The Tappan Zee Mystery

Where’s the cash for new bridge?

This summer, Gov. Cuomo is supposed to announce a financial plan for building a new Tappan Zee Bridge. But hot weather won’t cook up a miracle:

The numbers don't add up any more than they did in spring.

The risk is that Cuomo will end up doing what past governors have done: Arrange a deal that kicks the problem to the next governor.

A new Tappan Zee to replace the deteriorated span from Rockland to Westchester likely will cost $6 billion. Thomas Madison, director of the state Thruway Authority (which runs the project), asked the universal question last month: "How are we gonna pay?"

Madison had an answer—sort of. "The principal way and the predominant way will be toll-backed Thruway bonds," he said. The state will hike Tappan Zee tolls above today’s $4.75 round-trip EZPass rate for cars (more for trucks).

But how much?

Madison won’t say. "We will ensure that the bridge tolls are consistent with the other structures in the area," he said.

Hmm. The next bridge north—Bear Mountain—costs $1.25. The competing bridge to the south—the George Washington—costs $9.50, going up to $12.50 by 2015.

That’s a big range. Should Tappan Zee users expect a doubled toll?

Thing is, that might not do the trick. "A significant toll increase is unlikely to fully fund the project capital costs," state financial analysts said in 2009.

Why? People react to higher tolls just like they do to any higher prices: Some folks buy less, or none.

Look how traffic has already fallen as gas prices and tolls have gone up (the Tappan Zee hiked tolls 32 percent between 2007 and 2009). In 2010, 24.1 million vehicles crossed (one way), down from 25.1 million in 2006—a 3.9 percent drop.

The bigger picture is clear, too. Since 2007, traffic on all Thruway bridges is down—6.7 percent for cars, 9.3 percent for trucks.

On the Tappan Zee, bridge traffic grew a whopping 48 percent a decade on average from 1960 to 2000—and then stopped. Between 2000 and 2010, the Tappan Zee had almost no traffic growth—less than 1 percent.

Sure, traffic limits itself because (as Yogi Berra might say) the Tappan Zee is so crowded that no one goes there anymore. A bridge with one more lane and shoulders for accidents will help.

Still, people will only pay so much before they start carpooling, taking the bus or skipping trips altogether.

Look south: In 2011, traffic on the George Washington Bridge was 50.4 million vehicles—down from 54.3 million in 2006, or 7.1 percent. The tunnels show similar trends.

And it’s not just the economy: Traffic on the GWB was higher in 2002 than it was in 2006.

So the state could build a new bridge—and hike tolls so much to pay for it that fewer people end up using it.

Adding to the pressure, S&P bond analysts may slash the Thruway’s rating. They noted this month that the Thruway needs a recently announced 45 percent hike in truck tolls to stay afloat.

They said, too, that "we will likely lower the rating if the plan of finance for the Tappan Zee project" is shaky.

The answer isn’t federal funding. Cuomo is trying for a $2 billion federal loan—but that has to be paid back.

Tolls may not work financially—and they definitely won’t work politically. No governor likes to drastically hike car levies (remember, the recent announcement was on trucks).

The summer surprise could be for Cuomo to do what lots of people do when confronted with the impossible: Find a quick and dirty solution.

His advisers may say: Borrow now, worry later. Underwriters could structure a deal in which the Thruway doesn’t hike tolls significantly until the bridge is done—say, 2018, when a second Cuomo term would expire.

That’s what Gov. George Pataki did in 2000, when he had no way to pay for the MTA’s capital plan. He structured it so the bill—and massive fare hikes—would come due after he was gone.

Investors might go for such a kick-the-can deal, but only if the state offers a backdoor guarantee in case toll revenues fall short—pledging income-tax revenues, probably, as Albany already has done for $2.7 billion worth of Thruway projects.

Then again, investors might not. Who knows what will set markets panicking next?

It’s hard to think of a good plan—and a bad plan may not work.

This piece originally appeared in New York Post

This piece originally appeared in New York Post