Senate Republican Leader Tom Kean

Republican Leaders Senator Tom Kean and Assemblyman Alex DeCroce have sent another letter to Governor Jon Corzine and Acting Treasurer David Rousseau to release all documents related to the Governor’s “fiscal restructuring” proposal. The Republican leaders have also asked Governor Corzine to introduce a balanced budget that does not include revenue from his toll hike plan.

“We have continuously called on the Corzine administration to release all information and documents related to this toll hike scheme,” said Kean (R-21). “We believe these documents will help us find cuts in state spending as opposed to relying on 800% toll increases as the Governor has suggested. All Republican legislators have already agreed to oppose this egregious toll hike proposal that, if enacted, would cripple New Jersey’s economy.”

The letter asks the Corzine administration to provide a copy of all financial models or work product prepared by UBS, Halcrow Engineering and Skadden Arps Meagher & Flomm and to provide a copy of the details behind the $3 billion structural deficit for FY 2009. Additionally, the letter encourages the Governor to post the answers and requested documents on the web site they have established to afford the public with an opportunity to further understand the proposal.

“Clearly the Governor is aware that the more the public hears about his plan, the less they like it, so he is trying to keep as many details as possible under wraps, ” said DeCroce (R-26). “Governor Corzine should make this information public so the data can be adequately analyzed. The Governor also has an obligation to the taxpayers to introduce a budget that will be balanced without relying on a plan that is overwhelmingly opposed by the public and may never be approved by the Legislature.”

February 11, 2008

Dear Governor Corzine and Acting Treasurer Rousseau:

We are writing to request that you provide us with written responses to the questions and document requests below pertaining to your “fiscal restructuring” proposal. Furthermore, we respectfully request that you consider posting these questions and your answers as well as the requested documents on the web site you have established to afford the public with an opportunity to further understand your proposal.

Tolls Increases:

The study prepared by Steer Davies & Gleave presents the annual amount in tolls that travelers will pay after toll increases. However, the amounts listed in the study do not reflect actual payments. Rather, the amounts are expressed in “2006 dollars.”

Please provide the amounts that will be paid annually by toll payers in actual dollars so that we may understand for ourselves the actual revenues that may be collected and pledged away for various purposes.

EZ PASS contractual language currently allows the vendor to automatically charge customers replenishment fees when their accounts fall below certain amounts. Replenishment fees guarantee that there is always enough money in a customer’s account to pay tolls. The EZ PASS vendor profits off this scheme because they have access to a constant float that can be invested. Presumably, as tolls increase eightfold, the EZ PASS vendor will also increase replenishment fees eightfold or by some other factor.

Please address the extent to which you have considered whether large increases in replenishment fees will result in toll road users overdrawing checking accounts or exceeding credit card limits.

Please provide any information that you may have explaining how replenishment fees will be impacted by this proposal and whether any modifications to current EZ PASS contracts will be sought as a means to prevent the EZ PASS contractors from getting an unjust enrichment from larger floats of toll road users’ money.

Traffic Impacts / Steer Davies & Gleave Work Product

The study prepared by Steer Davies & Gleave projects that substantial traffic will leave the toll roads in response to toll increases. The study contained no meaningful discussion of where that traffic will go or any recommendations to address specific localized traffic problems. This is despite the fact that Section 3.1 of the contract between the State and Steer Davies & Gleave required that the information be produced. Furthermore, Transportation Commissioner Kolluri has indicated the projections contained in the study overstate traffic projections.

Has Steer Davies Gleave identified where specific traffic problems will ensue as a result of cars and trucks leaving the toll roads? If not, why not and why did the State pay Steer Davies & Gleave the full amount of the contract if they have underperformed on their contractual obligations? If they have provided this information apart from the study which was produced and released to the public, kindly provide it or explain why the information is being withheld.

What information and data, including information derived from various authorities and vendors, did Transportation Commissioner Kolluri rely upon to come to the conclusion that the projections made by Steer Davies & Gleave are inappropriate?

A number of road improvements on the toll roads, near the toll roads and mass transportation improvements (the MOM line, for example) have been proposed as part of the monetization plan.

Did the proposed improvements assume the level of road diversions projected by Steer Davies & Gleave or did they assume projections that Transportation Commissioner Kolluri believes are more accurate?

Restructuring Information / Financial Models / UBS Work Product

Part of the monetization plan replaces current debt backed by State appropriations with new debt backed by tolls. It is essential to see the details behind the debt that is being replaced and the new debt that will take its place in order to understand whether this trade of new debt to replace old debt is responsible. We are very skeptical. Much of the debt that is already on the State books has very low interest rates, is tax exempt, and has final maturity dates extending far less than 20 years. On the flip side, the new debt that will be issued will likely have higher interest rates, some will be taxable for a variety of reasons, and the final maturity dates will extend far into the future.

In a response to an earlier request for similar information, we were told by the Director of the Office of Public Finance that the information could not be provided because it would amount to giving out insider information. The response is premised on the inverse of the very definition of insider information. We are asking you to disclose information not just to us, but to the public. We note that the State has already announced its intention to restructure TTF debt. Apparently, we are to believe publicly announcing that debt for transportation projects will be restructured is permissible, but publicly announcing the specific subject-to-appropriation-debt that is going to be restructured is not permissible.

Please fully explain your rationale and legal basis for refusing to provide the public with details about what debt is going to be restructured.

Please provide the following material to address concerns about the fiscal responsibility of the plan;

any and all financial models or work product prepared by UBS or the Office of Public Finance that sets forth restructuring models;

any and all studies, regardless of who prepared them, that explain which debt would be most advantageous to restructure;

any and all studies, regardless of who prepared them, explaining difficulties, concerns, or issues with respect to restructuring specific debt;

any and all studies, regardless of who prepared them, discussing the tax exempt or taxable status of any debt;

any and all communications between the State and: the IRS, bond insurance companies, or rating agencies.

Please explain whether the maturity of new debt will be longer than debt that it is restructuring and why.

Please explain why the new debt is being structured so it has no payments until after 2010?

Please provide a spreadsheet showing the annual relief to the State budget attributable to the restructuring scenarios being considered.

Does UBS currently sell or trade in New Jersey bonds that may be the subject of restructuring and does their inside knowledge of what may or may not be restructured give them a competitive advantage in the marketplace? If so, has UBS placed a hold on trading New Jersey municipal securities?

Engineering Issues / Halcrow Work Product

Halcrow Engineering was retained but no work product generated by Halcrow has been shared with the public, despite large financial payments being made to them by the State.

Please provide all work product prepared by Halcrow Engineering.

Tax Information and Corporation Formation / Skadden Arps Meagher & Flomm Work Product

Skadden Arps Meagher & Flomm has been paid $3.9 million by the State. It is believed that they were hired to study various tax issues and help establish the corporation. Despite having requested the contract between the State and Skadden Arps Meagher & Flomm and their billings, we have been provided nothing. Presumably, the work product of Skadden Arps Meagher & Flomm contains valuable information and advice about how best to structure the corporation and restructure debt.

Please explain the process by which Skadden Arps Meagher & Flomm was retained and why they were selected as a vendor.

Please explain the services being provided by Skadden Arps Meagher & Flomm.

Please explain the work product that has been delivered by Skadden Arps Meagher & Flomm and release any and all work product that they have prepared. We appreciate that some of this information may be privileged, but surely, some of the work product that has been prepared by Skadden Arps Meagher & Flomm is informational in nature and can be released to the Legislature and public.

Concession Agreement Formation

We previously requested the concession agreement, or the latest draft thereof, which you indicated existed and would be made available to us when we spoke at Drumthwacket nearly two weeks ago. We have been provided nothing.

Please provide us the latest draft of the concession agreement.

Economic Impact

Dramatic toll increases will have dramatic impacts on the economy. Tolls paid by corporations will increase the cost of goods and services. Eight-fold increases in the cost of commutes may cause people to either seek new jobs and/or or relocate, thereby impacting real estate values and development trends.

Please provide a copy of any and all reports that estimate the impact of this proposal on real estate, job, labor trends.

Tunnel Funding Urgency

It has been suggested that the State of New Jersey must enact legislation to guarantee funding for the new Hudson River tunnel by June of this year or we will lose federal funding for this important project.

Please provide any and all communications between the federal government or its agencies and the State or its agencies that set forth deadlines and criteria the State must meet to avoid losing funding for the new tunnel, or as a condition of gaining funding in the future. In particular, please share any letters or communications indicating a particular deadline for securing a State match for federal funds.

Please provide an accounting or pro-forma of the steps that need to be taken to obtain approval for, and begin construction of, the new tunnel. Please ensure that these steps have corresponding costs and estimates for commencement and completion.

What level of financial commitment has been promised by the State, either in response to federal requirements, or because decisions have been made to support the building of a new tunnel?

How much has already been obligated, committed or expended on soft costs, including any feasibility studies, for the tunnel project?

TTF Renewal Urgency

The TTF is fully funded for another two years.

Why do we need to identify funding in the next month to renew a program that is funded for another two years?

Open Space Renewal Urgency

Why do we need to identify funding in the next month to renew funding for open space when just two months ago voters approved a bond question to provide additional funding for that purpose?

Structural Deficit

We previously requested that you provide us with details of the State’s structural deficit which you have defined as approximately $2.5 billion. You have not provided it.

Without seeing what comprises this structural deficit, it is impossible for us or anyone in the public to come to the same conclusion as you that spending restraint is not a viable alternative to hiking tolls and borrowing almost $40 billion.

Please provide a copy of the details behind the $3 billion structural deficit for FY 2009 that you have repeatedly referred to in public and suggested cannot be closed by imposing restraints on government spending.

We look forward to a thorough response. We also respectfully request that you make answers and information available on a rolling basis to avoid prolonged delay in receiving information on this crucial proposal which you have requested to be enacted later this month.

Sincerely,

Thomas Kean, Senate Republican Leader
Alex DeCroce, Assembly Republican Leader

Link to Post:

http://www.senatenj.com/index.php/tomkean/kean-decroce-continue-to-call-on-corzine-to-fully-disclose-all-documents-related-to-toll-hike-proposal/221