The demise of the Turnpike? Part three

Posted Wednesday, May 18, 2011 in Investigation

The demise of the Turnpike? Part three

by David Kaler

AUGUSTA – The state is trying to make the case that changing the rules of the game as it relates to the Maine Turnpike Authority is about "ethics," not money. But at the end of the day, it’s about money.

The issue at hand is LD 1538, "An act to amend the laws Governing the Maine Turnpike Authority and to Implement Certain Recommendations of the Government Accountability Report Concerning the Maine Turnpike Authority," which would shift funds from the Authority to the state.

LD 1538 was introduced by Rep. Richard Cebra, R-Naples, and was co-sponsored by 149 members of the 125th Legislature, to wrest control of the MTA's funds from the Authority.

MTA was formed in 1947 as a privately invested corporation to build only the second turnpike in the Untied States. It has become one of the most successful enterprises in the country, owning 109 miles of well-maintained highway. It has always more than made enough money through tolls to maintain the roads, pay off its private bonds, and provide a healthy return to its investors. Now, it is being looked at as a cash cow for the state of Maine. 

The bill calls for a transfer of funds annually from the MTA to the Maine Department of Transportation in the amount of 5 percent after repaying bonds and covering expenses. The funds are to be used for maintaining highways within 25 miles of the turnpike that provide access to the turnpike. Although the amount seems modest, the MTA made $114 million last year, so 5 percent would amount to a windfall for the DOT of roughly $5 million.

The bill also would change the rules about who can serve on the MTA board and their terms of service. Four directors would come from the four counties – York, Cumberland, Sagadahoc and Kennebec – through which the turnpike passes. Their terms would be for seven years, expiring on March 31, although many on the Transportation Committee would like the terms to be limited even further, to four or five years. There would be no reappointment to the board.

LD 1538 also would change the turnpike's fiscal year to that matching the state's: July 1 through June 30. Currently, the MTA operates on the calendar year. No one is saying so, but changing the MTA's fiscal year will give the state a chance to determine how MTA funds will fit into the state's budget, rather than waiting until January to correct the state's yearly income.

The bill would require all contracts, including engineering contracts, to be awarded by the bid process.

During the public hearing, it became clear that legislators were seeing the end to some of the state's fiscal problems in transportation through the fund transfer from the MTA to the DOT. According to the Office of Program Evaluation and Government Accountability's report in January, the MTA does not admit there is any surplus in its budget.

The Authority has several funds, which it calls "buckets": Revenue, Debt Service and Reserve, Reserve Maintenance, and the General Reserve Fund. The General Reserve Fund includes three major accounts: the MaineDOT account, the Interchange account, and the Improvement account. The MaineDOT account is used for debt service on the subordinated bonds that were issued for the DOT, and residually to fund any transfers to the DOT. The Interchange account is used to pay for interchange-related capital costs. The Improvement account is used to pay general capital or maintenance expenses and to meet any funding deficiencies in the higher buckets. Under the Resolution, money in this account can also be used “to pay for any other lawful corporate purpose of the Authority as authorized in the Enabling Act,” as long as certain criteria are met. It was this portion of the MTA budget that ran afoul of the state's auditors, since much of the account was allegedly used for unlawful purposes.

But all the legislators, whether they approved of the MTA or not or harbored a desire for MTA funds for the DOT, acknowledged a serious perception problem, even a problem of "arrogance" on the part of MTA officials.

Sen. Roger Katz, R-Augusta, praised the Turnpike Authority's excellent job, but said that it has become a "kingdom of its own," unaccountable to the state or its people. He said he would support the bill with a date of January 2012, but said that questions remain and he sees a lot of room to maneuver.

Sen. Dawn Hill, D-York, said she would rethink the limit of 25 miles from the turnpike to be funded by MTA money to include highways in the entire state, with the funds going not to the DOT but to the General Fund. If Hill's ideas carry the day, the turnpike will cease to function as a separate entity; it will become just another state highway. Funding will also be available to be used by non-transportation needs. 

The idea of ending toll collection was discussed, but found to be impractical as there is still an indebted bondedness of $400 million.

The new interim director, former Republican State Sen. Peter Mills, was spoken of with high regard during the hearing. Mills said in his opinion, sweeping changes are needed to keep the turnpike active and to improve its public perception.

Mills suggested that an outside audit be established every four months to gain credibility with the public. He acknowledged that changing the calendar year to the fiscal year was "probably necessary" but also difficult, and suggested making this change more slowly than the other changes.

In the MTA's defense, Mills noted that "the MTA has provided about 14 Park-and-Rides at no expense to MDOT." Also, the MTA has agreed to the DOT's request to pay the cost of 1.9 miles of Interstate 95 to improve and maintain the bridge into New Hampshire at a cost of $30 million.

All who testified were in favor of a change. Nearly all felt that the MTA was unresponsive to the other quasi-governmental departments who work for the state. The term "aloof" was used by many.

One of those testifying, a resident of York Harbor, had approached the MTA board, attended meetings, had multiple unreturned telephone calls and felt snubbed when questioning the moving of the toll booth from its previous location to the location now, and the proposed relocation to a new location farther north at a considerable cost. The resident said the entire board should be replaced for failure to see the abuses that have occurred over a 10-year period.

Longtime board member John Doherty apologized for his negligence in not spotting the abuses. When asked if he were paid for his position on the board, he said, “Yes, a stipend of $55 per meeting plus mileage.” Hardly worth the effort was the general consensus.

DOT former Director John Melrose gave a basic overview of the difference between his department and the MTA. Both work in the same business – roads and bridges – with the major difference that the MTA can issue revenue-yielding bonds, whereas the Maine DOT cannot. The DOT operates on revenue from the gasoline road tax and the occasional state bonds with federal matches. The DOT cannot be sure of its operating budget, while the MTA has a great deal of security.

Tim Doyle, former director of the Maine Truck Owners Association, gave the turnpike high marks from an operator's standpoint, but also said it was one of the top five most expensive toll roads in the United States. Many states help truckers by reimbursing part of the tolls they pay, but the Maine Turnpike is an investor-owned highway with no state control. He would like to see that changed if for no other reason than a partial return of tolls as is done in other states.

Although the reform of the Maine Turnpike Authority is a work in progress, it is clear that a successful private enterprise is about to enter a new phase of existence. Soon, it will be under much more stringent government control.

The question is, would turning the turnpike over to the state result in adequate roads and maintenance, or will the funds be siphoned off to pay for unrelated pet projects? Will the turnpike become just another state highway, or will the state preserve the integrity of the existing turnpike and upgrade other state roads with the surplus?

Time will tell, but other programs the state has taken over seem to suggest that funds will be used for anything that can get enough votes.

Remember that not so long ago, the state lottery was dedicated revenue for education only. Voters were told that lottery revenues would help support schools, so property taxes could decrease. Today, lottery proceeds are part of the General Fund, to be spent as part of the bienniel budget, and municipalities are back to raising property taxes to fund their schools.

It seems unlikely that we can expect anything different with the demise of the Maine Turnpike Authority.

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