ALBANY – After spending months defending a plan to hike Thruway tolls on trucks by 45 percent, the Cuomo administration Monday abruptly changed course and decided to drop what business groups had called a $90 million backdoor tax on consumers during a struggling state economy.
Administration officials confirmed the Thruway Authority and the Governor’s Office have devised a new proposal that calls for no increase in tolls, instead drawing on a series of cost savings to make up for the $90 million in annual revenues the toll hike was projected to bring in to the state coffers.
The toll increase, proposed by the Thruway leadership Cuomo put in place at the agency, was to have gone into place earlier this fall to correct the finances of the state authority that controls the 500-mile highway system as well as the state’s canal waterways.
State officials, including Cuomo, had defended the increase as unfortunate but necessary in order to protect the agency’s Wall Street bond ratings, which determine interest rates on borrowings by the Thruway; the agency is expected to be borrowing potentially billions of dollars to finance a new bridge project across the Hudson River.
Cuomo recently began to push back against the sizable 45 percent increase, saying it needed to be done only as a “last resort” and only if all other alternatives were first explored by Thruway officials.
The governor told reporters that the Thruway agency now envisions no toll hike on the highway for at least the next three years.
But he stopped short of guaranteeing no tolls would rise during that time, citing unknown financial or other circumstances that might arise.
“My position was that the toll increase would be a last resort. I thought it would be counterproductive,” Cuomo said.
“I understand the financial necessities, but I thought it would be counterproductive from an economic development point of view, especially in upstate New York,” he added.
Cuomo acknowledged the complaints of business groups. “We’ve worked very hard to say to business that it’s a new day in New York and that we got it, and we’re working on reducing costs, and New York is not going to be the high-tax state, the high-cost state, the high-regulation state … I thought it would send the wrong signal, especially at this time when we’re working so hard to send a different signal,” the governor added.
Thruway Executive Director Thomas Madison said officials in recent months devised an alternative plan to reduce costs – with such things as staff cutbacks through attrition, sharing services with other state agencies, reducing new vehicle costs and refinancing debt – to help reduce the need for the $90 million toll hike.
Most of the savings will come from the Thruway ending its payments to the State Police for its Troop T police coverage along the highway system; that $60 million a year will now be folded into the state’s general fund budget as an obligation.
“It’s a very special day for the Thruway Authority,” Madison said.
Eliminating the toll hike was expected to be formally approved by the authority’s board when it votes on the agency’s 2013 budget.
Business groups – ranging from those representing trucking companies, farmers and department stores – had blasted the toll plan as a backdoor tax hike that would be passed on to consumers in the form of higher prices on any product shipped along the statewide highway.
The Thruway Authority had a scheduled meeting later Monday, but sources say the toll increase matter was taken off the agenda.
Instead, the board members were to consider the new design plans for Cuomo’s proposed Tappan Zee Bridge project over the Hudson River between Westchester and Rockland counties.
Cuomo received enormous pressure against the proposal from a range of business groups – the same organizations that he has been wooing since he took office two years ago with a mantra that New York State is open for business and wants to be considered a friendly environment for attracting and retaining companies.
Some lawmakers have been pressing Cuomo to let the Thruway Authority get rid of a major cost item – maintaining the state’s canal system, including the Erie Canal.
That money-losing operation was put onto the Thruway’s books in the early 1990s as a way for the state to save money in its main, general fund budget. State Comptroller Thomas DiNapoli said months ago the agency needed to explore ways to bring its expenses down to better match revenues. Some lawmakers also were demanding a detailed audit of the agency before any toll plan could go forth.
“I’m shocked,” Kendra Hems, president of the New York State Motor Truck Association, said Monday morning when told of the toll increase coming off the table.
“We’re very pleased that the Thruway Authority has decided to stop pursuing a crippling 45 percent toll increase on commercial trucks using the highway. The hike would have devastated the entire state’s economy and nullified any attempts to make New York ‘open for business.’ It is our sincere hope that any future proposal to close their budget shortfall is crafted with careful consideration to the impact it will have on the highway’s users, and the state as a whole,” Hems said.
“It’s a victory for Western New York and for New York State,” said State Sen. Tim Kennedy, a Buffalo Democrat, who noted the opposition heated up during a public hearing in Buffalo earlier this year.
“We stood up in a unified voice starting in Western New York calling on the authority to change course and not increase tolls, and at the end of the day, we were victorious because we stood up together and forced their hand,” Kennedy said.
The Thruway Authority’s toll hike plan has been on a classic Albany-style roller coaster ride since first being unveiled in May.
Initially, officials said the Thruway had been mismanaged for years and that the $90 million from the toll hike was needed to stop the bleeding. They said at the time the increase had nothing to do with a potential $5 billion plan by Cuomo and the authority to build a new downstate bridge over the Hudson River.
Next up came the acknowledgement that there was a connection: If the toll hike didn’t go through, it could lead to rating downgrades on agency borrowings – and that could raise the price of the bridge project.
In the early fall, the agency borrowed $1.1 billion on the bond market.
It told investors – in a legal document – that it “has no reason to believe” that the toll hike plan as proposed would be scuttled. That document told investors the plan would go into effect in late September.
A series of delays, including two postponements of Thruway board meetings in one week, then hit the toll hike plan. That led Donna Luh, a representative from Western New York on the agency’s board who serves as vice chairwoman, to blast her own agency in an article in The Buffalo News. She said agency officials were keeping board members in the dark about the toll plan and that she no longer believed the increase was necessary.
At two recent events, Cuomo then began lashing out at the idea proposed by his own agency.
At one event, he said such a toll hike could be “detrimental” to the state’s economy, followed by another event at which he told reporters the toll hike should only be considered as a “last resort” – a quote he repeated Monday with word of the Thruway’s retrenchment on the matter.