The state has agreed to share services and pick up some $60 million in annual costs to help the State Thruway Authority avoid a proposed toll increase for long-haul trucks while it seeks a federal loan for construction of a new Tappan Zee Bridge.
Under the agreement, the state no longer will require the Thruway Authority to pay for the regular patrol of the Thruway by State Police -- a cost that now runs about $60 million a year -- and will provide support in other areas.
The toll increase was abandoned Monday morning. The move by Gov. Andrew Cuomo's administration was explained later as necessary to protect the agency's credit rating at a key moment in the state's efforts to secure a low-interest federal loan for the bridge project. At a meeting in Manhattan on Monday afternoon, the agency voted to award a contract for the bridge project to the low bidder, at $3.1 billion.
The federal loan, which would come from the U.S. Department of Transportation, will cover only about half of the cost of the new bridge project. The rest will be paid through the sale of Thruway Authority-backed bonds.
The agency's credit rating comes into play on both fronts, officials explained. Before federal officials authorize a major loan, they will want assurance that the Thruway Authority is on solid ground financially. Major credit ratings agencies will want to see similar assurances before they endorse new bonds as good investments. Should the credit agencies lose confidence, unfavorable ratings would increase the agency's borrowing costs.
Madison acknowledged as much early Monday when he detailed a series of cost-cutting measures that he said will save hundreds of millions of dollars and help the authority maintain its high A credit rating.
"It's a new day at the Thruway Authority," Madison said, citing years of alleged mismanagement under previous administrations.
Among the highlights of Madison's cost-cutting strategy:
• Shrinking the Thruway Authority's workforce by eliminating 361 positions by 2013.
• Ending some $60 million in annual reimbursements to the State Police for patrolling highways.
• Reducing the 2013 operating budget by 21 percent by cutting $25 million in operating overhead.
• Refinancing $900 million in short-term debt.
It's unclear whether financial analysts will respond positively to the Thruway Authority's efforts.
In June, analysts at Standard & Poor's gave the agency a negative financial outlook, citing uncertainty over the plan to hike tolls for commercial trucks by 45 percent next year. The plan faced strong opposition from upstate Republicans as well as small business advocates. The governor pushed the Thruway Authority to make a toll increase a "last resort."
On Monday, Cuomo praised Madison's decision to abandon the toll hike plan.
"That you could avert the toll increase is very exciting and very big news," Cuomo said. "I thought it would be counterproductive from an economic development point of view, especially in upstate New York. We've worked very hard to say to business that it is a new day in New York."
Whether financial analysts will take a similarly sunny view is unclear.
Madison said he will continue discussions with credit agencies in the coming weeks, but he could not predict how they would react.
"I can't speak for the bond underwriters," Madison said. "We intend to go back and speak with credit rating agencies after the first of the year."
Trucking groups had denounced the planned toll increase, saying their members were being hit with toll hikes so the state could advance its financing efforts for the bridge.
Kendra Adams, the president of the New York State Motor Truck Association, praised the administration's decision to back off the truck toll hike.
"The hike would have devastated the entire state's economy and nullified any attempts by the governor and the Legislature to make New York 'open for business,' " Adams said, referring to a slogan used in a promotion the Cuomo administration has mounted to attract businesses to the state.