Corzine pitches toll hike plan on Wall Street

January 10, 2008 6:23:20 PM PST
Wall Street analysts are praising parts of New Jersey Gov. Jon S. Corzine's plan to pay state debt and provide money for transportation work by increasing highway tolls but are cautious about the potential side effects of the toll increases.

Since Corzine unveiled his plan during a Tuesday speech, the administration has talked with Fitch Ratings, Moody's Investors Service and Standard & Poor's, the leading sources for credit ratings, research and investment risk analysis.

Their blessings, if given, could help entice investors to Corzine's proposal and lead to lower interest rates.

Any reservations could make investors hesitant.

Analysts said they haven't reached any conclusions and would watch as Corzine's plan is considered by the Legislature.

"We're just basically trying to weigh the positives and negatives of the plan and what it could achieve," Fitch analyst Richard Raphael said.

Corzine wants to create a nonprofit agency to manage the toll highways and issue bonds to bring the state a cash infusion to pay off debt and fund transportation projects. The bonds would be paid back by increased tolls.

The Democratic governor proposed raising highway tolls 50 percent in 2010, 2014, 2018 and 2022. Those increases also would include adjustments to reflect inflation. After 2022, tolls would increase every four years to reflect inflation.

Corzine estimates his proposed deal could be worth as much as $37.6 billion, helping the state pay as much as $29.6 billion in toll road, transportation, open space and general debt and provide money for road work.

Corzine also wants to freeze state spending in the coming budget, limit spending growth to revenue growth and have voters approve most state borrowing.

Moody's analyst Bob Kurtter and Fitch analyst Ken Weinstein endorsed ideas such as limiting spending growth and having voters approve borrowing.

"That would make progress," Kurtter said.

Moody's analyst Maria Matesanz said the plan for regularly scheduled toll increases could improve investor confidence and credit ratings. She described the plan as "probably the largest and most ambitious leverage of a toll road asset in the U.S. so far."

Raphael deemed as "positive" Corzine's plans to use money from the deal to address transportation needs and cut debt.

"But on the other side one has to gauge what the impact would be of large toll increases, economically as well as in terms of traffic diversion," he said.

Matesanz said toll diversion will be "part of our analysis and part of what we need to understand better."

The analysts said much depends on final details.

"We analyze results," Kurtter said, "not proposals."

Transportation Commissioner Kris Kolluri said turnpike traffic declined 6 percent in 1991 after a toll increase and less than 1 percent in 2003 after a toll increase. Traffic statistics provided by Kolluri's office show traffic quickly returned to prior levels.

"Diversion is going to be minimal," Kolluri said on Thursday.

State Treasury Department spokesman Tom Vincz said the Wall Street presentations are among "many components in the administration's education campaign to ensure that all stakeholders are provided with detailed information on the mechanics and scope of the governor's initiative."


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