Dec 13 (Reuters) - Ohio would raise $1.5 billion for highway projects through the sale of bonds backed by future toll revenue from the Ohio Turnpike, under a plan released by Governor John Kasich and state transportation officials on Thursday.
The state could also attract an additional $1.5 billion in federal and local government matching funds to pay for other road projects, according to the Ohio Jobs and Transportation Plan, which would need legislative approval.
Kasich, a Republican, said he rejected the option of leasing the turnpike to a private entity after a study. Instead, he wants to tap into the approximately $270 million a year in turnpike toll revenue that is more than what is needed to operate the road.
More than 90 percent of the bond proceeds would be used for the 241-mile turnpike or for highway projects in northern Ohio, under the plan.
But the fact that some of the money would fund non-turnpike projects could raise red flags with credit rating agencies.
Adam Torres, an analyst at Standard & Poor’s Ratings Services, said the move carries some potential for concern, citing a 2007 law that required the Pennsylvania Turnpike to make payments to that state’s transportation department. S&P downgraded the Pennsylvania Turnpike to A-plus from AA-minus in 2008 because of its lower capacity to service its debt, he added.
The Ohio Turnpike, which has about $575 million of debt outstanding, is rated AA by S&P, according to Torres.
Connie Wehrkamp, Kasich’s deputy press secretary, said the plan includes a mechanism to increase toll revenue and that there will be different structures for the bonds.
“The new debt will be structured to satisfy rating agency criteria and will include both a senior level of debt (higher coverage ratios) targeted to receive a rating in the AA category and a subordinate level of debt targeted to achieve a rating in the A category,” she said in an email.
Meanwhile, tolls for local trips using electronic passes would be frozen for 10 years and increases in other toll rates would be capped at the rate of inflation.
“Bonding against future turnpike revenue generates enough money to erase our highway budget deficit,” said Ohio Department of Transportation Director Jerry Wray in a statement. “Combined with ODOT’s work to reduce our cost of doing business and improve service to the state’s motoring public, this plan puts the resources we need into our major construction budget.”
Ohio’s dependence on gasoline taxes has led to a $1.6 billion highway budget deficit as economic uncertainty, higher gas prices and more fuel-efficient cars have depressed gas sales, the statement said.
The Ohio Turnpike Commission would have expanded authority and a new name -- the Ohio Turnpike and Infrastructure Commission under the plan.