obviously saves money in the long term due to extending the life of bridges and road surfaces rather than having to replace them before the end of their life-cycle. The $30.4 million cost identified by the DOH is based more on reactive and “funds availability” criteria. In addition, PERD stated that 231 people could be laid off from the Parkways Authority, the direct loss of income to the local economy would be over $9 million, and 31 State Police personnel on the Turnpike could be lost if the Legislature does not appropriate the $2.7 million in personnel and operational costs currently paid for the Turnpike State Police detachment by the Parkways Authority. The cost to dismantle toll booths and reconstruct the toll plaza entrances is an estimated $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 DOH estimates. 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. In their report, PERD stated that the Legislature needs to be aware that under new federal regulations, if it is decided to continue tolls on the Turnpike, the State could, within certain parameters, use excess toll revenues on other state roads.

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):

See Memorandum below for information regarding the fiscal impact of this bill on the State of West Virginia.

Memorandum

Based on conversations with Parkways General Counsel and Parkways Bond Counsel, House Bill 4187 presents a number of significant legal issues and flaws in drafting including some which involve the constitutionality of certain provisions of the proposed legislation. Important points to note that are special issues not captured elsewhere in this Fiscal Note are as follows: 1. The provisions of HB4187 prohibit the Parkways Authority and the Secretary of Transportation from issuing any refunding or other types of bonds; and 2. Neither the Parkways Authority, under its enabling legislation nor the Secretary of Transportation under West Virginia Code 5F-2-2 have any clearly enumerated authority to borrow funds other than those which are generated by the issuance of bonds; and 3. Should the Investment Management Board determine to provide funds in accordance with the directives in HB4187, and all parkways bonds are paid off or defeased as a result, tolls are then mandated to be removed in 2014 at that point pursuant to West Virginia Code 17-16A-18; and 4. Should that occur, there will be no funds from tolls and accordingly no funds to repay any loan or bond, since neither the Parkways Authority nor the Secretary may “borrow” funds from any other source to pay them, and neither the Parkways Authority nor the Secretary can incur indebtedness to the Investment Management Board directly; and 5. The Secretary of Transportation does not have any independent bonding authority under West Virginia Code 5F-2-2 and will not acquire it by assuming the responsibility, obligations and assets of the Parkways Authority as indicated by House Bill 4187; and 6. It is difficult to identify how House Bill 4187 is intended to permit or authorize what the Bill claims it is designed to accomplish; and 7. If the tolls are removed and the Parkways Authority and the Secretary remain without authority to obtain funding other than by the issuance of bonds, unless the legislature allocates additional funds, there will be no clear source of repayment to the Investment Management Board for its investment. Even if the legislature does allocate funds initially, unless there is an assured source of repayment to the Investment Management Board, there will in all likelihood be an adverse impact on the value (rating) of the credit owned by the Investment Management Board. If Turnpike tolls are terminated, the DOH would immediately be faced with maintaining and fully funding one of the most heavily used (and most costly to maintain) sections of interstate in West Virginia. Turnpike tolls not only provide funds paid directly by the roadway users to maintain the Turnpike, but in the process free up scarce state transportation dollars to maintain other roads and bridges in West Virginia. The Interstate system, authorized in 1956, is approaching the end of its useful life and is in need of massive rehabilitation and rebuilding. Other than diminishing federal funding, the State Road Fund would likely be the only source of revenue available to the DOH to provide funding primarily from gas tax revenues. Gas tax revenue is currently stagnant and in danger of dwindling even further as people drive less and use more fuel-efficient cars. In terms of buying power, the same dollars in the State Road Fund now buy 30% less than they did in 1998. Meanwhile, federal funds are also dwindling. The DOH and the Federal Highway Administration have said that removing tolls from the West Virginia Turnpike will not generate any additional federal dollars apportioned to the State of West Virginia. The Turnpike bonds are due to be paid off in May 2019. The Turnpike is operated and maintained by the Parkways Authority with Turnpike toll revenues paid by the users of the highway. 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. If the Turnpike tolls were eliminated after re-payment of the bonds in 2019 (or in 2014 if paid with IMB funds as proposed by HB4187), 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 by the Parkways Authority to operate and maintain the 426 lane miles of interstate highway, 116 bridges, three travel plazas and one welcome center (Princeton, WV). Most of the annual Turnpike toll revenue comes 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. If no additional revenues are identified to pay for the millions needed annually to maintain the West Virginia Turnpike, other roads and bridges in the State of West Virginia will have that much less funding available for maintenance which could negatively affect every county throughout the State. 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 DOH is not provided with the extra $400 million in funding, the State of West Virginia is losing ground. No matter who maintains the Turnpike, after 2019 the major focus over the next 30 years will be the 116 bridges which will require a significant investment of funds. The typical service life for a bridge is 40 to 60 years. Currently, the average bridge deck age is 31 years and 76% of the bridges are over 30 years old. By the year 2020, the average bridge deck age will be 38 years, 23% of the bridges will exceed their expected deck life of 40 years and 94% of the bridges will be over 35 years old. At the end of the 30-year planning period, if no decks are replaced, 81% of the Turnpike bridge decks will be over 60 years old. To date, the Parkways Authority has been able to keep its bridge decks in relatively good condition because of its focus on a comprehensive bridge maintenance program and a commitment to preservation type activities. Over the next 30 years, it is estimated that 80% of the Turnpike’s bridge decks will need to be replaced. The WV Turnpike, a $1 billion asset, consists of the following: Roadway • 88 Linear miles of roadway • 426 lane miles of roadway • 116 bridges • 1,711,900 square feet of bridge deck • 99.6 miles of guardrail • 6,248 culverts • 4,070 signs • 900 roadway lights • 80 lighted signs • 595 acres of mowing • 59 impact attenuators Facilities • 8 maintenance facilities (roadway, toll, heavy equipment, fleet and facilities maintenance) • 3 travel plazas • 1 welcome center • 2 rest areas • 4 toll barriers • 4 toll offices • 600 site lights • 20 security systems • 2 water treatment facilities • 2 sewage treatment facilities • 5 roadway weather information stations • 3 radio towers • 5 salt storage buildings • 4 equipment maintenance garages • 1 headquarters administration building • 3 state police offices It is important to note that in 2009 new discount programs were implemented by the Authority to help reduce the cost to drivers who travel along the Turnpike. Frequent users of the Turnpike, such as daily commuters driving to and from work, school, church, etc., can enroll in an E-ZPass plan that costs $95/year, per plaza (or $25/quarter, per plaza) for unlimited travel. This plan provides up to a 90% savings in toll rates for the high frequency user. In 2009, a new discount program for the less frequent Turnpike traveler was also implemented. Customers who drive the Turnpike only occasionally can sign up for a WV E-ZPass® at a cost of $5.00 per year and then pre-pay funds via credit card into their account ($20.00 minimum account balance). This plan provides customers of the WV Turnpike a 35% savings on their toll rate (the toll rate for a car is reduced from a $2.00 cash rate to an E-ZPass discount rate of $1.30 per plaza). The toll is automatically deducted from the pre-paid account as they drive through the toll plazas. The tolls paid by WV E-ZPass are eligible for deduction from WV income for tax purposes. The WV E-ZPass is available to anyone, regardless of state or country of residence.

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