Monday, January 12, 2009

GOP Leaders Offer Creative Proposal to Overhaul Turnpike's Finances

House Minority Leader Bradley H. Jones, Jr. along with Senate Minority Leader Richard R. Tisei sent the following letter to Treasurer Cahill today. The letter offers a detailed and creative proposal to overhauling the current financial disaster facing the Massachusetts Turnpike Authority.

Dear Mr. Treasurer:

As you are well aware, the current economic climate is worrisome and uncertain and it has forced policymakers to search outside-the-box for creative solutions to very complex problems. From glaring deficiencies in our transportation system to potential billion dollar deficits in our state budget, we have urged our colleagues to be thoughtful when proposing potential solutions. Unfortunately, many of the proposals, particularly regarding our transportation infrastructure, strike us as quick fixes rather than creative solutions. We have been considering a proposal that may provide state officials with the resources and time to overhaul our transportation system and would like to share it with you so as to solicit your thoughts and feedback.

The Massachusetts Turnpike Authority (MTA) has been sinking into a severe financial quagmire. Numerous attempts to mitigate the MTA’s fiscal problems, although well-intentioned, have proven insufficient at best. Furthermore the MTA’s solvency is threatened by complex lending agreements, the recent rating downgrade by Moody’s and the threat of further downgrades to its bond insurer, which has created pressure for a substantial toll increase.

We propose the Turnpike sell some of its capital assets to the Pension Reserves Investment Trust (PRIT) for cash at current fair market value. The result of this would provide the Turnpike with much needed revenue, while simultaneously providing the PRIT with valuable investment property.

Since 1959, the Turnpike has acquired various properties whose value has undoubtedly increased exponentially over the past five decades. Collectively, the Turnpike’s properties are estimated to be worth well over $8 billion, though a full and accurate accounting has been difficult to determine. Even the sale of five percent of such assets could cover the costs of terminating the Authority’s swaptions.

While the real estate market is certainly not what it was two years ago, no one can argue that property values in Massachusetts haven’t rapidly skyrocketed since the 1950s. The eventual sale of acquired properties by the PRIT could easily provide a healthy return in as little as five or ten years. Although the world’s financial markets, on average, provide sound returns in the long-run, the markets’ recent devastating behavior is enough to convince even the most aggressive investors to retreat to safer investments. Likewise, we understand that one goal of the fund has been a diversification of its portfolio, and this proposal would be consistent with that goal.

We hope you will give some consideration to this option as we in the Legislature weigh many potential solutions to finance our transportation system. This task will certainly be challenging, however, we cannot settle for narrow solutions to complex problems. Nor should increased tolls or taxes be the first resort.