HIGHER TOLLS LIKELY IN MD.

THE BALTIMORE SUN

As the Maryland Transportation Authority's revenues have declined this year, its costs for construction of the Intercounty Connector have risen to the point where the project now accounts for 53 percent of the agency's budget - forcing delays in other road maintenance projects and making a substantial increase in tolls at some facilities a near certainty after the 2010 gubernatorial election.

According to the state Department of Legislative Services, the independent toll authority is facing the same type of recession-related squeeze that has forced the Maryland Department of Transportation to defer about $2.2 billion in projects.

The legislative analysts report that the authority's long-term budget projections assume a toll revenue increase of about 45 percent statewide within two years. The authority acknowledged that it expects to increase tolls but insists that projection is based on extremely conservative forecasts of traffic and revenue growth.

"That is the absolutely least rosy of our scenarios," said authority Executive Secretary Ronald L. Freeland.

Some increase in tolls is likely because the authority's heavy borrowing to finance the ICC and a widening of Interstate 95 might put it close to its statutory debt limit in about five years.

State projections show the authority's outstanding debt - under $500 million as recently as the 2007 budget year - stands at $1.1 billion now and will approach its legal limit of $3 billion by the middle of the next decade. The authority would need authorization from the General Assembly to exceed that amount.

"They're leveraged to the hilt and it's a stretch for them to do all the things they need to do," said Warren Deschenaux, chief policy analyst for the General Assembly. "They were walloped by the recession."

The legislative services department has been conducting briefings of Washington-area legislators - first reported on the Maryland Politics Watch blog - on the state of the authority's finances. The briefings come as Montgomery County officials are discussing the possibility of widening Interstate 270 with express toll lanes - a project that would cost billions of dollars.

The analysts' briefing materials paint a discouraging picture for anyone hoping to tap the authority's funding capability.

For 12 straight months, as the economy sank into a deep recession, the authority's revenues posted declines from the previous year's totals. The agency posted a modest increase in April and a strong gain in May - the most recent months for which the analysts had figures - giving some hope that the worst may be over.

Much of the agency's debt has been piled up to pay for the ICC, a $2.6 billion project that will cost $736.8 million in authority funds in the current budget year alone. That is more than all other capital, operating and debt service spending in the agency's budget.

Freeland said the authority long anticipated that the ICC would take up a large percentage of its budget this year and the next two, tailing off after 2012.

According to legislative analysts, the authority will have to impose "substantial" toll increases in the 2012 and 2014 budget years to maintain its minimum ratios of revenue to debt. The formula is important in keeping the authority's AA bond rating that guarantees it can borrow at favorable rates.

The authority is forecasting a 2012 toll increase that would bring in $161.4 million. According to analysts, that would amount to an increase of $1.35 in the average toll of about $3.

"That would be absolutely worst case," Freeland said.

He said the authority would examine toll levels in 2011 based on its revenue results at the end of calendar 2010, but that as of now all options would be on the table.

Early this year, under pressure from plunging revenues, the authority imposed a series of toll increases amounting to $60 million in added revenue. The board avoided a general toll increase on two-axle vehicles, but imposed significant increases on truckers over the protest of industry representatives. The authority also raised the hackles of many customers by adopting a $1.50-a-month fee on E-ZPass accounts.

Those increases, however, amounted to little more than a stopgap measure compared with the increases that may be on the horizon.

Having tapped the trucking industry once, the authority could find it difficult to spare passenger vehicles again. Also on the table would be commuter rates, which have been the same for nearly a quarter of a century. Tolls range from $5 (northbound only) on the John F. Kennedy Memorial Highway (Interstate 95) and the Thomas J. Hatem Memorial Bridge (U.S. 40) to $2 each way at the Baltimore Harbor crossings. The Bay Bridge toll, where the cost is actually less than when it opened in 1952, stands at $2.50 (eastbound only). Whether to spare it again at a time when its maintenance costs are likely to rise will be a touchy political question for the authority's board, whose eight members are appointed by the governor.

According to legislative analysts, the expected 2012 toll increase is unlikely to do anything more than keep up the authority's debt payments and maintain the current system.

In some cases, that maintenance is extremely expensive.

The structurally deficient Canton Viaduct - the elevated portion of I-95 east of the Harbor Tunnel - is scheduled to be replaced at a cost of $168 million starting in 2012-2013. The westbound span of the Bay Bridge is scheduled to get its first full repainting since it opened in 1973 at a cost of $37 million. The Fort McHenry Tunnel needs a new deck: $22 million. The authority was recently forced to expedite work on the support structures of two Susquehanna River bridges after finding "advanced deterioration." An inspection of the Bay Bridge substructure could bring nasty and potentially expensive surprises.

"We have aging infrastructure, so we are going to have to pay greater attention to our aging facilities," Freeland said.

The ICC costs and the accumulation of much-needed maintenance has forced the authority to defer some other projects. For instance, it has stretched out the completion date on the express toll lane project on I-95 from 2012 to 2016.

Big-ticket projects in the planning process such as the replacement of the 70-year-old Gov. Harry W. Nice Memorial Bridge (U.S. 301 at the Potomac River) and the expected extension of the I-95 express toll lane project beyond White Marsh would likely require toll increases beyond those in the next round, analysts said.

The I-270 proposal is further off and in line behind the other two projects, but if it goes forward with express toll lanes, it might need "ramp-up" financing from the pooled proceeds of the other toll facilities, Freeland said.

Asked to sum up the condition of his agency, Freeland chose his words carefully.

"The financial future of the transportation authority will be constrained but manageable," he said.

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