DALLAS -- Amid concerns about rising toll road rates and debt load, Oklahoma's Legislative Bond Oversight Commission this week defeated Gov. David Waiters' proposal to issue $595.65 million of bonds to expand and improve the state's turnpike system.
In a 4 to 2 vote on Monday, the commission refused to approve the plan, which would have boosted the Oklahoma Turnpike Authority's bond indebtedness by 87.8% and pushed toll rates up by about 35% after inflation during the next five years.
"It is a lot of debt," said Oklahoma state bond adviser Jim Joseph. "It is a very strong system ... but it is one that only can handle so much without a significant increase in tolls."
Joseph, who advises both the executive and legislative bond oversight commissions, said he was concerned about the bond package for several reasons. Those include the size of the issue, the timing in a volatile bond market that could boost interest rates, and proposed competitive sale of the bonds, which could draw few bids and result in higher costs.
"It's unusual to sell issues this size competitively," Joseph said. "I believe if we are going into the market with an issue of this magnitude, we owe it to ourselves to finance it in the most efficient way possible."
Joseph also said he was not convinced that the turnpike authority needed to sell all the bonds within the next few months. The sale initially was planned in mid-November, with all proceeds to be available early next year.
"I had some concerns about the urgency for the need for cash," Joseph said. "If you sell when the market is not good, you put yourself in a position of paying higher interest rates."
A spokesman for state Sen. Stratton Taylor, a Democrat from Claremore and a Legislative Bond Oversight Commission member who voted against the turnpike plan, said Taylor opposes expanding the toll mad system without more information.
"There were not enough details to see if the package was financially feasible, and he is concerned about taking on so much debt without the details," spokesman Paul Sund said. "We can only support so many toll roads."
He said the senator objected to the toll road increases that would result from expanding the 563-mile system by about 75 miles to make it the biggest in the country, surpassing New York State.
In addition, the senator was concerned about the bond sale. "There are some unanswered questions about how the bond issue would fare in the market," Sund said. "With the state bond adviser raising questions, it was a warning signal."
Bond adviser Joseph said he also was concerned about investigations by the Securities and Exchange Commission and the FBI into turnpike authority bond issues from 1988 to 1992, although that concern was secondary to the size, timing, and type of sale for the $595.65 million in turnpike debt.
"The pending investigations of the authority's bond issues could affect the interest rates," he said, although the two federal agencies appear to be focusing on the vendors as opposed to the authority.
Meanwhile, the governor's office and the turnpike authority expressed disappointment with the vote. "I care deeply about the need for better highways in Oklahoma, particularly in rural Oklahoma. The Oklahoma Turnpike Authority, with my support, presented a credible, sound package to meet those pressing needs," Walters said this week in a prepared statement. "We are disappointed with the vote."
The governor, whose term expires Jan. 1 and who will not run for re-election, initially supported a $1.7 billion turnpike program. He later pushed the revised plan that would have included the issuance of $595.65 million of debt; the plan would have totaled $689 million when cash and other moneys were included. The plan would not only expand the toll mad system by 75 miles, but rehabilitate the state's oldest turnpikes, the Will Rogers and the Turner.
Steve Hill, a spokesman for Waiters, said the governor and the turnpike authority could present another proposal for approval by the bond oversight commissions. Sources said the governor already had tried to push through his package by removing Carlisle Mabrey from the Executive Bond Oversight Commission on Sunday because Waiters did not know if Mabrey would vote yes. Wally Burchett, publisher of the Poteau Daily News and Sun, was put in as Mabrey's replacement for the Monday meeting.
However, the five-member Executive Bond Oversight Commission never voted because the plan was defeated by the legislative commission, and both approvals are necessary to authorize a bond issue.
"We thought it was a valid bond issue," said turnpike authority spokeswoman Mary Kay Audd. "If we had not been confident in it, we would not have brought it before the bond oversight commission."
Audd said the turnpike authority could consider doing the issue by negotiated sale, instead of competitive bid, and selling it in a series to answer some of the concerns. However, "we haven't made any decisions," she said. The matter could be discussed at the Oklahoma Turnpike Authority's next regular meeting on Oct. 20, she said.
