The Ohio House of Representatives sent Governor John Kasich a plan to have the Ohio Turnpike borrow $1.5 billion for transportation projects.
The House today voted 62-27 for the measure, which was included in a transportation budget bill. It allows the Ohio Turnpike Commission to issue $1 billion in bonds this year and $500 million in about five years backed by tolls to pay for highway and bridge construction. The Senate passed the bill yesterday.
As U.S. states seek ways to pay for infrastructure, Kasich, a 60-year-old Republican, proposed the move in December to help cover a $1 billion shortfall in transportation funding after rejecting a plan to lease the highway to raise as much as $4 billion over 50 years.
“This is about jobs, pure and simple,” Representative Ross McGregor, a Republican from Springfield and chairman of the House Transportation Subcommittee, said during debate in Columbus. “ This is about helping our economy to recover.”
Kasich has called the plan conservative, and Fitch Ratings said in a Jan. 4 report it probably wouldn’t affect grades on existing toll-road bonds. Opponents counter that it’s a bad idea to quadruple the agency’s debt to pay for work beyond the 241-mile (388-kilometer) turnpike.
The bill requires that at least 90 percent of the proceeds be spent within 75 miles of the road, though it did not include language that some Democrats wanted limiting toll increases to the rate of inflation for 10 years.
Toll receipts reached a record $252.5 million in 2012, up from $231 million in 2011, according to the Turnpike Commission. Liabilities as of Dec. 31 were $623.3 million, including $566.3 million of revenue bonds, the agency said.
The Ohio Turnpike is rated AA by Fitch Ratings, third-highest, and Aa3 by Moody’s Investors Service, fourth-highest. Investors in the new debt may have lower priority for repayment than current bondholders, and those securities would be structured to provide for a rating level of A, according a Dec. 12 study by KPMG Corporate Finance LLC.
The commission is looking to go to the bond market in the third quarter, spokeswoman Lauren Hakos said by e-mail.
There should be investor interest because the underlying credit is strong, said Howard Cure, director of municipal research for Evercore Wealth Management LLC in New York. Still, the state must be careful, he said.
“Does the legislature and the governor have the discipline not to drain the financial resources of the Turnpike?” Cure said.
-- Editors: Stephen Merelman, Justin Blum