CLT UPDATE
Saturday, July 19, 2008
No longer near, the end has arrived:
The inmates are torching the asylum!
State revenue collections for the
fiscal year that ended last month climbed $1.152 billion over fiscal
2007, a 5.8 percent increase...
Income tax collections for the fiscal year beat benchmarks by $455
million, rising 9.6 percent, while overall collections totaled $20.888
billion, beating the original state estimate by $1.063 billion.
State House News Service
Wednesday, July 16, 2008
State tax revenues up 5.8 percent in fiscal 2008
Treasurer Timothy Cahill chastised the Patrick administration
and the Legislature on Tuesday over what he labeled a “reckless” move to
position the state as a guarantor of the Mass. Turnpike Authority’s debt, and
questioned whether his colleagues on Beacon Hill grasped the gravity of the
larger economic picture....
“It’s a very, very risky move. I think it’s a reckless move by the
administration and the Legislature,” Cahill said during an interview on NECN’s
“NewsNight” evening program, adding that the move “aggravates me.”
House lawmakers and administration officials rejected Cahill’s charge that the
shift was sudden, and said they did not expect it would cost the state money.
“The treasurer is someone who is pretty plugged in to what is happening in the
Commonwealth, and this bill was put out by the committee on Ways and Means
yesterday, and if the treasurer is going to suggest that he wasn’t aware of the
bill until tonight, or until we acted, I’m not sure that I’m accepting of that
idea,” said Rep. Joseph Wagner, House chair of the Transportation Committee.
“We don’t expect that the Commonwealth is ever going to have to stand behind the
Turnpike’s borrowing,” said Wagner....
The treasurer also attacked the $28.22 budget the Legislature passed and Patrick
signed on Sunday with $122 million in vetoes, saying it raised questions about
their understanding of financial conditions. The budget “probably is” $1 billion
out of balance, Cahill said.
“With the lack of real tough decisions that were made, I’m wondering if people
really understand it,” Cahill said.
State House News Service
Tuesday, July 15, 2008
Cahill rips Patrick, House move on Pike debt
The Patrick administration is engineering a large-scale
financial rescue of the Massachusetts Turnpike Authority that would allow the
cash-strapped agency to refinance $800 million in debt to avoid potentially
ruinous repayment terms.
The House, acting swiftly at the administration's request, gave initial approval
yesterday to legislation that would allow the Turnpike Authority to use the
state's higher credit rating to refinance its debt to lower its interest costs.
The move means taxpayers would be responsible for the turnpike's debt if the
agency defaults....
However, state Treasurer Timothy Cahill accused the administration of exposing
the state and its taxpayers to heavy risk without demanding financial reforms at
the Turnpike Authority.
"It borders on fiscal recklessness, to be honest with you," Cahill said
yesterday. "This is a bailout, and it does nothing to force the turnpike to
clean up its own mess. The taxpayers deserve better than this." ...
Cahill, and another critic, state Senator Mark Montigny, said the administration
needs to install new oversight provisions that would prevent the Turnpike
Authority from entering into potentially risky financial transactions in the
future.
"We're assuming all of the risk here, but we're abandoning any concept of
oversight," the New Bedford Democrat said. "I want to prevent this from ever
happening again, and we can't do that until we assess blame and correct this."
...
The turnpike debt provision was tacked onto a $3 billion borrowing measure that,
if passed, would fund repairs to as many as 300 bridges that have structural
problems.
Overall, the provision authorizes the state to guarantee the Turnpike
Authority's entire debt load of $2.4 billion ...
The Boston Globe
Wednesday, July 16, 2008
State tries to rescue Pike from huge debt
Massachusetts residents got a shock when state officials, at
the peak of construction on the Big Dig project, disclosed that the price tag
had ballooned to nearly $15 billion. But that, it turns out, was just the
beginning.
Now, three years after the official dedication of the Central Artery/Third
Harbor Tunnel, the state is reeling under a legacy of debt left by the massive
project. In all, the project will cost an additional $7 billion in interest,
bringing the total to a staggering $22 billion, according to a Globe review of
hundreds of pages of state documents. It will not be paid off until 2038....
To meet that obligation, the state's annual payments will be nearly as much over
the next several years, $600 million or more, as they were in the heaviest
construction period....
The state is paying almost 80 percent of its highway workers with borrowed
money; the crushing costs of debt have pushed the Massachusetts Turnpike
Authority, which manages the Big Dig, to the brink of insolvency; and
Massachusetts spends a higher percentage of its highway budget on debt than any
other state....
As a result, the Globe analysis of state and federal data shows, state taxpayers
and toll-payers are responsible for a staggering $18 billion of the total $22
billion in construction and debt costs....
So far, the answer adopted by Governor Deval Patrick and his administration is a
familiar one: Borrow more money to meet current transportation needs. The
administration has gained legislative approval for $5 billion in new borrowing
for transportation projects and is asking for $4 billion more in a plan to get
the state's 3,000 bridges into top condition over the next eight years....
But more is needed, said Michael Widmer, president of the Massachusetts
Taxpayers Foundation. It simply avoids the nasty reality by borrowing deeper and
longer into future, he said.
"They are not addressing the situation, they are just shifting billions of
dollars of debt to future generations," Widmer said.
"Nobody wants to be the one to increase taxes," he said. "But without taxes, it
means the next generation will face a deep hole."
The Boston Globe
Thursday, July 17, 2008
Big Dig's red ink engulfs state
Cost spirals to $22b;
crushing debt sidetracks other work,
pushes agency toward insolvency
Lieutenant Governor Timothy Murray yesterday accused state
Treasurer Timothy Cahill of failing to help devise a financial bailout for the
Massachusetts Turnpike Authority, despite knowing of its looming debt problems
almost three months ago.
In unusually heated criticism, Murray said Cahill, the state's top financial
officer, signed off on the outlines of a plan to rescue the Turnpike Authority
in April, only to then criticize it this week when details were reported....
Murray's comments came one day after Cahill harshly criticized the Patrick
administration's plan to essentially act as a cosigner on the Turnpike
Authority's crushing $2.4 billion debt, which would allow the authority to use
the state's higher credit rating to refinance the debt....
Yesterday, Cahill acknowledged that he signed off on a financial disclosure
statement April 16 that included details of the Patrick administration's plan to
back the Turnpike Authority's debt. He said his objections this week are due to
changes in the plan that would substantially increase the amount of debt to be
supported by taxpayers.
"The suggestion in the [disclosure] statement was a much smaller exposure of
$800 million, and now we're talking about almost $2.5 billion," Cahill said.
"It's a full-scale bailout with no responsibility."
The Boston Globe
Thursday, July 17, 2008
Treasurer accused of inaction on Pike
It just seems that someone should back up Treasurer Cahill as
he objects to making state taxpayers responsible for the uncontrolled Mass
Turnpike debt. Citizens for Limited Taxation wants him to know we are
happy that SOMEONE on Beacon Hill hasn’t completely lost his mind....
Of course they are denying that a tax increase will be required, laying the
usual "trap for fools." According to the Globe, Michael Widmer of the so-called
Mass. Taxpayers Foundation is calling for a tax increase to fund the insanity.
Let me guess: MTF’s preferred tax hike would be a gas tax and/or the income tax,
not a tax on business.
Is Big Business finally getting worried about the commonwealth’s economic
viability? Does it really imagine that a tax increase on working people is the
solution to state government irresponsibility?
CLT News Release
Thursday, July 17, 2008
CLT gives Treasurer Tim Cahill the Rudyard Kipling award
State Treasurer Timothy P. Cahill continued to clash publicly
with officials of Governor Deval Patrick's administration yesterday over the
administration's proposal to throw the troubled Massachusetts Turnpike Authority
a financial lifeline by guaranteeing the authority's debt.
Cahill, who has objected to the plan all week, said during a State House hearing
that he believes the administration is acting recklessly. He called for
unspecified changes to be imposed on Turnpike Authority operations if the deal
moves forward.
"To bail out the Turnpike and not change anything about the operation, not put
any reforms, I don't think the public - and rightfully so - would stand for
that," Cahill said after the hearing.
The Patrick administration and the Turnpike Authority continued to call the plan
a relatively risk-free move for the state, as well as the only option on the
table to save an agency that is on the brink of insolvency....
Cahill appeared to pick up an ally yesterday in state Senator Mark C. Montigny,
the New Bedford Democrat who presided over the contentious hearing where the
competing viewpoints were aired.
"I think this is ill considered, ill timed, and I think it is about as bad as it
gets," Montigny, cochairman of the Joint Committee on Bonding, Capital
Expenditures, and State Assets, said after the 3 1/2-hour hearing. "It is the
worst of both worlds for the taxpayer and the tollpayer."
Budget watchdog Michael Widmer, president of the Massachusetts Taxpayers
Foundation, also blasted the administration's plan.
"This is one of the most irresponsible proposals I have seen seriously
considered by the Legislature in my 16 years," said Widmer, whose organization
is backed by business. "We are just heading off a cliff, Thelma and Louise, with
a smile on our face."
Widmer called for a gas-tax increase and new tolls to help the Turnpike
Authority meet the terms of its Big Dig-related debts.
The Boston Globe
Friday, July 18, 2008
Cahill calls for turnpike overhaul
Says bailout plan must include changes
State officials struggled to find alternatives to Gov. Deval
Patrick’s administration plan to bail the Massachusetts Turnpike Authority out
of further debt yesterday as Pike officials pushed for quick passage of the
proposal.
Treasurer Tim Cahill urged lawmakers to find another way to help the floundering
agency instead of using the state as co-signer as the Pike refinances $800
million in debt.
“We cannot allow ourselves to operate with a blank-checkbook mentality,” Cahill
said, adding the plan will hurt the state’s credit rating....
As lawmakers struggled with the administration’s plan, a top taxpayer watchdog
said a hike in the gas tax and tolls is the only way to help the authority,
where $2.4 billion in debt continues to swell thanks to the Big Dig.
“The only way out of this is to increase the gas tax or increase tolls, or some
combination,” said Massachusetts Taxpayers Foundation President Michael Widmer.
The Boston Herald
Friday, July 18, 2008
Pike refinance push spurs demands for alternatives
The Patrick administration is seeking the power to help out
the Massachusetts Turnpike Authority by co-signing for some of its debt.
Unfortunately, the Legislature has no good choice but to adopt the proposal
before adjourning later this month.
The authority's plight shows once again that transportation financing is a mess
in Massachusetts. And a hike in the unpopular gas tax has to be a part of the
solution.
A Boston Globe editorial
Saturday, July 19, 2008
State to Pike: Don't drop dead
The Massachusetts Convention Center Authority yesterday
dumped Aramark Corp. as its concessionaire at the Hynes and South Boston
convention centers, citing disappointing service and an ongoing labor dispute
with a food-service union.
The authority also signaled yesterday it may end up running the catering and
concession services on its own - a prospect that brought sharp criticism from a
tax activist who warned the authority might end up dishing out lucrative
contracts to union members who’d become virtual government workers....
While casting the dispute as one over the quality of food services, [MCCA
executive director James Rooney] acknowledged in an interview that Aramark’s
ongoing contract dispute with Unite Here Local 26 also played a role in his
decision....
Rooney, who said the current contract with Philadelphia-based Aramark will be
terminated by early next year, said the authority will either re-bid the
concession contract - or bring the food and beverage services “in house,”
similar to what the New England Patriots do at Gillette Stadium.
But Barbara Anderson, executive director of Citizens for Limited
Taxation, blasted that idea as potentially costing taxpayers if unions end
up negotiating “fiscally irresponsible” contracts, similar to union agreements
at the Massachusetts Turnpike and MBTA, both also quasi-independent government
agencies.
The Boston Herald
Thursday, July 17, 2008
Embattled Aramark ousted
Convention deal canceled over service, union flap
Chip Ford's CLT
Commentary
The day of reckoning has arrived. At last, "The
Best Legislature Money Can Buy," after decades of mal- and mis- and
nonfeasance, has managed to plunge the state into near if not outright
bankruptcy. Massachusetts has the highest per-capita debt burden
of any state in the nation, and it's about to assume even more.
Lot's more. And we haven't even yet gotten to the
"Ticking Time
Bomb" explosion of unfunded public employee pensions and benefits!
Not only are the inmates running the asylum --
they're preparing to burn it down!
Count on the so-called
Massachusetts Taxpayers Foundation -- front for Fat Cat Big Business
and Banking -- to come up with its usual solution: Tax the average
citizens even more! The voice of the amen chorus, the Boston Globe
editorial elites, as would be expected are right there seconding the
motion loudly.
Last year's state revenue tax take was $1.152 billion
more than fiscal 2007, a 5.8 percent increase. The
Legislature spent every cent and then some. The budget it and
Governor Patrick just approved for this new fiscal year totals $28.11
billion, a 4.86 percent increase over last year's spending.
It even raided the "rainy day fund" to spend more. Still not
enough. So it passed another $800 million in new taxes.
Still not enough. The "fulltime" Legislature is expected to
approve $10 billion in borrowing before it goes home on vacation until
after the November election -- three months away.
And now we learn even all that is still
not enough: The Legislature plans to back another $2.5 billion of
borrowing in our name to bail out the Mass Pike/Big Dig gross
mismanagement fiasco.
We thought the most recent price tag of $15 billion
for the Big Dig was ridiculous -- especially since it was promised to
come in under $5 billion when it was sold to the public in the mid-80s
by the Dukakis administration. It was that same administration
which also burdened taxpayers with the "temporary" income tax hike we're
still paying 19 years later. Back then the federal government, we
were promised, would be picking up 90 percent of the cost.
Initially it picked up a significant portion -- until the feds
recognized the state's gross mismanagement and cut back, then cut off
any additional funding. That stuck the remainder of the bill on
the state to fund/finance, stuck it on
taxpayers and tollpayers.
Of course the state has no money that doesn't come
out of our pockets, mine and yours and everyone else's who works for a
living.
It's all over but for shutting off the lights.
This irresponsible and unaccountable spending frenzy is now so ingrained
on Bacon Hill that the pols no longer have a chance of stopping it
or themselves. It's become simply what they do.
We can no longer trust those running the state to do
anything but worsen our plight. They simply don't care to reform
themselves, have no desire to recover from their spending addiction.
They've hit bottom and are still digging the hole deeper and dragging us
down into it.
Now more than ever, we citizens, we taxpayers, we
voters -- WE must take matters into our hands if we're to survive
as more than passive cash cows existing only for the ruling elite to
milk. We must stand together and send a resounding NO MORE!
We must vote YES with one voice on Question 1 in November and repeal the
income tax. Not only are we saying "Not one cent more," but
"That's it, the game is over!"
And while we're at it, throw out every bumbling,
profligate, tax-borrow-and-spend incumbent who has a challenger on the
ballot.
Doing anything less than both is the act of a cash
cow mooing as it's led into the slaughterhouse.
 |
|
Chip Ford |
State House News
Service
Wednesday, July 16, 2008
State tax revenues up 5.8 percent in fiscal 2008,
officials see slowdown
By Jim O’Sullivan
State revenue collections for the fiscal year that ended last month
climbed $1.152 billion over fiscal 2007, a 5.8 percent increase, but
dropped in June for the second straight month as consumer doubts dragged
down sales and larger economic forces continued downward trends.
Income tax collections for the fiscal year beat benchmarks by $455
million, rising 9.6 percent, while overall collections totaled $20.888
billion, beating the original state estimate by $1.063 billion.
Following a 2.7 percent drop in May, revenues last month fell $21
million, 0.9 percent, below the same month last year, but beat their
monthly benchmark by $33 million. Sales and use tax receipts in June
slid 1 percent, $9 million below benchmark.
Beacon Hill officials are watching revenue trends closely, with skeptics
calling the budget as much as $1 billion out of balance and dependent on
a string of uncertain projections, including the federal acceptance of a
Medicaid waiver and estimates of tax receipts tied to a series of
complex corporate tax law changes being implemented.
Wary of revenues that are projected to underperform spending
significantly, Gov. Deval Patrick on Sunday asked lawmakers for the
ability to make unilateral budgets cuts across the state operating
budget. Patrick has not ruled out any state accounts as targets,
administration officials say. Budget writers used a fiscal 2009 estimate
of $20.987 billion when crafting the spending blueprint, meaning
revenues would need to grow less than half of one percent over the final
fiscal 2008 take, not the projected 3.8 percent, to meet that threshold.
Lt. Gov. Timothy Murray said there would be no guarantee that local aid,
which funds municipal operations and accounts for over a fifth of the
state operating budget, would be held harmless.
“I think realistically everything is on the table, and the hope
obviously is the economy, in Massachusetts and New England, stays on
solid enough ground that it’s a road we don’t have to go down,” Murray
said. “Clearly, everything would be on the table.”
The June tax numbers showed income and sales tax receipts falling short
of projections, but increases in corporate and business taxes. Income
taxes rose 2.2 percent over a year ago, but missed benchmark by $8
million.
"For the second month in a row, overall collections fell below the
levels seen in May and June of 2007," said Revenue Commissioner Navjeet
Bal in a statement. "May's drop was partially due to quicker processing
of tax returns in April, but with the June numbers we are clearly seeing
a slowdown unrelated to the speed of tax return processing."
While the state’s revenue stream has held steady so far, experts say
indicators suggest a deep swoon ahead. Nationally, inflation rose 1.1
percent last month, significantly higher than expected, and was up 5
percent over the past year, the steepest jump in 17 years.
Treasurer Timothy Cahill on Tuesday predicted “some rough times going
forward,” and said bearish markets could force the state and
municipalities to spend more on pension obligations. Businesses have
predicted fallout from new corporate and cigarette taxes they said would
discourage new investments and cost jobs.
Budget analysts called the latest revenue figures worrisome.
“I think that they are a warning that the economy is weakening,” said
Noah Berger, executive director of the Mass. Budget and Policy Center, a
labor-backed think tank. Berger said the slumping sales and withholding
returns depicted “an ominous direction.”
“We are in a position where revenues are slowing. We don’t know whether
they’re going to drop precipitously or simply slow,” Berger said.
Murray said the administration wanted to keep open its options to spread
any prospective cuts along “as broad a range as possible.” Asked if a
pecking order for cuts had been established, Murray said, “No, I don’t
think we’ve gotten that far yet.”
In the middle of a fiscal year, the Legislature rapidly handed then-Gov.
Mitt Romney limited 9C expansions in January 2003, shortly after he took
office. Those powers allowed Romney to cut $114 million from local aid
as part of an overall $343 million reduction.
After Romney used the unilateral abilities again in late 2006, Patrick
as one of his first acts in office restored $383 million in cuts,
arguing that the money had already been budgeted and the services
promised. The governor says having budget cutting authorities expanded
now will give managers more flexibility in dispersing potential cuts.
Reducing local aid would throw another hurdle between Patrick and a
cornerstone promise of his campaign: reducing the property tax that
serves as the other major revenue source for cities and towns.
In an emailed statement, Patrick’s press secretary, Kyle Sullivan, said,
“Governor Romney was given expanded powers only for local aid and
education. We have asked for more expansive powers and more timely
authority to ensure that if necessary we have the flexibility to spread
any potential state budget cuts more equitably than Romney did. The
Governor has put four proposals on the table this session alone to
relieve property tax burden on homeowners and will continue to do
everything we can to protect local aid.”
State House News
Service
Tuesday, July 15, 2008
Cahill rips Patrick, House move on Pike debt,
drawing strong responses
By Jim O’Sullivan
Treasurer Timothy Cahill chastised the Patrick administration and the
Legislature on Tuesday over what he labeled a “reckless” move to
position the state as a guarantor of the Mass. Turnpike Authority’s
debt, and questioned whether his colleagues on Beacon Hill grasped the
gravity of the larger economic picture.
The charges touched off strong responses from lawmakers and Patrick
aides, who defended the change as necessary and sought to paint Cahill
as dilatory in taking his concerns public.
Cahill criticized the amendment to Gov. Deval Patrick’s $3 billion
bridge repair proposal, saying the state’s bond rating could suffer if
the change becomes law and the administration puts the Commonwealth
behind the Turnpike’s debt of up to $2.5 billion. Proponents said the
maneuver could save the Turnpike close to $200 million, and shield toll
payers from assuming the cost.
The House adopted the bill Tuesday, over Republican objections, after
its release from the budget committee Monday. Patrick has pushed the
change, which does not force the debt backing but authorizes the
administration to implement it.
“It’s a very, very risky move. I think it’s a reckless move by the
administration and the Legislature,” Cahill said during an interview on
NECN’s “NewsNight” evening program, adding that the move “aggravates
me.”
House lawmakers and administration officials rejected Cahill’s charge
that the shift was sudden, and said they did not expect it would cost
the state money.
“The treasurer is someone who is pretty plugged in to what is happening
in the Commonwealth, and this bill was put out by the committee on Ways
and Means yesterday, and if the treasurer is going to suggest that he
wasn’t aware of the bill until tonight, or until we acted, I’m not sure
that I’m accepting of that idea,” said Rep. Joseph Wagner, House chair
of the Transportation Committee.
“We don’t expect that the Commonwealth is ever going to have to stand
behind the Turnpike’s borrowing,” said Wagner.
In a statement released by Patrick’s press office, Jay Gonzalez,
undersecretary for administration and finance, said, “The Governor and
the Legislature worked together to craft what may be the only
responsible and cost-free solution to a serious problem inherited from
prior administrations. The Treasurer’s office was briefed a week ago on
the need to take swift action to protect toll payers from a $175 million
payment and did not come forward with any solutions to this pressing
problem before the House took action.”
Wagner estimated the lump payment at $165 million that could be due to
the UBS investment firm from the Turnpike if an outside insurer’s bond
rating were downgraded. A senior Patrick aide said the valuation had
recently risen to $179 million.
Cahill said his office “found out today that an amendment was entered
into the bridge repair bill” and “added to that bill at the last
minute.” He said, “We’ve had very minimal conversations with the
administration.”
Aides said Cahill’s office had been briefed in advance, and called the
change timely because the Legislature needed to authorize it before
closing its legislative session for the year on July 31.
The Legislature was scheduled to hold a hearing on the debt maneuver on
Wednesday, but aides said Tuesday the hearing had been delayed until
Thursday.
The authority’s debt entanglements originated in complicated financing
deals made in 2001 and 2002, after costs from the Big Dig spiked and the
Turnpike struggled to make payments. Under the arrangement, the Turnpike
makes fixed-rate interest rate payments to UBS, and UBS returns
variable-rate interest payments.
The bill, while extending the state’s fiscal backing to the independent
authority, which issues its own bonds and has its own revenue sources,
bans spending to repair Pike bridges.
The treasurer also attacked the $28.22 budget the Legislature passed and
Patrick signed on Sunday with $122 million in vetoes, saying it raised
questions about their understanding of financial conditions. The budget
“probably is” $1 billion out of balance, Cahill said.
“With the lack of real tough decisions that were made, I’m wondering if
people really understand it,” Cahill said.
With the troubled stock market and swirling economic problems elsewhere,
Cahill said, the state’s $52 billion pension fund is likely to lose
money this year.
“This fiscal year, we’re probably going to be negative. At best, we’re
going to be flat,” he said, predicting that the state and municipalities
could be forced to step up their own payments to meet pension payment
obligations, potentially for years.
The Boston
Globe
Wednesday, July 16, 2008
State tries to rescue Pike from huge debt
$800m would be refinanced; treasurer objects to 'bailout'
By Casey Ross
The Patrick administration is engineering a large-scale financial rescue
of the Massachusetts Turnpike Authority that would allow the
cash-strapped agency to refinance $800 million in debt to avoid
potentially ruinous repayment terms.
The House, acting swiftly at the administration's request, gave initial
approval yesterday to legislation that would allow the Turnpike
Authority to use the state's higher credit rating to refinance its debt
to lower its interest costs. The move means taxpayers would be
responsible for the turnpike's debt if the agency defaults.
A Patrick administration official yesterday said the debt provision is
urgently needed to get a safety net in place before the Legislature
recesses at the end of July. "What we're doing is making sure the
Turnpike Authority is not in the position of having to make a lump-sum
payment in the hundreds of millions of dollars that would have to be
financed on the backs of toll payers," said Jay Gonzalez, undersecretary
of administration and finance.
However, state Treasurer Timothy Cahill accused the administration of
exposing the state and its taxpayers to heavy risk without demanding
financial reforms at the Turnpike Authority.
"It borders on fiscal recklessness, to be honest with you," Cahill said
yesterday. "This is a bailout, and it does nothing to force the turnpike
to clean up its own mess. The taxpayers deserve better than this."
The turnpike has said it may have trouble making higher payments that
could come due in January under the terms of complex loans that were
used to help pay for the Big Dig. While they have not sketched a plan to
fix the agency's debt problem, turnpike officials have indicated that
one of the primary options for fixing its finances is to increase tolls.
The Turnpike Authority increased tolls on the roadway inside Route 128
and at the Boston Harbor tunnels in January.
Cahill, and another critic, state Senator Mark Montigny, said the
administration needs to install new oversight provisions that would
prevent the Turnpike Authority from entering into potentially risky
financial transactions in the future.
"We're assuming all of the risk here, but we're abandoning any concept
of oversight," the New Bedford Democrat said. "I want to prevent this
from ever happening again, and we can't do that until we assess blame
and correct this."
Top aides to Governor Deval Patrick defended the administration's
maneuvers, arguing that the state's backing is needed to avert a
financial disaster brewing at the Turnpike Authority. Gonzalez also
emphasized that the turnpike will still be primarily responsible for
repaying its debt and that he does not foresee deeper financial problems
that would force the state to open its coffers. "We don't expect to have
to pay a cent of the turnpike's debt," he said.
The turnpike debt provision was tacked onto a $3 billion borrowing
measure that, if passed, would fund repairs to as many as 300 bridges
that have structural problems.
Overall, the provision authorizes the state to guarantee the Turnpike
Authority's entire debt load of $2.4 billion; the Commonwealth would in
effect act as a cosigner on a loan for the turnpike.
The full debt must be backed by the state in order to allow the turnpike
to refinance the $800 million portion that carries the costliest
interest charges, officials said. The bill still needs approval from the
state Senate, whose members have called for a hearing on the turnpike's
debt for tomorrow.
The authority is facing a pair of troubling scenarios involving complex
debt deals it made earlier this decade with investments banks, including
UBS. Under one scenario, UBS can demand repayment of an additional $2
million a month beginning in January, a burden turnpike officials said
they would have trouble meeting.
The authority may also have to make a $179 million payment to UBS if the
company that provided insurance on the bonds, Ambac Financial Corp. of
New York, experiences further financial troubles.
Ambac's credit rating was lowered last month by Wall Street rating
agency Moody's out of concerns that tightening credit markets have
limited the firm's financial flexibility. One of the nation's largest
providers of financial insurance and guarantees, Ambac has seen its
stock price plummet in the last year. Another reduction in Ambac's
credit rating would allow UBS to demand immediate repayment, citing the
turnpike's lack of adequate financial backing.
The move to use the state's credit rating would allow the turnpike to
avoid both costly scenarios.
The authority's arrangement with UBS was authorized by former Turnpike
Authority chairman Matthew Amorello as a way to extract an upfront
payment from the investment house to plug holes in the Big Dig budget.
Similar transactions were also made with Lehman Brothers, freeing up a
total of $65 million.
The turnpike's problems stem in part from the turmoil that has been
rocking financial markets since last summer, and has spread in
particular to public agencies and large nonprofits whose interest costs
have soared as investors have retreated from portions of the bond
market.
The Boston
Globe
Thursday, July 17, 2008
Big Dig's red ink engulfs state
Cost spirals to $22b;
crushing debt sidetracks other work,
pushes agency toward insolvency
By Sean P. Murphy
Massachusetts residents got a shock when state officials, at the peak of
construction on the Big Dig project, disclosed that the price tag had
ballooned to nearly $15 billion. But that, it turns out, was just the
beginning.
Now, three years after the official dedication of the Central
Artery/Third Harbor Tunnel, the state is reeling under a legacy of debt
left by the massive project. In all, the project will cost an additional
$7 billion in interest, bringing the total to a staggering $22 billion,
according to a Globe review of hundreds of pages of state documents. It
will not be paid off until 2038.
Contrary to the popular belief that this was a project heavily
subsidized by the federal government, 73 percent of construction costs
were paid by Massachusetts drivers and taxpayers. To meet that
obligation, the state's annual payments will be nearly as much over the
next several years, $600 million or more, as they were in the heaviest
construction period.
Big Dig payments have already sucked maintenance and repair money away
from deteriorating roads and bridges across the state, forcing the state
to float more highway bonds and to go even deeper into the hole.
Among other signs of financial trouble: The state is paying almost 80
percent of its highway workers with borrowed money; the crushing costs
of debt have pushed the Massachusetts Turnpike Authority, which manages
the Big Dig, to the brink of insolvency; and Massachusetts spends a
higher percentage of its highway budget on debt than any other state.
The scope of the debt has not previously been calculated, much less
publicly disclosed, by the state's political leaders, including Governor
Deval Patrick and his senior transportation officials. The Globe
confirmed its calculations in interviews with the state's financial
analysts.
"The Big Dig saddled us with costs we can't afford," said Bernard Cohen,
secretary of transportation. "We are grappling with that legacy now.
There are no easy answers."
The debt is a big part of why Massachusetts had the highest
tax-supported debt per capita in the United States last year. Most of
the Big Dig borrowing occurred when cost overruns on the tunnel network
skyrocketed in the late 1990s and state officials scrambled to keep the
partially completed project afloat.
The impact of the debt can be seen in some frustrating and alarming
ways.
During the last three years, Massachusetts spent the most of any state,
by far, 38 percent of its highway budget, on debt payments, according to
Globe analysis of federal data. The median is less than 6 percent
nationally.
The state has also been forced to meet payroll demands for 1,400
Massachusetts Highway Department workers with borrowed money because it
does not have enough cash to pay them. That means that painters and
clerical workers paid around $18 an hour cost the state $28.80 an hour.
The 80 percent of the workforce being paid with borrowed money compares
to 14 percent before the Big Dig work began.
Across the state, commuters are suffering daily for the massive
shortfalls that have led to closings and stalled projects.
In Boston, Red Line trains on the Longfellow Bridge are forced to a
crawl, trucks are prohibited, and the volume of passenger cars is
restricted. On the South Shore, the Fore River Bridge between Quincy and
Weymouth is awaiting replacement while motorists squeeze over a
temporary span. And in Southeastern Massachusetts, Fall River motorists
are frustrated with the pace of work on replacing the Brightman Street
Bridge.
"It's a mess," said Fall River resident Muriel Pomprowicz.
Other such signs of neglect include a fleet of rusty trucks, some of
them 12 years old, that are still on the road.
From the start, the Big Dig was supposed to be paid for jointly by the
federal and state governments. When the project was unveiled in the
early 1980s, Massachusetts residents were told by transportation
officials that the federal government would pick up 90 percent of the
cost. Based on cost and borrowing estimates made at that time, state
residents were expected to spend around $345 million, interest payments
on debt included.
But the federal government ruled that the project was not eligible for
that level of federal support. As costs mounted over the next two
decades, it was the state's responsibility to make up the difference.
Ultimately, the federal government paid just 27 percent of the
construction costs, or about $4 billion.
As a result, the Globe analysis of state and federal data shows, state
taxpayers and toll-payers are responsible for a staggering $18 billion
of the total $22 billion in construction and debt costs.
The Massachusetts Turnpike Authority, which was brought in to oversee
the Big Dig construction in 1996 as part of a financial rescue plan,
borrowed $1.8 billion, but will have to pay back almost $5 billion,
including interest. Its borrowing was so expensive because it was
financed over 40 years, twice as long as the vast majority of government
debt, with no principal due for the first 10 years.
It is now unable to keep up with its share of the state's debt payments
and is in desperate need of a bailout. Alan LeBovidge, the turnpike's
new executive director, estimates a yawning deficit next year in the
authority's operating budget, $70 to $100 million.
"There is a funding gap," said LeBovidge. "It's a large number, and I
don't have a magic wand."
The authority's annual payments on its Big Dig debt are $115 million
now. Those payments will level off at $145 million annually by 2020 and
continue for another 18 years. The capital budget for construction,
paving, and inspection for the Big Dig and the 137-mile Massachusetts
Turnpike, meanwhile, has been slashed to $22 million, about 19 percent
of the debt expense.
The Turnpike Authority raised tolls last year, but will need to raise
them again and again to stay afloat. It may even add tolls on the
approaches to its downtown tunnels to alleviate the load on commuters
from the western suburbs.
"It's outrageous that toll-payers wind up footing the bill when others
get a free ride," said Mary Z. Connaughton, a Turnpike Authority board
member.
Quantifying the amount of money that was diverted to the Big Dig from
statewide road and bridge repair and construction programs is difficult.
A Globe analysis of data maintained by the Federal Highway
Administration shows spending for state roads and bridges lagged behind
other states. If Massachusetts had kept pace, it would have spent an
additional $851 million.
"The Big Dig drained funding away," Cohen said. "I can't tell you
exactly how much, but it's been in the billions of dollars."
There are two sources of state highway funds: state borrowing and
reimbursement to the state on federal gasoline taxes collected in
Massachusetts. The Big Dig, which makes up 7.5 miles of an 11,000-mile
system, gobbled up about 40 percent of those funds during the last 17
years, data show.
Since planning for the Big Dig began, the state gas tax was raised only
once, in 1991, to help pay for the Big Dig. That two-cent-per-gallon
increase contributed a modest amount to the project.
"The state didn't want to pay the cost as we went along, so now it is
time to pay the piper," said Alan Altshuler, former state transportation
secretary. "It's quite a bind, and there is no obvious way out. It's
something the politicians have to figure out."
So far, the answer adopted by Governor Deval Patrick and his
administration is a familiar one: Borrow more money to meet current
transportation needs. The administration has gained legislative approval
for $5 billion in new borrowing for transportation projects and is
asking for $4 billion more in a plan to get the state's 3,000 bridges
into top condition over the next eight years.
Asked why the state doesn't raise taxes to help pay for its burgeoning
costs, Cohen said no such course was necessary.
"We can afford these borrowings within the income stream we have today,"
Cohen said. "Raising taxes is not on the table."
Since taking office, Patrick has proposed merging the Turnpike Authority
with other transportation agencies to increase efficiency and save
money. He also has begun to reduce the number of workers being paid with
borrowed money.
There have been high-level discussions about adding tolls on Interstate
93, as well, though Cohen insists only as a last resort.
"What is on the table is reform and reorganization to show people we are
serious about sound policy," he said. "We need to turn things around
before we ask people to dig in deeper in pocket."
Cohen said eliminating consulting contracts, reducing senior staff, and
curtailing overtime at the turnpike have contributed to $14 million in
savings in the last year.
But more is needed, said Michael Widmer, president of the Massachusetts
Taxpayers Foundation. It simply avoids the nasty reality by borrowing
deeper and longer into future, he said.
"They are not addressing the situation, they are just shifting billions
of dollars of debt to future generations," Widmer said.
"Nobody wants to be the one to increase taxes," he said. "But without
taxes, it means the next generation will face a deep hole."
The Boston
Globe
Thursday, July 17, 2008
Treasurer accused of inaction on Pike
Lieutenant governor counterattacks
after criticism of bailout
By Casey Ross
Lieutenant Governor Timothy Murray yesterday accused state Treasurer
Timothy Cahill of failing to help devise a financial bailout for the
Massachusetts Turnpike Authority, despite knowing of its looming debt
problems almost three months ago.
In unusually heated criticism, Murray said Cahill, the state's top
financial officer, signed off on the outlines of a plan to rescue the
Turnpike Authority in April, only to then criticize it this week when
details were reported.
"He's been informed about this since April. He had plenty of time to
come forward with ideas, and we have not heard from him," Murray said.
"What is reckless in this situation is to do nothing . . . because the
turnpike could end up facing a $200 million payment that would fall on
the backs of the toll payers."
Murray's comments came one day after Cahill harshly criticized the
Patrick administration's plan to essentially act as a cosigner on the
Turnpike Authority's crushing $2.4 billion debt, which would allow the
authority to use the state's higher credit rating to refinance the debt.
The plan is aimed at lowering interest costs on an $800 million portion
of the debt that is tied up in complex loans that have gone sour in
recent months, putting the authority at risk of tens of millions of
dollars of unanticipated costs.
In a story in the Globe yesterday, Cahill said the administration's plan
"borders on fiscal recklessness," arguing that it puts taxpayers at risk
of paying the Turnpike Authority's debt while failing to improve
oversight of its financial management.
Yesterday, Cahill acknowledged that he signed off on a financial
disclosure statement April 16 that included details of the Patrick
administration's plan to back the Turnpike Authority's debt. He said his
objections this week are due to changes in the plan that would
substantially increase the amount of debt to be supported by taxpayers.
"The suggestion in the [disclosure] statement was a much smaller
exposure of $800 million, and now we're talking about almost $2.5
billion," Cahill said. "It's a full-scale bailout with no
responsibility."
Top aides to the governor said the move to back the authority's full
debt load is due to circumstances that arose late last month, when an
insurance company backing the bonds had its credit rating downgraded.
If the company, Ambac Financial Corp., suffers another downgrade, the
Turnpike Authority could be forced to make an immediate debt payment of
$179 million, a sum officials have said the authority cannot afford.
The tensions between Cahill and the Patrick administration contributed
to widely divergent reactions to the rescue plan on Beacon Hill.
The House of Representative approved the plan unanimously Tuesday, with
a top lawmaker saying it is a prudent financial step. "We think it makes
sense," said State Representative Joseph Wagner, a Chicopee Democrat and
cochairman of the Legislature's Committee on Transportation. "This is a
safeguard for everyone involved."
Michael Widmer, president of the business-backed Massachusetts Taxpayers
Foundation, said the administration's proposal does not solve the
Turnpike Authority's underlying financial problems and could lead to
huge losses for the state.
"There are all sorts of things happening that no one ever expected in
the larger credit and financial markets," he said. "I don't know how we
can guarantee the state is not going to be on the hook for this."
State senators are scheduled to hold a hearing today on the debt
proposal.
Senate President Therese Murray signaled initial support for the
administration's plan yesterday. "The consequence of not doing anything,
and the specter of defaulting, would have too severe an impact on toll
payers," Murray, a Plymouth Democrat, said in an e-mailed statement.
"The Senate intends to take this up."
The lawmaker in charge of today's hearing, Senator Mark Montigny,
Democrat of New Bedford, said he intends to push for changes in the
Senate version of the bill that would require state authorities to
obtain approval for complex financial transactions from the governor's
financial executives.
"The crisis we're in right now means these reforms are more necessary
now than they've ever been," he said. "It's a symptom of a much bigger
problem with quasi-independent authorities like the turnpike."
CLT News Release
Thursday, July 17, 2008
CLT gives Treasurer Tim Cahill the Rudyard Kipling award:
"If you can keep your head when all about you,
are losing theirs and blaming it on you"....
It just seems that someone should back up Treasurer
Cahill as he objects to making state taxpayers responsible for the
uncontrolled Mass Turnpike debt. Citizens for Limited Taxation wants him
to know we are happy that SOMEONE on Beacon Hill hasn’t completely lost
his mind.
The governor has no idea what he is doing. The House, knowing how bad
the fiscal situation is, doesn’t know what to do about it. The Senate
leadership can’t think of anything to do but attack the Treasurer, the
one sane person left.
Ladies and gentlemen: the Big Dig/Turnpike has been borrowing for
operating expenses! This is fiscal insanity! And most of our government
leaders want to make us taxpayers responsible for the debt! Without even
initiating reforms that might begin to control it!
Of course they are denying that a tax increase will be required, laying
the usual "trap for fools." According to the Globe, Michael Widmer of
the so-called Mass. Taxpayers Foundation is calling for a tax increase
to fund the insanity. Let me guess: MTF’s preferred tax hike would be a
gas tax and/or the income tax, not a tax on business.
Is Big Business finally getting worried about the commonwealth’s
economic viability? Does it really imagine that a tax increase on
working people is the solution to state government irresponsibility?
CLT salutes Treasurer Cahill for resisting the Big Dig bailout.
The Boston
Globe
Friday, July 18, 2008
Cahill calls for turnpike overhaul
Says bailout plan must include changes
By Eric Moskowitz
State Treasurer Timothy P. Cahill continued to clash publicly with
officials of Governor Deval Patrick's administration yesterday over the
administration's proposal to throw the troubled Massachusetts Turnpike
Authority a financial lifeline by guaranteeing the authority's debt.
Cahill, who has objected to the plan all week, said during a State House
hearing that he believes the administration is acting recklessly. He
called for unspecified changes to be imposed on Turnpike Authority
operations if the deal moves forward.
"To bail out the Turnpike and not change anything about the operation,
not put any reforms, I don't think the public - and rightfully so -
would stand for that," Cahill said after the hearing.
The Patrick administration and the Turnpike Authority continued to call
the plan a relatively risk-free move for the state, as well as the only
option on the table to save an agency that is on the brink of
insolvency. On Wednesday, Lieutenant Governor Timothy P. Murray hit back
at Cahill, saying Cahill should have acted earlier to protect the
authority's financial health.
Cahill appeared to pick up an ally yesterday in state Senator Mark C.
Montigny, the New Bedford Democrat who presided over the contentious
hearing where the competing viewpoints were aired.
"I think this is ill considered, ill timed, and I think it is about as
bad as it gets," Montigny, cochairman of the Joint Committee on Bonding,
Capital Expenditures, and State Assets, said after the 3 1/2-hour
hearing. "It is the worst of both worlds for the taxpayer and the
tollpayer."
Budget watchdog Michael Widmer, president of the Massachusetts Taxpayers
Foundation, also blasted the administration's plan.
"This is one of the most irresponsible proposals I have seen seriously
considered by the Legislature in my 16 years," said Widmer, whose
organization is backed by business. "We are just heading off a cliff,
Thelma and Louise, with a smile on our face."
Widmer called for a gas-tax increase and new tolls to help the Turnpike
Authority meet the terms of its Big Dig-related debts.
Montigny said he would try to delay consideration of the proposal in the
Senate so that lawmakers could have more time to ponder its
implications.
But whether he will be successful remains unclear. Senate President
Therese Murray said earlier this week that she wants to debate the plan
in the Senate and is concerned about the consequences of a financial
failure of the Turnpike Authority. Senator Steven C. Panagiotakos,
chairman of the Senate Ways and Means Committee, said yesterday that he
has concerns about the plan and will review the administration's
proposal next week.
On the table is a proposal, already approved by the House, that calls
for the state to serve as cosigner for $2.4 billion of Turnpike
Authority debt. That would help the authority, which is a quasi-public
agency dependent on toll revenues, to take advantage of the state's
strong credit rating to refinance loans. If the plan fails, the
authority could owe millions in new interest, as well as a roughly $200
million penalty payment to investment bankers.
Lawmakers and officials debating the plan said they also were concerned
about the long-range impact on state finances of total Big Dig debt,
which includes $7 billion in interest payments expected to drive the
total cost of the $15 billion project to $22 billion, figures that were
reported for the first time yesterday by the Globe.
Alan LeBovidge, executive director of the Turnpike Authority, said he
had heard no viable alternatives to the state guarantee plan, from
Cahill or other critics.
"If we get a letter tomorrow from somebody that said, 'Hey, I'm an
investment banker; here's what you can do,' we'd do it," LeBovidge said.
"We're not out there to waste people's money. We want to minimize the
cost."
The bailout's proponents also said that having the state guarantee the
turnpike's debt would be unlikely to affect the state's credit rating.
Even Cahill has acknowledged that it may not hurt the state's rating.
"No one has to bear these costs," said Jay Gonzalez, state
undersecretary for administration and finance. "Even with the guarantee,
there is no expectation that the Commonwealth would have to pay any of
the Turnpike Authority's loans."
Montigny's cochairman on the debt committee, Representative David L.
Flynn of Bridgewater, defended the House's support of the bailout. "I
don't know anything else [that can be done], except the responsible
actions taken to pledge the credit of the Commonwealth to . . . stop the
bleeding," Flynn said.
The Boston
Herald
Friday, July 18, 2008
Pike refinance push spurs demands for alternatives
By Hillary Chabot
State officials struggled to find alternatives to Gov. Deval Patrick’s
administration plan to bail the Massachusetts Turnpike Authority out of
further debt yesterday as Pike officials pushed for quick passage of the
proposal.
Treasurer Tim Cahill urged lawmakers to find another way to help the
floundering agency instead of using the state as co-signer as the Pike
refinances $800 million in debt.
“We cannot allow ourselves to operate with a blank-checkbook mentality,”
Cahill said, adding the plan will hurt the state’s credit rating.
But authority head Alan LeBovidge said the bill should be passed before
the July 31 legislative deadline to avoid increased debt payments.
Noting that no alternatives have been formally proposed, LeBovidge said
sarcastically, “Maybe I missed it. They all said they had other options,
but there were none that I wrote down.”
The provision authorizes the state to guarantee the Turnpike Authority’s
entire $2.4 billion debt load. However, LeBovidge said he hopes the
state will not have to fully back the new loan.
House lawmakers approved the proposal as part of a bridge repair bill
Tuesday evening, and it is now before the Senate. Sen. Mark Montigny
(D-New Bedford) said he is deeply skeptical of the proposal because it
offers little legislative oversight to ensure the Pike would reform its
spending.
As lawmakers struggled with the administration’s plan, a top taxpayer
watchdog said a hike in the gas tax and tolls is the only way to help
the authority, where $2.4 billion in debt continues to swell thanks to
the Big Dig.
“The only way out of this is to increase the gas tax or increase tolls,
or some combination,” said Massachusetts Taxpayers Foundation President
Michael Widmer.
LeBovidge said there are no plans to increase tolls on the Pike, but
undersecretary of administration and finance Jay Gonzalez admitted
during the hearing that the turnpike’s “financial situation is not
sustainable over the long term.”
The Boston
Globe
Saturday, July 19, 2008
A Boston Globe editorial
State to Pike: Don't drop dead
The Patrick administration is seeking the power to help out the
Massachusetts Turnpike Authority by co-signing for some of its debt.
Unfortunately, the Legislature has no good choice but to adopt the
proposal before adjourning later this month.
The authority's plight shows once again that transportation financing is
a mess in Massachusetts. And a hike in the unpopular gas tax has to be a
part of the solution.
Yet the authority is in trouble now. Debt from the Big Dig has damaged
the authority's credit rating and hurt its ability to refinance
outstanding bonds. The fallout from the subprime mortgage mess has
undermined a key bond insurer, making the authority's debts seem even
riskier. If conditions get worse, the authority could be asked to cough
up nearly $200 million in a matter of weeks. The Patrick administration
would avoid that by guaranteeing some Turnpike Authority debt, which
would let the agency share the state's superior credit rating.
Granted, the Turnpike Authority has had lousy luck with easy fixes in
the past. Because it once seemed flush with money, the authority took
over responsibility for the Big Dig from the state. But the agency
suffered as the project's pricetag ballooned - to $22 billion if finance
costs are included, according to a new tally by the Globe. To generate
up-front cash in lean times, the agency entered into complex financial
bets in 2001 and 2002. Those bets have now gone sour.
Opponents of the rescue plan, most notably state treasurer Tim Cahill,
have raised legitimate objections. Co-signing for the authority's debt
could harm the state's credit rating, and won't fix the authority's
long-term fiscal woes. Transportation agencies need to be streamlined,
and their finances reformed so that turnpike commuters aren't stuck
paying for the Central Artery.
All true, but these objections don't add up to a plan to avoid a
financial catastrophe at the authority. If the authority's problems
spark a broad debate over how to save the state's creaking
transportation system, so much the better. But for now, the state will
still have to step in.
The Boston
Herald
Thursday, July 17, 2008
Embattled Aramark ousted
Convention deal canceled over service, union flap
By Jay Fitzgerald
The Massachusetts Convention Center Authority yesterday dumped Aramark
Corp. as its concessionaire at the Hynes and South Boston convention
centers, citing disappointing service and an ongoing labor dispute with
a food-service union.
The authority also signaled yesterday it may end up running the catering
and concession services on its own - a prospect that brought sharp
criticism from a tax activist who warned the authority might end up
dishing out lucrative contracts to union members who’d become virtual
government workers.
In a letter to Aramark yesterday, MCCA executive director James Rooney
said the authority has been “consistently” worried about the “quality
and level of service provided by Aramark” at its two centers.
Despite promises to improve the quality of catering and concession
services, Aramark’s performance has led to widespread “customer
dissatisfaction” with food and beverages at shows, Rooney wrote.
While casting the dispute as one over the quality of food services,
Rooney acknowledged in an interview that Aramark’s ongoing contract
dispute with Unite Here Local 26 also played a role in his decision.
He said tensions between Aramark - whose MCCA business is worth about
$27 million a year - and about 300 food-service workers has gotten so
ugly that it’s created a bad atmosphere at the two centers.
Aramark, which has been slapped with an unfair labor practice complaint
by federal regulators, left no doubt in a statement yesterday that it
thought it got the heave due to its battle with Unite Here.
“This current situation appears to be motivated by our present dispute
with Local 26,” said Aramark, which has served the authority for 14
years.
Rooney, who said the current contract with Philadelphia-based Aramark
will be terminated by early next year, said the authority will either
re-bid the concession contract - or bring the food and beverage services
“in house,” similar to what the New England Patriots do at Gillette
Stadium.
But Barbara Anderson, executive director of Citizens for
Limited Taxation, blasted that idea as potentially costing taxpayers
if unions end up negotiating “fiscally irresponsible” contracts, similar
to union agreements at the Massachusetts Turnpike and MBTA, both also
quasi-independent government agencies.
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