TRENTON - Drivers in New Jersey would pay at least 50 percent more in highway tolls, starting in 2010, under Gov. Corzine's new plan to raise up to $38 billion to pay down debt and fix roads and bridges.
In his annual State of the State speech yesterday, Corzine finally hung a price tag on his proposal to bail out the state by hiking tolls on the New Jersey Turnpike, the Garden State Parkway, and Atlantic City Expressway.
His plan was remarkable for its scope.
While other money-starved and tax-averse state politicians have spun off assets such as roads to raise money, no one has come close to trying to raise $38 billion in one shot.
The Democratic governor said the toll hikes would be controversial and a form of "tough love." Indeed, Republican State Sen. Thomas H. Kean Jr., the new leader of the GOP in the upper chamber, immediately ripped the plan as a hidden tax hike.
"The governor is now proposing the largest tax increase on the citizens of this state that they have ever seen to pay for a massive borrowing scheme," Kean said.
But Corzine said he had no alternative but to urge "significant toll hikes."
"The number-one issue facing our state is fixing our financial foundation," Corzine said. "The crisis has morphed into a full-fledged financial emergency and poses a direct threat to New Jersey's quality of life."
As Kean pointed out, the first hike in tolls would not take effect until a year after Corzine would stand for reelection should he seek a second term.
Under his plan, fares would be raised by 50 percent every four years between 2010 and 2022, as well as by an additional cumulative amount of perhaps 3 percent annually to reflect inflation. The inflationary hikes, plus the 50 percent increases, would be bundled together and phased in together only at the four-year points.
Under the plan, a typical car driver on the New Jersey Turnpike would be charged $2.05 in tolls in 2010 for a trip that costs $1.20 now. In 2014, the driver would pony up $5.85. Such a driver would take a 23-mile daily trip on the turnpike, the administration said.
In another example, it now costs $2.50 to drive the 47 miles of the Atlantic City Expressway. Under the proposal, that cost would go up to $3.90 in 2010.
Transportation academics say New Jersey tolls are relatively low compared with the rest of the country.
And in a briefing for reporters, Corzine aides said that national data showed that New Jersey had headroom to hike the tolls. Tolls on the New Jersey Turnpike and Atlantic City Expressway are half the national average and tolls on the Garden State Parkway just one-fifth, the aides said.
Corzine said a plus of his proposal was that New Jersey would not actually sell or lease the 368 miles of road at stake.
Rather, he said, the state would create a nonprofit agency, dubbed a "public benefit corporation," that would float billions in bonds and enter into a contract with the state authorizing it to use fares and concession sales to pay back the bonds.
To make sure the bonds are attractive to Wall Street, the toll hikes would be locked into a schedule, and Corzine would abdicate his current ability to politically influence tolls.
He would not, for instance, directly name the board members of the new nonprofit, as he currently does for the New Jersey Turnpike Authority.
Instead, he would name an intermediary body that would pick the board members - but from a list drawn up by Corzine.
Even as he unveiled his ambitious plan, Corzine also recommended several fiscally conservative steps to accompany it.
He promised his next state budget would freeze overall spending at current levels. He also called for laws to forbid the state from relying on one-shot revenue gimmicks and to amend the state constitution to require voters to approve most state borrowing.
Corzine's plan must be approved by the Democratic-controlled Legislature. In a statement, Senate President Richard J. Codey (D., Essex) stopped short of flatly endorsing the plan and said it would be a "hard sell." But he also said that he saw no better proposal on the horizon and that New Jersey was indeed in a dire financial position.
In his speech, Corzine, the former chairman of the Goldman Sachs investment house, dug into the financial issues that are his forte.
To raise up to the $38 billion, Corzine said, would take a 20 percent hike in the income tax, or a 30 percent hike in the sales tax or even a 50-cent increase in the gasoline tax - all of which he said were out of the question.
Nor, Corzine said, could the state cut its way back to fiscal health. To do so, he said, would "impossibly damage" New Jersey's ability to fund schools, cushion local property taxes, and protect public safety and welfare.
By Corzine's account, the state can only turn to the highway tolls, more than half of which are paid by truckers or out-of-state drivers, as the governor noted.
He also said Republicans and Democrats alike had dug New Jersey into a deep hole of debt. According to the most recent state figures, New Jersey owes $32 billion it borrowed to pay for pensions for state workers and teachers and to build schools, among other purposes.
State debt has more than doubled in the last decade and is now equal to $3,700 for every resident of the state, three times the national average, Corzine said. It must spend $2.6 billion - almost 10 percent of its annual budget - every year on principal and interest.
Moreover, Corzine said in his speech, the state owes an additional $25 billion in unfunded pension liabilities and $60 billion in future medical costs of retirees.
Once the nonprofit floats bonds, collects the money and gives it to the state, Corzine said he would spend about $20 billion to pay off debt from past transit projects and to undertake new ones.
In particular, Corzine has stressed, New Jersey must spend heavily to render safe as many as 700 bridges to avoid a fatal collapse as happened in Minneapolis last summer.
Among major allocations, he would spent an additional $12 billion or so to pay down the general debt of the state.
According to financial experts, a bond sale of about $38 billion would be unprecedented at the state level.
"That would be far and away the largest deal to have come to market to this point," said Robert Nelson, managing analyst at Thompson Financial's Municipal Group.
"That's a huge deal for the municipal market," Nelson added. "Even a deal in the $5 billion range is very very large in the municipal market. Something in the range of $30 billion to $40 billion would be enormous."
In Pennsylvania, Gov. Rendell had suggested the state could net $20 billion by leasing out the Pennsylvania Turnpike.
After the legislature shot down that idea, the state is now seeking to place tolls on Interstate 80 and increase tolls on the turnpike to raise about $1 billion a year for roads, bridges and public transit projects.
On the New Jersey Turnpike yesterday, motorist Bill Reese of Gloucester Township, who had pulled into the James Fenimore Cooper rest stop, called Corzine's proposal "ridiculous."
"It's obscene and poorly thought out," he said.
Michael Graci of Newark, Del., seemed resigned to paying more.
"I don't think it's going to affect my usage at all. Obviously, to get through the state of New Jersey the New Jersey Turnpike is a primary way to go through, and I would continue to use the turnpike," he said.