DALLAS -- The Oklahoma Turnpike Authority, which operates the largest toll-financed highway system in the nation, is about to get even bigger.
Gov. David Walters is drafting a five-year transportation plan for Oklahoma that includes nearly $1.8 billion of projects that could be financed with sales of revenue bonds beginning late this year.
"It's more than a working idea." said Jim Joseph, the state's bond adviser. "[State officials] don't know that all of them will be done, but they expect most of the projects to be done."
The proposals are aimed at relieving urban traffic congestion and at helping revamp or expand existing turnpikes in the 563-mile network. The plan could be vital to connecting the state's turnpike system with Kansas and Texas, which would create a series of toll roads stretching from the Mexican border to the Midwest.
Though turnpike managing director Terry Young is reluctant to discuss specifics of the governor's draft plan until it is finalized, he said that nearly all of the dozen projects have been proposed before. The feasibility of most have been studied and will be reviewed again as part of Walters' $3 billion highway program.
"The governor has taken a very strong interest in using the turnpike method of financing," said Young, a former Tulsa mayor. The state's ability to include turnpike construction spending in a formula that increases federal reimbursement is a major motivation for the large scale transportation program, officials said.
The draft plan calls for $100 million to be spent to rehabilitate the heavily used Will Rogers and Turner turnpikes. The largest expenditures call for construction of a $270 million turnpike from Snyder, Okla., to Interstate 40, and a tollway from Duncan to Interstate 35, a $265 million project.
One proposal in the governor's outline that has not been studied is a proposal to build the first phase of the Osage Turnpike from Tulsa to State Highway 20.
The 12-mile, $100 million project would be the first leg of a planned turnpike north to Kansas.
Young said he will meet with Kansas transportation officials tomorrow to discuss a proposal to link the Oklahoma Turnpike with toll roads in Kansas.
The start of those talks comes nearly seven months after turnpike officials in Oklahoma and Texas began discussions about coordinating efforts to link proposed Texas toll roads with the Oklahoma system.
That plan would create a series of roads that officials believe would attract growing commercial traffic expected to result from increased trade with Mexico.
While the proposals appear to have support in Oklahoma, it is less certain how Wall Street analysts and bond investors will view the state's largest ever turnpike expansion. Analysts were skeptical of Oklahoma's big 1989 capital program, but were proven wrong when the Turnpike Authority brought in its four projects under budget and on time.
"We had concerns that it was too big for them, but they did it," said Ernie Perez, director for transportation ratings at Standard & Poor's Corp., which rates the authority's debt A-plus. Moody's Investors Service rates the bonds A1.
A critical factor in which projects may be built will be the outcome of new feasibility studies. One source said that only one of the four projects in the 1989 construction program was feasible on paper but all have worked out well.
In Oklahoma, it is less important that a project be self-supporting because the state cross-pledges revenues from all its turnpikes. As long as system revenues are strong enough to subsidize marginal projects in the early years, they are more likely to be completed.
Chris Evangel, a vice president at Moody's, said the authority's most recent audit shows that last year debt service coverage slipped below estimates, but remained at about a strong 1.4 times of annual debt service. Bond covenants require the authority to maintain coverage of at least 1.2 times on its senior debt and 1.05 times on senior and subordinate debt combined, Evangel said.
"They were a little below their projections, but they were all right," Evangel said.
Another critical factor in winning support from Wall Street is likely to be the authority's demonstrated willingness to take measures necessary to maintain its financial position. At a June 18 meeting, the authority board voted to raise tolls an average of 19.2% systemwide, effective July 7.
The board also voted to begin funding the depreciation of its toll roads. It is believed to be the first in the nation to do so. By calculating the cost of wear on its roads, the authority will raise revenues to maintain the turnpikes on a regular basis.
Young said the approach adopted by the board allows the authority to annually adjust its tolls for inflation and to account for depreciation as calculated by outside auditors.
"This way we are building very good reserves in several areas," Young said.
While the toll increase and move to cover depreciation are not related to the governor's transportation plan, Young said it only affirms the willingnes of the authority to safeguard its finances.
"It plays to the point of how Wall Street sees us," he said. "We have not had a fear of being aggressive in building roads in Oklahoma using the turnpike method."