Wednesday, April 1, 2015

Two roadblocks to new tolls on PA highways

A private toll road investor tells how his private toll road bonds have lost their value

Two roadblocks to new tolls on PA highways

My column on "public-private parterships" to let private companies charge drivers tolls for road improvements provoked dozens of readers to write. More than I expected said "That'd be fine, if it actually cut traffic." Plenty said "No way. I pay enough taxes." Here are my two favorites; both contain warnings:

I) Don't let this happen to you. "I invested in one of these toll roads," retired Philadelphia phys ed teacher (and Dobbins and George Washington High basketball coach) Hal Reinfeld told me. "I have a lot of money in bonds from a privately-funded highway in South Carolina," the Greenville Connector. The bonds, issued in 1998 at a modest 5-3/8% by the Connector 2000 Association Inc., have lost most of their value after the road group "defaulted on one (dividend) payment last winter. And chances are, I'm not going to get the next one in July either."

What went wrong? "They only get a third of the traffic they thought they were going to get; they're not getting the money they thought they were going to get" from tolls, "so they started borrowing money, and now they're up to their (waists) in expenses," Reinfeld told me.

Bond trustee US Bank has circulated a plan to cut interest rates and extend the bond terms, but the South Carolina legislature has delayed letting that happen. Investors and the issuer "are now in negotiations to determine whether they're going to cut the payment in half, or default the whole thing, which would leave me in a bind for a lot of money." 

II) They won't let this happen to them: Private toll roads as a fund source for transit and road repairs were "my crusade for the entire twelve years I was on the SEPTA Board, from 1988-2000," says Woodcock Washburn senior partner Richard E. Kurtz, of Berwyn.

"However," Kurtz adds, partnership advocate Frank Rapaport, who I quoted in my story, "is dead wrong when he asserts: 'Nobody's against this.' Somebody is very much against it." Who? He can't prove it, but Kurtz suspects "the trucking industry... Clearly, a dedicated lobbying group collars enough legislators to block every proposal" to boost tolls. "It doesn't take Sherlock Holmes to deduce that PA lobbyists are hard at work looking out for the truckers."

Joseph N. DiStefano
About this blog

PhillyDeals posts raw drafts and updates of Joseph N. DiStefano's columns and stories about Philly-area finance, investment, commercial real estate, tech, hiring and public spending, which he's been writing since 1989, mostly for the Philadelphia Inquirer.

DiStefano studied economics, history and a little engineering at Penn, taught writing at St. Joe's, and has written the book Comcasted, more than a thousand columns, and thousands of articles, and raised six children with his wife, who is a saint.

Reach Joseph N. at JoeD@phillynews.com or 215 854 5194.

Joseph N. DiStefano
Business Videos:
Also on Philly.com:
Stay Connected