While the concept of creating bridge and sanitation authorities to help New York City shoulder a portion of its massive capital program is gaining a head of steam, the idea appears a long way from becoming real.
Officials from both the private and public sectors say it will "not be an easy political lift" to get the authorities off the ground.
Questions abound about how to structure the two entities:
* What technologies will be used to collect fees and tolls?
* What kind of revenue streams will support the authorities?
* What degree of political and financial autonomy will the authorities have?
* And what will be the impact of new fees and tolls on the city's economy?
Politicians, labor leaders, and members of the business community have been mulling and muddling, arguing and maneuvering over the past month about how to shape and define these authorities.
Currently on the drafting table are blueprints for the creation of a surface transportation authority, which may be supported with toll collections on bridges, and a solid waste authority, which may be financed with user fees on households and businesses. Budget woes, a crumbling city infrastructure, and unending pressure to deal with a plethora of environmental issues, from recycling to incineration, have served as the impetus for their creation.
And billions of dollars in funding could be generated by revenue bond sales over the next 10 years to finance these authorities' operating budgets and capital programs.
Mayor David N. Dinkins was expected this week to include at least the outlines of these authorities in his revised four-year financial plan, covering fiscal 1992 through 1995. The mayor may offer a freeze on property taxes over the next two to four years to gain support for the authorities and their now revenue streams from the city council and lawmakers in Albany.
Much More to Be Done
Roger C. Altman, co-chairman of Mayor Dinkins's Management, Advisory Task Force, said, "Much more work has to go into these ideas." The task force, made up business and labor leaders, has been working on ways to develop the authorities.
"They are not going to be ready for quite some time, and there is not going to be any revenue from these two ideas over the next year," he said. It will take at least two years for them to be fully established, he noted.
The task force has heatedly debated how to start and finance these entities. A number of the task force members oppose tolls on the city's East River and Harlem River crossings.
Mr. Altman said, "We have not decided that bridge tools are the only way to go."
Other revenue streams for a bridge authority could be a gas tax, automobile registration fees, or an auto excise tax, he explained.
The proposed authorities would most likely be insulated from the political process of the city's general budget, observers say. That way, needed financing for infrastructure work -- especially on bridges, and sanitation programs -- could be spared severe budget cuts during difficult economic times.
In addition, by selling and supporting their own revenue bonds, the new authorities could reduce the city's overall debt burden. At the moment, the city is slated to sell about $37 billion of general obligation bonds over the next 10 years for various capital programs, including sanitation and infrastructure projects.
The revenue issues sold by these authorities could receive higher credit ratings than the city's own bond, reducing the authorities debt service costs and creating a new market for them. City officials hope investors would flock to buy these new securities. The city, rated A-minus by Standard & Poor's Corp. and Baal by Moody's Investors Service, has been paying high interest rates on its bonds because of the volume it has to sell and investor concerns about its fiscal health.
But the political hurdles on the road to establishing these authorities are many and high.
A newly empowered and larger city council is opposed to collecting tolls. Council members also are concerned about how expensive sanitation fees would be and how the fees would be imposed on home owners and commercial residents.
In addition, the city council is looking to lawmakers in Albany for support on legislation allowing the city council more oversight of the budgets and bonding authorizations of these authorities, a role currently reserved for the mayor.
A combination of political and fiscal concerns may prevent state lawmakers -- who would have to authorize these authorities -- from supporting them. The Republicans in the state Senate, for example, prefer to privatize a number of public services, rather than impose new fiees and taxes.
Labor unions have been arguing against new authorities, saying they could undermine the city's economy. But observers say this union polemic is more about their concern over losing their leverage to powerful and autonomous authorities.
And business leasers in the city, suffering through the current recession, are worried how new fees and tolls would affect their livelihoods. For example, paying tolls on bridges could dramatically affect a trucking fleet owner's bottom line.
What It Means to the Market
For the bond market, however, new credits could mean more work and more money. In addition, a host of new buyers may be found for these bonds.
One way to make these authorities more acceptable to the municipal market is to model them after the New York City Municipal Water Authority, a state-created bonding authority established in 1986 to finance water and sewer projects. The authority, with about $4 billion of revenue bonds outstanding, secures its debt with water and sewer rates charged to residential and commercial users. It is rated A by Moody's Investors Service and Aminus by Standard & Poor's Corp.
Nicole D. Anderes, vice president with Roosevelt & Cross Inc. in New York, said, "They did a good job of setting up the water authority as an independent authority, and if they model these authorities after that one, they should receive good market acceptance."
Ms. Anderes said, "The market is comfortable that the water authority is independent from the city's general operations." At the time of its creation, one of the things that had been working in the favor of the water authority was that fees had already been in place.
Mark Page, deputy director of the city's Office of Management and Budget, said, "The competition among these credits for buyers would be less than competition from buyers of GO debt."
For example, portfolio managers that have reached their limit on city GOs could still buy revenues bonds from the authorities and the city would still be able to finance its capital needs without selling more GOs and paying high interest rates to attract buyers, Mr. Page noted.
Bond rating agencies have not yet studied the details of the plans for the authorities, but offered their concerns and some views abouth what would make the authorities viable.
Hyman Grossman, managing director with Standard & Poor's, said he was concerned about the managment structure that would oversee the authorities. If you appoint the same people that manage city agencies to the authorities, "it doesn't necessarily make for better management," he said.
"You are running an enterprise, and when you run an enterprises you need good management," he said, adding that he supports a takeover of the bridges by the Triborough and Bridge and Tunnel Authority.
"It is may opinion the TBTA has a solid track record of achievement," he said.
Kenneth B. Kurtz, assistant vice president with Moody's, said the agency would have to study the range of possible effects the authorities might have on the city's economy. Creating new revenue streams or using current revenue streams to support these authorities "may leave city less flexible," he noted.
Mark Tenenhaus, a municipal analyst and vice president with Dean Witter Reynolds Inc., warned. "The expected increases in the costs of the subway and buses, combined with tolls levied to enter Manhattan from Queens, Brooklyn and the Bronx, may polarize the city's economy."
He added, however, "Somewhere there is happy medium in how you structure the new authorities, but the thing you have to worry about is the balkanization of revenue sources -- if may dilute the city's revenue base."
Logjam in the Making?
While new credits may mean new buyers of bonds, the increased volume of New York City paper may also cause a logjam in the market for city paper. Christopher R. Bovich, head of trading at Prager, McCarthy & Lewis in New York, said, "The supply factor would put a little pressure on the New York market in general and New York City market in particular."
The plans for the authorities are still subject to change, and a clear picture of how they would operate and be financed remian vague.
On a preliminary basis, for example, if a new sanitation authority was created, it would expect to have a $600 million operating budget, close to the budgets has it been working with recently, said Anne Canty, a spokeswoman for the sanitation department.
She also said the sanitation department also has a $3 billion capital plan for the next 10 fiscal years, which could be supported by bonds.
Revenues to secure the operating budget and the bonds are still being discussed. One sanitation source said based on a rough analysis of user fees imposed on all households and businesses, it would cost each about $20 a month. That fee would probably be adjusted or eliminated for people in the lower income bracket or on welfare, the source noted.
Aside from social ills, one of the most pressing problems in the city is its deteriorating infrastructure.
A new surface transportation authority could oversee and finance the repair, rehabilitation, and maintenance of the city's 872 bridges and five tunnels.
The Department of Transportation, which currently oversees these structures, reports that 56% of the bridges are deficient. The department also reports that its $10.4 billion capital program for the next 10 years is $2.7 billion short of funding.
Based on an analysis that uses the $3 toll expected to be imposed on the Triborough Bridge and Tunnel Authority's bridges and tunnels in 1994, the new surface transportation authority could collect $684 million in revenues annually from tolls on the 12 bridges that traverse the Harlem River and the East River.
According to a draft plan prepared by the Department of Transportation that outlines the surface transportation authority, the cost of maintaining the 12 bridges over a 10-year period is about $1.1 billion, with $623 million for operating costs and $470 million for debt service on the revenue bonds issued to meet capital needs.
To reduce congestion and lower operating costs, a new electronic toll collection system has been proposed, using radio frequencies that read a tag inside a vehicle's windshield.
Marilyn Dahl, director of government affairs for the New York Chamber of Commerce and Industry and the New York City Partnership, said, "We have gone so far as to say that these are concepts worth pursuing." The chamber of commerce has been working with the mayor's Management Advisory Task Force on the authority proposals.
"We are interested in the dedicated stream, but there is a whole host of questions that have to be worked out," Ms. Dahl said. "There are advantages to having authorities with access to the bond market and better bond prices."
But Ms. Dahl also said group's position on tolls "is difficult."
"Historically, we have opposed this," she explained. "We have members that would be adversely affected by bridge tolls."
While business leaders agree something needs to be done about improving the delivery of services and maintaining the city's infrastructure and sanitation needs, they also remain concerned about expanding the size of government.
"I think [the authorities] are worth examining," said Raymond Horton, president of the Citizens Budget Commission, a not-for-profit fiscal watchdog group. "The major issue is pretty simple: Are they a veiled way to upsize government? Are they basically another way to get more money into the system?
"It doesn't mean they are bad, it just means there ought to be some sort of relationship between authority revenues and the traditional revenue streams," he observed. "Is there going to be a tax reduction to make up for the fact that user charges are going to be introduced> If not, then it is basically upsizing government."
