Toll-Treble Trouble

| City & State

New York State Thruway chairman Howard Milstein resigned in early December— but he left behind the bill. The Thruway hasn’t explained how it will pay for its signature project: the Tappan Zee Bridge replacement. Gov. Andrew Cuomo should resist the urge to pay for the New NY Bridge with the billions the state is getting from rogue financial firms.

Cuomo styles himself as a responsible progressive—a leader who believes in activist government but who doesn’t want government to break the bank. A key principle of 20th century progressivism was that big projects that can pay for themselves, should. That’s how Gov. Thomas Dewey set up the Thruway in 1950. After the state-highway project went way over budget—doubling from $200 to $400 million— Dewey determined “the only feasible method of building such a project … is the toll principle,” The New York Times reported.

Drivers would pay to build and maintain the road and its major bridges, leaving tax revenues to fund parts of government that don’t finance themselves. Plus, an independent Thruway protected the road from deterioration. The Thruway doesn’t need the governor’s permission to raise tolls. It can take this unpopular step to fund repairs and maintenance. In fact, the Thruway legally must raise tolls when necessary to pay bondholders.

Now this successful creature of progressivism is in peril. The Tappan Zee replacement project will cost $4 billion. To pay for the project properly, the $4.75 Tappan Zee car toll—and higher truck tolls— will have to double, and then some. This statement isn’t conjecture. The Thruway is issuing a bond in mid-December. Though this bond isn’t for the Tappan Zee replacement, the Thruway released some information about bridge financing ahead of the debt sale. Mostly because of the bridge, the Thruway’s annual debt costs are rising from $254.9 million this year to $445.5 million in 2018.

To put this increase in perspective: This extra $190.6 million annually is more than the $129.6 million that the Tappan Zee Bridge brings in each year from tolls. The Thruway thus could double tolls on the new bridge—and still not have enough. Indeed, the Thruway already projects in the bond documents that annual toll revenues on the entire highway will rise from $694.4 million this year to $991.8 million in 2018. The Thruway assumes similar toll hikes in its proposed budget for next year, notes E.J. McMahon of the Empire Center.

The Thruway won’t detail how it plans to hike tolls by nearly 43 percent, or $297 million, over three years. But the Tappan Zee generates 20 percent of Thruway toll revenues, meaning that if the Tappan Zee toll doesn’t increase significantly, tolls on the rest of the Thruway will have to rise to make up for it. Practically speaking, too, it will be hard for the Thruway to keep up with maintenance on the rest of its system if it hikes tolls on other highway stretches for the bridge.

The Thruway should announce a plan to increase Tappan Zee tolls by, say, $1 or $1.50 a year, starting, well, now. (Merry Christmas!) Such a plan would allow the Thruway to save money for future debt costs. It’s more prudent, too, to see how drivers react to a gradual toll increase than to risk sticker shock that causes them to flee.

There is only one problem: Cuomo doesn’t seem to want the Thruway to announce a toll-hike schedule on his watch. The governor may want to save himself a political headache by taking some of the $5.1 billion New York has amassed from bank fines for money laundering and other sins and put it toward the new bridge. Allocating this windfall to infrastructure is a good idea. And if we had $5.1 billion in statewide infrastructure needs and $5.1 billion in extra money, it would be okay to use some of the money for the bridge.

But the state has tens of billions in infrastructure needs. The MTA alone faces a $15 billion capital shortfall. Unlike the Tappan Zee, most of the state’s infrastructure has no chance of paying for itself. The bridge may not be able to pay for itself, but the responsible thing is to try—starting now.

© 2014 City and State