The Boston Globe reports:
Ten days after the Massachusetts Turnpike Authority board recommended sweeping toll increases, officials said yesterday that the authority's finances have grown even worse, with the agency's liability for a set of risky investments rising to nearly a half-billion dollars.
Patrick administration officials, several of whom spoke with the Globe on the condition they not be named, revealed the news in part because of worries that legislative attempts to put the proposed toll hikes on hold could trigger a demand that some of the investments be paid off in full, in one lump sum. But even if the toll increases are given final approval by the turnpike board, the threat still looms that the authority could soon be sent a bill for $353 million if the financial markets continue to deteriorate.
Several legislators have argued that the toll increases should be set aside while the Legislature debates alternatives, including a House proposal to raise the gas tax and a Senate proposal to raise cash through long-term leases on the roads with private businesses.
"The worst case, as far as I'm concerned, has come to pass," said Senator Mark Montigny, a New Bedford Democrat who leads the Senate bonding committee and was briefed on the problems yesterday. "We're looking at a sinking ship and the hole is getting bigger every day. And it's not just the ship at the Pike. It's the credit markets and the economy . . . This credit crisis is not over."
Beginning in 1999, the Turnpike Authority entered into complex arrangements - known as credit swaps - with three investment banks as a means of raising cash to pay off rising Big Dig debt. Essentially, the banks paid the Turnpike Authority cash for the right to swap interest rates with the agency on future debt payments. The deals, while immediately raising $71.5 million in cash for the agency, left it vulnerable to fluctuations in interest rates. The deals also established termination fees that rise and fall based on market conditions.
One deal was with J.P. Morgan,another with UBS,and:
The final deal, with Lehman Brothers in 2002, is the most directly tied to the toll increase. Lehman Brothers has gone bankrupt, but the owner of its assets has the right to terminate the full value of the agreement for about $75.7 million if the Turnpike Authority's credit rating drops. The authority's rating is at the cusp of junk bond status, and credit rating agencies have warned that without a toll increase, it will be lowered soon.
Yet,the Massachusetts thinks they can run health care!
