DRPA's heavy debt burden
Having spent lavishly over the years, it's now short of money for critical repairs. Tolls are likely to increase.
The past spending habits of the Delaware River Port Authority are taking a toll on commuters who use the authority's four bridges.
The DRPA, whose board meets today to adopt its annual budget, has a higher debt burden, compared with its income, than any toll-collecting agency in the region. About 42 percent of its total revenue goes to pay annual interest and principal on its debt.
By comparison, the Port Authority of New York and New Jersey spends 14 percent of its revenue on debt service. At the Delaware River & Bay Authority, which operates the Delaware Memorial Bridge, the figure is 13 percent. At the Delaware River Joint Toll Bridge Commission, which operates seven bridges, the figure is 16 percent.
And the DRPA is preparing to borrow hundreds of millions more next year to pay for bridge repairs and PATCO commuter rail-car upgrades. That is likely to mean higher tolls for those who cross the Ben Franklin, Walt Whitman, Betsy Ross and Commodore Barry Bridges.
This year, the DRPA expects to bring in about $236 million, of which $193 million is from bridge tolls. The agency must spend $101 million of that for debt service.
"For the revenue we generate, the first $100 million goes to pay off the mortgage," said John J. Matheussen, chief executive officer of the DRPA.
The bi-state agency's $1.2 billion debt is partly a legacy of its past largesse. Since 1999, the DRPA has given hundreds of millions of dollars to help build Kvaerner Philadelphia Shipyard, Lincoln Financial Field, the Kimmel Center, the National Constitution Center, the New Jersey State Aquarium, the Camden Riversharks minor-league baseball stadium, to spruce up Admiral Wilson Boulevard, and to invest in a still-unbuilt tram across the river, among other economic-development projects.
Other millions went to projects dear to the hearts of politically connected DRPA board members, most notably Pennsylvania State Sen. Vincent J. Fumo. The DRPA, for instance, donated $3.57 million to the Spring Garden Community Development Corp., a Fumo-supported nonprofit.
Many of those people, including Fumo, are no longer on the board. The current management of the DRPA says it is committed to tighter financial controls and to limiting spending to transportation projects.
"All that debt was issued before we arrived," said John H. Estey, the senior adviser to Gov. Rendell who acts as chairman of the DRPA in Rendell's stead. "If Gov. Ridge and Gov. Whitman wanted to use revenues for stadiums, that was their decision."
Most of the $300 million borrowed in 1999 for economic development was gone by 2003. Now, Matheussen said, the DRPA is so short on money that "we haven't had the ability to go out and buy new police cars and dump trucks."
"We made a decision to pare down our operations - we've reduced the number of employees by 12 percent," said Jeffrey Nash, the Camden County freeholder who is vice chairman of the DRPA. "We also made a decision - Gov. Rendell and I have agreed - that economic development will be restricted to transportation or water-borne projects, unless it's critical for job development."
Estey, Rendell's designee, agreed.
Nash said some of the past economic-development spending "turned out to be bad investments." The tram that is still mostly on the drawing board, for example, or a submarine simulator for the Camden aquarium that apparently is still in Israel.
But Nash defended other economic-development projects. The rehabilitation of Admiral Wilson Boulevard from a strip of tawdry motels, he said, "was critical to the community. . . . It affects the perception of Camden and it affects the economy."
Commuters who pay the bridge tolls are not happy to see their money used for other things, DRPA officials acknowledge.
"That's what I've heard the most complaints about in my 41/2 years," Matheussen said. "The projects each have a constituency . . . but people say, 'I just don't like toll dollars paying for them.' And I can't say they're wrong in their attitudes."
Christine Brenner, director of the Forum for Policy Research and Public Service at Rutgers University in Camden, said "the people who are driving over the bridges are paying down those bonds." The DRPA's money-losing projects "have to be very carefully examined . . . and maybe they [the DRPA board members] have to make some hard choices" about which to fund.
Brenner said a subsidized operation like PATCO, which brings in only about half of its $41 million annual operating expense, is worth the cost because of such benefits as reduced congestion and pollution in the region. Other projects, such as the River Link ferry and tourism-promotion projects, may be harder to justify, she said.
Robert Inman, an expert in public finance and a professor of finance at the Wharton School of the University of Pennsylvania, said the DRPA has "a straightforward public-finance problem, with a lot of politics thrown in."
Inman said that as long as bridge traffic doesn't drop off significantly, the agency should have no problem raising enough money to meet its debt.
"The question is, what do you do with the money? The risk is that you create a money machine and then waste a lot of the stuff," Inman said. The political challenge, he said, is to "match the payment to a benefit received."
"You do want the people who come into the city to contribute for the use of city assets. But you don't want to abuse New Jerseyans for the benefit of Philadelphia neighborhoods."
The DRPA's bonds for economic-development projects are not highly regarded by Wall Street.
The Standard & Poor's bond rating on $370 million in DRPA "port district project" bonds is BBB-, the lowest investment-grade rating. S&P's most recent report on the DRPA cited "the need to support noncore activities, which draw heavily on the authority's financial resources."
Nash said he does not expect additional borrowing to jeopardize the DRPA's bond rating.
"As long as there is a dependable revenue source, we don't believe the bond ratings will be affected," Nash said.
Estey said, "We've been pretty upfront that new debt will be supported by new revenue streams."
The DRPA board is expected today to approve a 2008 operating budget of $238 million and a capital budget of $93.5 million.
The agency's staff last week proposed dipping into its cash reserves rather than increasing tolls immediately.
The proposed budget suggests taking about $62 million from the DRPA general fund to help pay for forthcoming bridge repairs and rail-car upgrades, rather than raising tolls right away.
But DRPA officials said a "new significant funding source" - probably higher tolls - would be needed soon to provide $1 billion over five years for repairs and improvements to the Ben Franklin, Walt Whitman, Betsy Ross and Commodore Barry Bridges and the PATCO commuter rail line.
Although there has been no toll increase proposed officially, some officials have suggested that a toll increase of $2, taking the current $3 for autos to $5, may be necessary. Tolls, which are paid only on westbound trips, were last increased in 2000.
Transit Agencies and Debt
Annual debt service as a percentage of total revenue:
Delaware River Port Authority. . . 42%
Ben Franklin, Walt Whitman, Betsy Ross and Commodore Barry Bridges; PATCO commuter rail; RiverLink ferry; Philadelphia cruise terminal
New Jersey Turnpike Authority. . . 34%
New Jersey Turnpike, Garden State Parkway, PNC Bank Arts Center
Pennsylvania Turnpike Commission. . . 18%
Delaware River Joint Toll Bridge Commission. . . 16%
I-78, Delaware Water Gap (I-80), Trenton-Morrisville (Route 1), and Easton-Phillipsburg (Route 22) toll bridges
South Jersey Transportation Authority. . . 16%
Atlantic City Expressway, Atlantic City International Airport
Port Authority of New York and New Jersey. . . 14%
George Washington, Goethals and Bayonne Bridges; Lincoln and Holland Tunnels; Outerbridge Crossing; PATH commuter rail; JFK, La Guardia and Newark Liberty International Airports
Delaware River & Bay Authority. . . 13%
Delaware Memorial Bridge; Cape May-Lewes Ferry; airports in New Castle and Dover, Del., and Cape May and Millville, N.J.
Burlington County Bridge Authority. . . 8.4%
Tacony-Palmyra, Burlington-Bristol and Riverside-Delanco Bridges