Digging into the Treasurer’s CRC Report

Last week we noted that Oregon State Treasurer Ted Wheeler agreed with the Washington State Treasurer that the toll revenue projections for the CRC were unrealistic.

Let’s dig a little deeper into the report (PDF, 695K), as there are quite a few salient points:

  • Traffic projections in the 2008 DEIS are based on a 2002 Metro employment forecast, so they are severely out of date.
    traffic projections - Copy
  • An “investment grade” traffic and toll revenue forecast prior to the initial sale of toll bonds is essential.
  • Regardless of whether we issues “toll bonds” or “general obligation bonds”, ODOT and the State General Fund are ultimately on the hook if toll revenues are insufficient to cover bond repayments.
  • Overall, the Treasurer believes that a responsible forecast of toll revenues would be 15-25% lower that the current ODOT estimate.
  • The project assumes that toll rates will increase 2.5% annually, but experience in the Puget Sound area has shown that it is politically difficult to increase tolls as quickly as planned.
  • Between lower traffic volume and more slowly increasing toll rates, the Treasurer estimates there is a gap of $468 to $598 million in project funding.
  • The Treasurer suggests several strategies to reduce the funding gap:
    1. Begin tolling before project completion – potentially worth up to $200 million.
    2. Use a Federal Transportation Infrastructure Finance and Innovation Act (TIFIA) loan instead of bonding to capitalize toll revenues. This would require congressional authorization but provide for lower interest rates (saving $194 to $238 million) and take the State General Fund off the hook.
  • The State “equity” contribution (the portion not funded by tolls) of $450 million would require a 1.5 cent increase in state-wide gas taxes to cover 25-year general obligation bonds. This must be enacted by the Legislature (and while the Treasurer does not point this out, would be subject to referendum).
  • The Treasurer suggests that as an alternative, ODOT could issue 12-year “GARVEE” Bonds, but as I understand it these can only be repaid with future Federal funds, which I assume means committing Federal funds that would otherwise be used for other projects.
  • Regardless of the toll financing mechanism, the CRC governance “must include a robust toll-setting mechanism to assure that all toll-related debt service is pad in full each year through toll revenues.”

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