The Thruway Authority’s proposed $2.9 billion New York State Dedicated Highway and Bridge Trust Fund bond issue is a fiscal gimmick and a $1.77 billion secret tax hike on businesses and taxpayers and will be rejected by the New York State Comptroller’s Office, Comptroller Alan G. Hevesi announced today.
“This scheme spends money we don’t have. It steals from the future to pay for today’s costs. It’s Albany at its irresponsible worst and I will not approve it,” Hevesi said. “This is not a refinancing to save money with lower interest rates. It saves $1.3 billion in the short term by not paying any principal for five years while increasing costs by $1.77 billion in the remaining 15 years. It’s time we stopped stealing from our children. Our capital spending should be used to put construction workers to work, not to pay hundreds of millions in unnecessary interest.”
Stopping this bad deal should have no impact on spending for roads and bridges. The $1.3 billion is a small part of a $17.9 billion five-year transportation capital plan administered by the State Department of Transportation. If permitted, the transaction would produce only $267.7 million in savings in the first year, 2005-2006. The 2005-06 Financial Plan already assumes a surplus of $601 million. Since this is the beginning of the year and the beginning of the five-year plan, there is plenty of time to find a fiscally responsible alternative for this portion of the total plan.
“In November, New Yorkers will have an opportunity to vote on the proposed Transportation Bond Act,” Hevesi said. “The State Constitution calls for public approval of debt, and that is the way it should be done. The Transportation Bond Act also meets all the requirements of our debt reform guidelines promulgated earlier this year.
“The Thruway deal, however, is another case of the State using a public authority to do back door borrowing and impose huge costs on an unaware public. Pushing debt costs into the future and increasing costs to taxpayers without any opportunity for public input is wrong,” Hevesi said.
Hevesi has consistently opposed bond refinancings that steal from the future. As New York City Comptroller in 1995 he imposed a rule that no bond refinancing could be done if it added to costs in any future year.
The Comptroller’s Office has warned of the State’s huge and out-of-control debt and has taken steps to bring it under control. In July 2004, the Office released for comment draft debt management guidelines to public authorities, including the Thruway Authority, and to local governments that issue debt, the State Division of the Budget (DOB) and the public finance industry. On February 1, 2005, the Office of the State Comptroller formally implemented these guidelines in conjunction with the report, New York State’s Debt Policy, A Need for Reform. The purpose of the Comptroller’s guidelines is to protect the interests of State and local taxpayers by ensuring that the total cost of the borrowing to the issuer is reasonable and appropriate.
The Governor’s Office and the Thruway Authority have known for months that this proposed transaction violated the Comptroller’s debt principles and that the Comptroller’s Office was very concerned about the proposed structure of the transaction. The Thruway deal was discussed in the February 2005 report on the Executive 2005-06 State Fiscal Year Budget and in the May 2005 report on the Enacted Budget.
There have been direct discussions about this deal between Comptroller’s Office staff and representatives of the Executive Chamber, Division of Budget and Thruway Authority since a June 23 meeting. The Comptroller’s Office has repeatedly sought information about the transaction, and to date has not received data providing the level of detail requested. On July 14, the Comptroller’s Office sent a letter noting that because it had not been provided with necessary information, it might not be able to complete its review on time. In correspondence on both July 17 and July 18, the Comptroller’s Office requested that the Thruway Authority delay the transaction.
The bonds issued by the Dedicated Highway and Bridge Trust Fund are paid for by taxes on business and individuals, including: the Petroleum Business Tax on automotive and aviation fuel as well as residual petroleum; the Motor Fuel Tax on gasoline and diesel motor fuels; the Highway Use Tax derived from the truck mileage tax, the fuel use tax and highway use permit fees; Motor Vehicle Fees, primarily from registration and licensing fees; the Auto Rental Tax; and other revenue sources including the transmission and transportation tax, motor vehicle data search fees, fees imposed for outdoor advertising and various permits.
“The Governor’s proposal will inevitably lead to increases in these taxes to cover the additional $1.77 billion in costs,” Hevesi said.
Reply With Quote