Falling balance in emergency fund prompts state officials to seek another toll increase for bridge users

Transportation officials are weighing a toll increase on the Tacoma Narrows Bridge for a second consecutive year, in part to shore up a controversial emergency fund balance that didn’t exist and wasn’t anticipated when the eastbound span opened in 2007.

The state had to dip below its established minimum balance for the first time early last year to pay bridge expenses as debt payments climbed but toll revenues remained flat. Fewer cars than originally projected are crossing the bridge due to the weak economy, state officials have said.

Now, the financial pinch is prompting the Washington State Transportation Commission to try to stabilize the emergency cushion. The commission wants to clarify that the fund balance must be maintained at a minimum level consistently every month, not just at the end of each budget year.

Officials say it’s prudent to have cash available at all times in the event of a major bridge closure. And investors confident in the bridge’s financial management would be more likely to reward the state with lower interest rates on other megaprojects financed with tolls, such as the Alaska Way Viaduct in Seattle and the new Interstate 5 span connecting Washington and Oregon.

But bringing stability to the fund balance means tollpayers would have to pay more, at least in the short term.

Last week, a citizens advisory committee that recommends toll rates voted to ask the Transportation Commission for flexibility with regard to the fund balance. The advisory committee is studying a toll increase of between 25 and 40 cents this year.

Meanwhile, a Gig Harbor lawmaker wants to reduce the minimum size of the fund balance so that tolls can be held down.

The Transportation Commission’s decision on the toll increase is expected this spring.

If a 40-cent increase were to go into effect in July, it would pay expenses and maintain the fund balance throughout the fiscal year that ends in June 2014. If a 90-cent increase were to take effect in January – a scenario not favored by the advisory committee – it would cover the fund balance through June 2016.

The state is paying off the bridge under a financial plan that expected tolls would start low and gradually increase over time to a maximum of $6.

But because the number of crossings hasn’t increased since the bridge opened, it’s likely that tolls will have to climb higher, unless state officials figure out another way to pay bridge expenses.

Electronic tolls are now $4, those paid at the tollbooth are $5, and those paid by mail are $6.

The debate over the fund balance reinforces the end of happier times for commuters when the bridge was new, the operating fund was flush with money and tolls were low.

As Transportation Commission Executive Director Reema Griffith put it: The bridge is “out of the honeymoon stage and into the real payment cycle.” financial buffer

The emergency balance — formally known as the “sufficient minimum balance” — traces its origins back three years. Think of it as the buffer you leave in your checking account to cover unexpected expenses.

In 2010, State Treasurer James McIntire advised the commission that a cushion is needed “for the inevitable uncertainties in traffic, weather, accident and expense projections.”

The advice he outlined would “maintain our state’s strong financial standing and keep borrowing costs low. They ensure the public’s money is used for the actual construction, maintenance and operation of major roadways — not interest payments to investors,” he wrote in an op-ed published in The News Tribune in January 2010.

The commission adopted a policy to maintain an unspent balance of at least 12.5 percent, of the bridge’s annual costs, representing about 45 days of toll revenue. That’s equal to $8.1 million in the coming budget year, which begins July 1.

That level was picked because the commission believes it sets aside enough cash to pay lost toll revenue, bridge debt and other costs if the span were shut down for several days.

The bridge is covered by insurance that costs $1.6 million during the current budget year. But it doesn’t kick in until the span is closed for at least 10 days, and it doesn’t reimburse for toll revenue lost after the bridge reopens when traffic slowly returns to normal. debt payments rising

Staying above the cushion wasn’t an issue until last year.

After the bridge opened in 2007, debt payments started out small enough that even low tolls keep the bridge’s operating fund flush with cash.

The fund balance peaked at $29.2 million in October 2007, according to the treasurer’s office, before beginning its gradual decline.

Two factors quickly ran down the balance in recent years: escalating debt payments and the commission’s decision to forego a toll increase in 2010. Annual debt payments have increased threefold since 2008. They will jump more than $8 million in the coming budget year. (Meanwhile, operating and maintenance costs are projected to climb $782,000 during the same period.)

The commission decided to spend down its cash instead of raising tolls because of the financial hardship it would bring to residents in the ailing economy.

The fund balance dropped to $2.3 million last June before rebounding as a result of new toll rates that took effect July 1. At the end of 2012, it rested at $7.2 million. The state is projecting it to drop again in the coming budget and bottom out in fiscal year 2015 if traffic remains flat and there’s no new revenue.

“We drew it down too far,” Griffith said.

PENINSULA PINCHED

The Transportation Commission will discuss the citizens advisory committee’s recommendations at its meeting later this month as the toll-setting process reaches the home stretch.

If the state adopts a more rigid policy on the minimum fund balance, Advisory Committee member Chris Myers said it would tie the hands of his group because there would be virtually no wiggle room in recommending toll rates.

“Now we give the appearance of public input because we were told we had to, but it really doesn’t matter,” he said.

Newly appointed state Sen. Nathan Schlicher, D-Gig Harbor, introduced a bill last week that would reduce the cushion to no more than 6 percent. It also would require the state Department of Transportation to reduce management costs billed to the fund balance.

Schlicher said it’s grossly unfair that Peninsula residents would pony up more money when they already pay a disproportionate share of the bridge’s cost as the heaviest users.

“It just doesn’t make a lot of sense to me to make what is a really a tough situation for people that much worse,” he said.

Christian Hill: 253-274-7390

christian.hill@thenewstribune.com

@TNTchill