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Bishop: For Whom the Bill Tolls

Thursday, November 12, 2015

 

That, of course, is the worry that a majority of the state’s engaged citizens express with regards to massive borrowing the Governor has proposed to fund with tolls. But, so inevitable is the sense that we are about to hand a billion dollars to the DOT and its bondholders that even the most determined critics are focused only on alternatives of where to get the money.

Echoing Nancy Pelosi’s infamous exhortation about Obamacare, that Congress has to pass the bill so you can see what is in it, the Raimondo administration has doubled down on a lack of transparency over its plan.  But unlike Obamacare, we’re not dealing with a plan that is too long and complex to read and analyze before voting, but one that is too short and vague for anyone to know what they are actually voting on. 

Perhaps the only thing that the Raimondo administration has been clear about is that her plan will start by targeting trucks. What trucks is a moving target; what bridges is a moving target; how much the tolls will be is a moving target. The electorate, to its credit, resists the siren song not to worry about the details because someone else will pay the cost. Instead widespread public critique of this gambit has adopted an economic paraphrase of Martin Neimoller’s criticism of the ruthless Nazi divide and conquer strategy: “first they came for the trucks”.

Where Tolls Work

The irony is that tolls, made noticeably more efficient with automated collection infrastructure, have proven to be an appropriate source of revenue for capacity expansion and congestion mitigation in other states.

But here, we have no bold plan to build the connecting highway to URI and the Jamestown Bridge from 95, enhancing capacity for reaching the state’s educational and tourism centers. Here we have no bold plan to add lanes to 95 to provide rush hour relief. Here we have no bold plan to add interface between Route 4 and Route 95 South to enhance Quonset as a hub for shipping along the 95 corridor all the way to the Hudson, which would improve Rhode Island’s economy while alleviating regional congestion around New York City from shipments that now must come from New Jersey through the most crowded roads in the northeast. Rather we have a shameless pass the buck approach that says we forgot to fix the bridges so we’ll attempt to graft the money from the least politically powerful constituency.

Spending More, Getting Less

If one is concerned about the political opportunism and lack of transparency in the would be tolling program, what is far worse are the same attributes of the pogram the Governor appears to be carrying out at DOT. The effective sacking of 3 senior officials might indeed be justified in a department that spends more than other states for inferior results. But the Governor has failed to detail what offenses against efficient and effective operation these engineers have committed. With the state being asked to entrust this department with a billion dollars in new spending over the next 30 years, how are taxpayers to understand whether the sidelined officials are part of the problem or the solution?

Rhode Island spends twice the national average per lane mile on its state administered roads. It can be expected that Rhode Island’s costs would be somewhat more because our roads are more heavily traveled and the maintenance of traffic flow during constructions projects adds expense when making otherwise equivalent repairs. But, even controlling for that factor, Rhode Island usually spends more than average and we have some of the poorest bridge infrastructure to show for it.

Unfortunately, it appears that the only transportation statistic the Governor is paying attention to is our high percentage of deficient bridges and not those that question the effectiveness of our spending. If the Governor won’t take this issue seriously, it falls to the legislature to examine whether this history of inefficiency arises because of the relatively small size of the Rhode Island road construction market; explicit or implicit barriers to entry for contractors; cozy relations between our cadre of contractors and the department; poor bid segmenting; failure to monitor specs or secure long term performance; higher prevailing wage than other jurisdictions; etc.

And while efficiency is open to question, so is the decision making at DOT that apparently hasn’t been prioritizing failing infrastructure. Instead we spent $44 million on a useless train station in Wickford and millions to maintain it while bridges are crumbling. We spent $25 million on a bridge for bicycles when it’s the ones for cars that are at risk and we already had lanes on a state administered bridge that serves bicycles for the same crossing. Those two boondoogles would have paid almost 15% of what the Governor wants to borrow right there!

The people of Rhode Island deserve this inquiry and evidence of change before another billion dollars is poorly spent. If these matters are understood and addressed in ways that gain the trust of electorate, this opens a broader range of solutions to funding deficient infrastructure.

First they Came for the Trucks

Gina Raimondo

The Governor has suggested that this burden should fall on trucks because they cause more wear, but has never discussed the increased funds that have already been derived from trucks for years without fixing the bridges. She has never articulated why we should be the only state in the nation that tolls trucks and not cars – raising disappointment from truckers and cynicism from the citizenry who can’t imagine such a wasteful investment of 10s of millions in the gantries without a plan to ultimately use them to toll cars. Perhaps that is just a conspiracy theory since the evidence is that the state makes wasteful investments all the time, but essentially we’re damned either way.

Nor has the Governor responded in a meaningful way to truckers’ alternative proposals for fuel tax and truck registration increases that they see as less complicated and less burdensome. Of course part of the truckers proposition, e.g., a 12¢ increase in the diesel fuel tax, puts more of the cost back on smaller instate trucks. Their proposal is not a holy grail but a constructive contribution that the Governor has ignored.

Pay/Go Alternatives

The governor has equally turned a blind eye to the Center for Freedom and Prosperity’s research into pay/go public private partnerships with long term performance standards. This is not a panacea, as it could effectively shift borrowing costs to the private sector that then simply recoups them in bid pricing. But it is one of few models that checks overrun costs and essentially secures a long term warranty over sections of the state’s infrastructure. These potentially attractive features nonetheless could run afoul of provisions that prevent contracting for governmental functions for terms longer than the serving administration. And this kind of plan is not necessarily indicative of where the money would be drawn from to pay for such contracts if they exceed available transportation funds.

Nor has the Governor responded to the Republican pay/go plan to fund bridge repairs by looking to cuts in the rest of the state budget.  Regardless of whether one agrees that the entire amount can be found, these efforts are critical as the highway statistics reveal another built in deficit in Rhode Island’s transportation planning: a reliance on a much higher percentage of federal funding than most other states.

This is a trend that is evolved significantly during the tenure of Senator John Chafee who was chairman of the US Senate Committee responsible for the allocation of transportation funds in the budget. Perhaps the small relative size of Rhode Island’s road infrastructure has served to make it less important for later generations of politicians to walk back this ‘Chafee’ effect, but it no longer escapes the notice of the federal DOT and inevitably a higher percentage of state funds must be devoted to roads which means we will have to cut spending in other areas.

Costs of Borrowing

Meanwhile, the Governor has argued that borrowing for this bridge work is defensible as availability of more money earlier in the program will prevent the same job from having to be done twice, i.e. once as temporary repairs and second as permanent repairs. Certainly, this is not to be dismissed out of hand, anymore than the simple economic argument that if the pace of construction inflation – even of efficient construction – is higher than the interest rate, some borrowing can be appropriate. 

But the cost benefit equation would look better at a lower interest rate, which could be obtained if the Governor works to enlist the citizenry for her plan instead of enact it in spite of them. Then necessary borrowing for a popular plan could be put before the electorate in a referendum.

Merits of roadwork as economic ‘stimulus’

But whatever we spend on the roads, the Governor argues, stimulates the economy. The Governor’s studies are wrong on this. Any benefit derived from money circulated in the economy to road workers is offset because the money is taken from trucking companies and consumers who have less money to spend in the economy. But strategic spending for a better higher capacity road system is essential to economic development in a nation whose culture of individual mobility is linked hand in hand with its vocational and recreational opportunities.

The wrong road on tolls

Governor Raimondo is following in the footsteps of Governor Chafee who poisoned the well for any appropriate uses of tolls to build needed new infrastructure and manage efficient allocation of that we have already built by pushing blithely for tolls on the Sakonnet River Bridge and refusing all talk of other alternatives (until he had no alternative).

Lets not turn our roads into the next 38 Studios where taxpayers will indeed be on the hook if tolls can’t cover borrowing (just as Gina Raimondo herself  told us we were on the hook for 38 Studios revenue bonds because of the state’s reputation). To endorse Rhode Works, Citizens must see improved performance from DOT, and significant changes the reflect fair vetting of funding sources and capital spending imperatives for highways. In the end they must have a say at referendum on any borrowing.

The Governor must engage a broad process that honestly builds an alternative that is not simply ‘my way for the highways’. If, instead, she pushes this flawed tolling uber alles program, any legislator who votes for it must get a serious challenger – whether in the primary or general election. This isn’t an effort to promote partisan advantage but a recommendation that citizens take effective aim at politicians who don’t respect their right to vote when state debt is engaged. 

Brian Bishop is on the board of OSTPA and has spent 20 years of activism protecting property rights, fighting overregulation and perverse incentives in tax policy. 

 

Related Slideshow: 10 Biggest Questions Facing Truck Tolls in RI

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1.

Why won't the Governor define the proposal?


The Administration has put forth a number specifics that have changed since the original proposal, including the original “17-22” tolling locations changed to simply 17, and the reduction of toll amount from “$40-$50” to $30.  However, the Administration just got the green light last month by the Feds to move forward with the loosely-defined plan, which included inquiring as to whether the undersides of bridges could be tolled — which the Feds said now. 

Where will the tolls be located?  

Where had they been considering bridge undersides, and why? 

The loosely-defined plan has opened up the Administration to criticism that is moving to fast. 
 

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2.

When will RI get the details?

The Senate approved an updated version of the truck toll plan last General Assembly session.  With no fall General Assembly session scheduled after much speculation, the lawmakers will ostensibly resume taking up the issue upon return in January or soon thereafter. 

Will a more detail proposal be made public prior to the new session, or will the nuts and bolds — and gantries — be kept under lock and key until they’re unveiled at a Finance Committee hearing?
 

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3.

Does 80% of the $500 Million really only go to cover 6/10 Interchange?


The administration is proposing a $500 million revenue bond - and anticipating refinancing of federal debt as well as an influx of new federal funds - to provide the basis to cover costs for the project dubbed “RhodeWorks."

However, of that $500 million bond, $400 million of it would go to just one project - the much needed repairs on the crumbling 6-10 connector, which represents less than 1% of all state roads. 

Granted, not all of Rhode Island’s roads are in as dire condition at the 6/10 connector, but how much will the state have to spend — or bond — if $400 million goes to one project alone?
 

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4.

Is RI stuck in a cycle for bonding?


With Rhode Island still smarting (will it ever not) from 38 Studios, the issue of a non-voter approved bond has taken on the appearance of a four-letter word. 

The Republican Policy Group has put forth a no-toll — and no-bonding plan, but the administration continues to make that case that despite the costs associated with bond debt, it will cost less for RI to pay for the projects now. 

In case you missed it, former Attorney General Arlene Violet wrote a scathing review of the state’s bonding industrial complex this week in the Valley Breeze, which is worth the read.  

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5.

Will the General Assembly consider alternative proposals?


The Republicans have their no-toll, no-bond, pay-go proposal.  The Center for Freedom and Prosperity put forth a “P3” proposal for a public-private partnership.  The Trucking Association put forth their own no-toll plan, with increased fees and taxes instead to pay for the infrastructure costs. 

And State Rep. Doreen Costa has put forth a call to put any bond question before voters.  How much, if any, of these other approaches will see the light of day at the General Assembly?  The chances might be slim, but the opposition is vocal — and mobilized.  Don’t expect bond opponents to go anywhere anytime soon.  

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6.

Can RI be assured it won't extend to autos?


The current proposal, as it sands, is to toll only trucks of a certain size — Class 8 to Class 13.  However, that doesn’t have Rhode Islands worried that in the event of revenue shortfalls, that the classifications could be expanded. 

Even if the Governor and General Assembly assured Rhode Islands that would never happen, there might be some discussion - and debate - around ensuring that’s the case.  Raimondo worked to increase the cigarette tax (already the third highest in the country) this past session.  The state’s revenue from gambling will continued to take a hit as competition from Massachusetts ramps up.  Could — or should — a stipulation be put in any legislation that if the toll plan is to be expanded, it would need to go before voters?
 

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7.

Do recent projection shortfalls (Medicaid and rental tax)) call into questions revenue projections?


Raimondo had anticipated saving just over $70 million in Medicaid reform in this year’s budget, but the state’s Office of Health and Human Services said the number they were looking was almost two million short of that mark, and the the state’s revenue and caseload estimating conference pegged gap as even higher, as first reported by the Providence Journal. 

Most recently, WPRI noted that the rental home tax the Governor had touted fell $1 million short of expectations in the first month alone.  The administration is depending on a revenue stream of $60 million year, which leads us to our next question. 

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8.

What happens if the state doesn't meet the revenue?

 
The projections put forth from the administration show that the state expects to collect $60 million a year from the tolls to pay for a thirty revenue bond.  This was after the administration shifted gears from a 15 year, $700 million bond that was depended on $100 million in revenue a year.  

The Republican Policy Group recently held a press conference on “missing inconvenient information,” at which is asserted that “half of the proposed tolls or $30 million comes from pass-through truckers, while the remaining half is paid by three sources: local trucks delivering out-of-state, instate/out-of-state trucks delivering in Rhode Island. 

However, the impact study projects only $12.79 million in additional cost from inbound traffic and $5 million from all local and outbound traffic. The figures don't add up. Approximately, $12 million in annual toll revenue is unaccounted for.”

Does it create a 38 Studios issue?

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9.

What happens if trucks go around?

 
RI Trucking Association spokesperson Bill Fischer has questioned repeatedly what would happen if the trucks simply bypass the state.  

“We’d be on the hook for these bonds,” said Fischer. "We're saying charge us more in fees, focus on the diesel tax. We're worried about what no one has talked about, and that's evasion.  It's a big deal because you don't need to go through Rhode Island to drive from New York to Boston. We still have to make the bond payments.  These guys have computer programs that incorporate the fees and tolls.

The burden is being placed on the local guys." The Republican Policy Group has questioned whether diversion had been thoroughly vetted, as well. “Did the report account for diversion through Connecticut to avoid tolls as it relates to IFTA fees? Currently, truckers remit IFTA (International Fuel Tax Agreement) taxes to each state based on miles traveled. When they divert to avoid tolls, our state will lose these taxes.  What is the corresponding loss in revenue? 
 

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10.

What if RI doesn't get matching funds?


As part of the overall project cost of just over $1 billion, $500 million would come from the revenue bond, $120 million would be achieved through existing bond refinancing, and $400 million is slated to come from the federal government for the 6-10 transit project.

Will that go by the wayside if the Feds don’t come through?  What will that mean for future projects?
 

 
 

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