Turnpike Numbers

by: Hopeful

Sun Mar 04, 2007 at 02:54:37 PM EST

By contrast, if the state's pension fund ran the toll roads, state government would retain control of a New Jersey asset and politicians could continue to exert some influence over toll increases. Sure, the pension fund would probably need to increase tolls to meet its goal of an 8.25 percent return on all investments. But the toll increase would probably be less than if the roads were leased to private investors whose only motivation is generating higher returns for their clients and themselves.

...

The pension plan also cannot hold "real assets" like bridges and roads worth more than 7 percent of the value of the fund, currently about $77 billion; financial analysts estimate that the Turnpike Authority and the Atlantic City Expressway could be worth as much as $30 billion. That could force the pension fund to team up with other investors to buy the toll roads, as Mr. Corzine suggested.

The relevant numbers are in the New Jersey Turnpike Annual Report.  (As our Op-Ed writer who described the advantages of monetization noted, the 2005 report is most recent.)  So, here are the numbers from 2005 and 1997.  Note that everything is in billions, and I have computed at the bottom the annual numbers need to realize the 8.25% the pension plans wants, and the 4.75% a financial idiot like me could get by lending the money to the United States Treasury.  The debt service is because the Turnpike owes about $5 billion.

As you can see, the Turnpike covers the costs of running this crucial road, and even making a bit extra.  But for it to be a major "profit center" would require a lot more in tolls.

New Jersey Turnpike (billions $)

Item	2005	1997
Revenue	0.81	0.38
Operating Expenses	0.44	0.16
Debt Service	0.24	0.24
Net Revenue	0.15	-0.02
8.25% Target	2.5
4.75% Target	1.4

To be fair, the Times says that the Treasurer's spokesman says ""we have not considered any alternative that would give a controlling interest in a state asset to the pension fund."  I wish the Times had not used anonymous sources for this article's financial estimates.  I'm looking forward to seeing the Treasurer's report, so that I can learn why a private company would pay so much.  Until then, I'm going to agree with a Republican:

"This whole idea reeks of the kind of Wall Street wizardry that brought us junk bonds and Enron," said Tom Wilson, chairman of the State Republican Party.

ps.  Why the 2005 numbers listed don't add up: There is $34 million transfer to Debt Service fund that is counted in one place but not the other, and numbers are rounded off.  For my purposes it doesn't matter.