Over at Streetsblog, they’re talking Tappan Zee — wondering why Gov. Cuomo won’t release any new information about the financial plan for the multi-billion-dollar bridge (no, nobody knows how many billions, but probably more than six and less than twenty) until after asking contractors for proposals.

Noah Kazis asks:

[I]f the bridge were funded entirely by the drivers who cross it, a conservative financial analysis estimated that the one-way E-ZPass toll would have to rise from $4.75 to around $16 just to cover the cost of construction. In a more extreme but still plausible scenario, it would take $30 tolls to pay for the whole thing. Would Cuomo tolerate tolls that high?

If Cuomo won’t accept $16 tolls, where would the extra revenues come from? In a scenario where tolls double but don’t triple, there would still be a gap of at least $1.2 billion dollars.

These are good questions.

A preliminary “Financial Plan Development” document prepared by Merrill Lynch and Loop Capital for the state on November 24, 2009 is pretty clear that the money — at least, not all of it — won’t come from tolls.

In the 74-page paper, Merrill and Loop said:

Even a significant toll increase is unlikely to full fund the Project capital costs, and could pose potentially adverse traffic demand response. Toll increases require significant efforts to gain stakeholder support.

In order to attain an aggressive rate escalation scheme required for the Project, a new ownership and governance structure may be considered and would establish the bridge as a separate entity. Current bond resolution limits the application of toll revenues to [the existing Tappan Zee Bridge and to New York State Thruway Authority] facilities.

In other words, too-high tolls would send drivers elsewhere (or encourage them to go nowhere at all). Making the bridge its own legal entity apart from the rest of the Thruway, where it lives now, wouldn’t fix that problem. But it would (maybe) deflect criticism of the higher tolls from the governor and from the Thruway, and would also ensure that the vastly higher Tappan Zee revenue didn’t subsidize other bridges.

The Merrill / Loop analysts didn’t venture a suggested toll price. But they noted that competing bridges run by the Port Authority, at the time, had a top rate of $8. Today, it’s $12 and probably still rising — meaning that Kazis and Charles Komanoff aren’t far off.

The Merrill and Loop analysts also considered the idea of a “System-Wide Toll Rate Adjustment,” saying that higher tolls across the Thruway system “could provide substantial financing capacity … without major structural changes in ownership and governance.” Of course, then the question would be: would users of other bridges want to subsidize the TZB?

As for the idea of the private sector magically creating the money through a public-private partnership: the Merrill / Loop report notes that such a plan has some benefits. But it would involve “high procurement costs for [the] initial lease,” would offer “Limited upside potential to the State from project success.” It didn’t really matter, anyway, as it would involve so much debt that it might be hard for the private-sector borrowers to get a good borrowing rate, they said.

The conclusion of the paper? There really wasn’t one, except that it’s really, really hard to conjure money from nowhere.

Yes, the paper is two years old, and prepared pre-Cuomo. Yet not much has changed since then, and in the absence of new information, it’s all we’ve got.

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