Date Requested: February 03, 2015
Time Requested: 01:48 PM
Agency: WV PARKWAYS AUTHORITY
CBD Number: Version: Bill Number: Resolution Number:
1657 INTRODUCED HB2526
CBD Subject: Roads and Transportation


FUND(S):

Toll Road Revenues; WV Division of Highways (DOH)

Sources of Revenue:

Other Fund Toll Road Revenues; DOH

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 $85 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
2015
Increase/Decrease
(use"-")
2016
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. If $85 million per year in tolls are eliminated, this would reduce future revenues from tolls over the next 30 years by over $2.5 billion, of which over $1.9 billion comes from out-of-state users of the Turnpike.



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.
    
    The proposal in the bill that addresses the fate of the 400 current employees of the Parkways Authority provides no assurance that they will actually be employed on a permanent basis in other state jobs.
    
    House Bill 2526 proposes to set up two separate Funds with toll revenues:
    
    1) Parkways Authority Future Trust Fund (“FTF”): Consists of 50% of all toll revenue received from the date the bonds are paid off (May 15, 2019) until the date of cessation of tolls on July 1, 2020. Once the tolls cease, the Auditor’s Office will disburse the entire balance to the WV Division of Highways Turnpike Transition Fund (“TTF”). Balances in the fund shall not be expended and at the end of any fiscal year shall not expire, but shall be retained for the Parkways Authority until tolling ceases.
    
    2) Turnpike Transition Fund (“TTF”): Administered by the DOH and consists of all monetary assets of the Authority 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. All obligations and responsibilities of the Parkways Authority for any part or portion of the West Virginia Turnpike shall cease on June 30, 2020.
    
    The Parkways Authority has estimated that this means a one-time deposit of approximately $48.3 million is to be placed in the Future Trust Fund and made available to the DOH to operate the Turnpike in the future. To preserve and operate the Turnpike in its present condition, $63 million (see further explanation in the following paragraph) is the amount actually needed annually for paving, bridge painting and retrofit, bridge deck replacement, routine maintenance (snow removal and ice control, mowing, patching & litter), non-routine maintenance, facilities improvements, equipment replacement, culverts/drainage, and pavement striping/guardrail/signage – all attributes of a modern interstate system.
    
    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 $63 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. It is important to note that the PERD estimated annual costs did not include funding for the 30 Year Bridge Deck Replacement Program that will need to begin in 2019 at a cost of $22 million per year to replace 80% of the bridge decks due to asset lives exceeding 40 years.
    
    
    The Parkways Authority estimates that the one-time deposit contemplated by this bill to the Transition Fund is estimated to total approximately $48.3 million (50% of toll revenues from May 15, 2019 to June 30, 2020). In addition, $29 million of monetary assets, primarily from bond reserve funds, would be deposited into this Fund. This would bring the balance in this Fund to an estimated $77.3 million. The money in this Fund, along with monies from an already struggling State Road Fund, would be made available to maintain the West Virginia Turnpike for 15 years until January 1, 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 $64.6 million annually) come from out-of-state vehicles. It is readily apparent that this Fund would be woefully short of the amount needed to maintain the West Virginia Turnpike. Additionally, the $63 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 bridges ($50 million), and continuation of Tourist Information Centers on the Turnpike.
    
    Based upon the description of the two Funds, the following is an estimate of the amount that would be deposited into those Funds and comparing 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: (for 13.5 months)
    
    Toll Collected 96.6
    50% Deposit into the FTF < 48.3 >
    50% Deposit into the TTF < 48.3 >
    
    Gross Toll Revenues Available to the DOH to
    Operate the Turnpike in this Period 48.3
    
    Less Operating Costs: (for 13.5 months)
    
    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: $< 35.1>
    
    STEP #2
    
    Beginning July 1, 2020, the Turnpike Transition Fund will be set up with the following monies (in millions) per House Bill 2526:
    
    
    Monetary Assets:
    
     Debt Reserve $ 10.8
     R&R Reserve $ 10.6
     O&M Reserve $ 4.7
     Facility Improve. $ 1.9
     Insur. Liab. $ 1.0
     Fund Total: $ 29.0
    
    Adding the $29 million from the Monetary Assets to the $48.3 million in TTF from Step #1 (50% of toll revenue for the 13.5 month period) brings the total of this Fund to $77.3 million.
    
    STEP #3
    
    July 1, 2020 would begin with the following deficit from the May 15, 2019 through June 30, 2020 period:
    
    Operating Deficit: $<35.1 >
    Monies from TTF (Step #2) $ 77.3
    
    Total Remaining Funds in the TTF
    For the Year Beginning July 1, 2020: $ 42.2
    
    Less Costs for:
    
     Removing toll plazas: $23.0
     Annual Highway and Bridge
     Maintenance and Operations: $63.0
     < 86.0 >
    
    Total Deficit as of (First Fiscal Year
     Without Toll Revenues)
     June 30, 2021 - $< 43.8 >
    
    
    
    The second fiscal year without tolls will start with this $43.8 million deficit and with another $63.0 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 $74.2 up to $106.8 million and both the Future Trust Fund and the Turnpike Transition Funds will have already been depleted by June 30, 2021.
    
    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. HB2526 anticipates that the West Virginia Turnpike can be maintained for as little as $6-7 million per year. For example, 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, not even taking into consideration the cost of maintaining the other assets. 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 2526 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 the Division of Highways and the Director of the Division of Personnel shall jointly propose rules to provide for the evaluation, transition, termination, and reemployment of Authority and Division of Highways employees during the transition and to otherwise carry out the purposes of this article as they relate to personnel matters.
    
    In addition to the 160 toll employees, there are another 55 jobs for tourist information center counselors, administration, customer service center/accounting, and radio operators that will need to be taken into consideration. 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 the 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 44 Harper Road, Exit 9, Princeton and Exit 28, Ghent area. The many employees of the Parkways Authority, Tamarack, HMS Host (food concessions) and Petroleum Marketers (gasoline concessions) 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 $750 million a year just to preserve and improve the State’s existing roads, bridges and highways and every year in which the DOH is not provided with the extra $750 million in funding, the State of West Virginia is losing ground. Also, an additional $380 million a year is needed to fund key construction or expansion projects over the next 20-25 years.
    
    Tolls are a “user fee” 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.
    
    Since toll roads are primarily self-financed by user fees and do not rely on taxes, the customer is not paying twice for the facility. 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