E-ZPass financing woes could mean higher tolls

Tuesday, May 14, 2002


TRENTON - As lawmakers warned E-ZPass debt could bring higher tolls and delayed construction, officials from the agency that authorized $300 million in bonds to finance the electronic toll system said they did not study whether the deficit-ridden project's financing was sound.

Caren Franzini, state Economic Development Authority executive director, told the Assembly Transportation Committee yesterday the authority depended on financial reports from the state Transportation and Treasury departments.

The state planned to rely heavily on $25 fines from toll cheats to pay its E-ZPass debt, but it has cost $19.2 million to collect $13.3 million in fines and a comprehensive fine collecting system never has been implemented.

E-ZPass reportedly is facing a $469 million deficit by 2008, when the bonds sold to pay for construction are due.

"We weren't asked what we think about it," Franzini said. "We were asked to issue the bonds."

Franzini said the bonds do not require the bridge and highway agencies to raise tolls should E-ZPass fail to earn enough revenue, but Assemblyman John Wisniewski, D-Sayreville, the committee chairman, said failing to pay the debt is not an option.

"The toll roads certainly won't default," said Wisniewski. "Tolls may go up, projects may not get done and that's not what anyone bargained for."

E-ZPass, which uses transponders on vehicle windshields to collect tolls from either credit cards or prepaid accounts, has been troubled by money and equipment problems in New Jersey since it was implemented four years ago.

Besides using toll violation fines to pay the debt, the state planned to raise $190 million by leasing the system's fiber-optic lines, but that plan was hurt by a telecommunications industry slump, state officials said.

Gov. James E. McGreevey suspended expanding E-ZPass, which was installed in 360 lanes on New Jersey toll roads and bridges. It was to be installed in about 380 additional lanes.

The committee is holding hearings to try to determine what caused the problems and who is responsible.

It previously heard testimony from Edward Gross, the former New Jersey Turnpike executive director. Gross defended the E-ZPass financing and said it always has been understood - despite Whitman administration claims in 1998 that E-ZPass would cost taxpayers nothing - that the bridge and road agencies would be responsible for paying the debt should revenue fall short.

Franzini said the E-ZPass bonds were purchased by a group called Newcourt Capital, which then sold them to various financial institutions.

Wisniewski said his staff has been unable to find Newcourt and asked whether it might have been created by MFS Network Technologies, which was awarded the contract to install E-ZPass.

Franzini and Lawrence G. Cier, EDA investment banking director, said they knew of no connection.

Assemblyman Diane Stender, D-Fanwood, suggested Newcourt be called to testify and questioned why the bond deal was completed privately.

Franzini said the deal was closed privately because it was so complex.

"That was probably a very good way to escape scrutiny," Stender said.

Assemblyman Alex DeCroce, R-Morris Plains, said the E-ZPass debt will not be due for several years and defended the system, charging Stender with being on a "witch hunt" after she suggested E-ZPass was not working.

"Right now, everything is working well," DeCroce said.

Wisniewski did not agree.

"The problem here is an accident already has happened," he said.

Responded DeCroce, "Well, it hasn't happened."

Wisniewski, though, said the state will owe money eventually.

"That money has to come from somewhere and if it's not from a toll increase, it's going to be from a reallocation of resources," he said.

Assemblyman Francis Bodine, R-Moorestown, said a toll increase would effect only people who use the toll roads and bridges, including motorists from out-of-state.

Assemblyman Reed Gusciora, D-Princeton Borough, said many of those people are state taxpayers.