State Backing Of Turnpike Debts Delayed A Third Time

By Meghna Chakrabarti (The Third Rail)

Dust off your Robert's Rules of Order. At first glance, this is one for the policy wonks. On second glance, it's interesting to anyone who drives on the Massachusetts Turnpike.

Not long ago, the Massachusetts House passed a bill (H. 100) that would extend the Commonwealth's authority to guarantee debt obligations held by the Massachusetts Turnpike Authority (humanspeak: the state wouldn't let the Pike default on its bonds). The State had backed the Pike until January 15th of this year. This bill would extend that to June 30th.

The Pike's current bond rating is dismal; the authority is already on negative watch. If its rating did drop, overnight, the Pike could be liable for a one time termination payment in the tens of millions of dollars to UBS. But, having the State's backing could keep the Pike's bond rating from being downgraded to junk status.

Or, that's the thinking, at least.

The bill hasn't passed the Senate. In fact, yesterday, a vote on the bill was delayed for a third time by Senator Mark Montigny (D). Montigny moved to lay the matter on the table, effectively ceasing all discussion and debate on the bill until the next formal session, scheduled for next week.

Montigny objects to handing the state's backing to the Pike without deeper investigation into how the agency negotiated the original swaptions deals.

So, the Pike's bond rating hangs out on a limb for another week. It's not a fiscal disaster yet for the state, or the Pike. If USB triggered a termination payment, the Pike would have 30 days in which to get the bill passed and then use the state's backing as a negotiation tool. But the Senate's delay isn't likely to leave the ratings houses flush with fond feelings for the Massachusetts Turnpike Authority either.

Thanks to the State House News Service for the following report of the statement Sen. Montigny made in formal session yesterday:

Sen. Montigny said: I would like to say that in light of all the discussions we've been having lately on the happenings on an international, national and state level, this is a time for reform. It's a great opportunity to do the right thing here, not an unfettered bailout of the Massachusetts Turnpike Authority...

We are debating in Washington both criminal and civil penalties for breaches of fiduciary trust with financial entities. Somehow these deals are signed - there's been no serious attempt to unwind these deals. There's been no serious attempt to file civil suit. Our attorney general should be looking at how these deals were signed. None of those questions have been answered...

There has been no serious work to see if there are criminal charges. We are being asked once again to bail out an agency when we haven't asked the question about whether anyone had signed that deal. We have a number of these agencies where the staff is lacking in knowledge but the staff has the ability to sign that deal again tomorrow. We're not doing anything prospectively to stop this from happening again. We have to clean up quasi publics. Under Senate rule 24, I motion to lay the matter on the table.