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January 29, 2008

State Comptroller Thomas P. DiNapoli

Testimony before the New York State Assembly
Standing Committee on Transportation

 Thruway Authority Toll Rate Increases

January 29, 2008

I appreciate the opportunity to review the findings and recommendations from my Office’s audits of the New York State Thruway Authority.

Specifically, these are: Uncollected E-Z Pass Tolls and Fees,
New York State Canal Corporation: Board Governance and Controls over Selected Financial Practices, and the most recently completed Proposed Toll Increases for July 2008 through January 2010.  The audit of proposed toll increases found that the toll increases were not justified at this time.

The Thruway is a critical transportation backbone which connects New York City to Buffalo over a 641 mile highway. Construction was begun in 1950 and completed in 1954. Every year, more than 270 million vehicles travel 8 billion miles on the longest toll road in the United States. The operations are intended to be self-supporting.

In 2005, the Authority implemented a two-step toll increase with the last of these taking effect this month.  In October 2007, the Thruway Authority proposed an additional series of toll increases to take effect in July 2008, January 2009, July 2009 and January 2010.  The proposed increases would generate $520 million in additional toll revenues through 2012. 

By way of background, during the first 50 years of full operation from 1954 to 2004, the Thruway Authority raised tolls just five times.  Now in the span of just five years, the Authority proposes raising tolls six more times.

In response to numerous inquiries regarding the need for the increase, I asked my audit staff to immediately review the finances and operations of the Thruway Authority. In addition, my Office was already in the process of finalizing two related audits.  The first is an audit of uncollected E-Z Pass tolls from January 1, 2000 through December 31, 2005, and the second is an audit of Board governance and financial management practices of the Canal Corporation for the period of January 1, 2001 through March 31, 2006.  These two audits represent ongoing work of my Office to oversee management and financial practices for all public authorities.

As it turned out, the critical findings from these three audits seem to reach the same conclusion: that fundamental financial and operational management issues need to be addressed, and that no further toll increase is justified at this time.
Six key areas highlight these conclusions:

  1. Auditors found that there was over $27.4 million in outstanding E-Z Pass toll collections.  The most astonishing example was an out-of-state trucking company that had been cited for over 2200 violations and owed more than $59,000 in unpaid tolls.
    • The Authority needs to maximize all current revenue streams available to the Thruway Authority.
  2. Auditors found weaknesses in the existing capital management system, which make it difficult to track spending for any of the more than 300 individual projects.  Moreover, Board members charged with oversight do not routinely receive detailed information on spending, by project.
    • The Authority should take steps to improve financial controls over capital spending to minimize cost overruns and complete projects in a timely manner.
  3. The Authority does not currently prioritize capital projects, making it virtually impossible to react to changing financial conditions. Within a short time frame, auditors found more than $159 million in lower priority projects (parking areas, E-Z Pass lanes) that could be delayed.
    • The Authority must prioritize capital projects in future capital plans to facilitate any adjustment that may need to be made in response to unanticipated funding shortages within current revenue streams.
  4. Auditors learned that information made available to the Board regarding capital projects did not permit comparison of actual costs to budgeted amounts nor did they provide estimated completion dates even though that information was readily available.
    • The Authority should develop management reports showing progress to date and dollars spent on each individual project item for review by the Board of Directors of the Thruway Authority.
  5. Auditors found that Authority managers were overly conservative in estimating potential Federal aid.  Based on past levels, the Thruway Authority could expect to receive an additional $125 million in Federal funds by 2012. 
    • The Thruway Authority should more accurately estimate future Federal aid based on historical receipts.
  6. Auditors found that the Thruway Authority has not conducted an across the board management review to improve efficiency and reduce costs. Similarly, review of the Canal Corporation found cost overruns of $17 million on the Canalway trail—an overrun of nearly 50%—and a two-year delay. 
    • The Authority should undertake a comprehensive, top to bottom analysis of Authority operating costs to identify where costs can be reduced.  In addition, in the future this same analysis should be undertaken in connection with all toll adjustment requests.

This is why I believe that an increase in tolls must be a last resort and not the first.

Let me clearly state that my auditors’ recent reviews did not focus on discovering a dollar for dollar alternative to the toll increase. Rather, the work was to serve as a basis for determining whether the toll increases were justified at this time. In eight short weeks we have found numerous measures that must first be implemented.

If the proposed toll increases are enacted, commuters, tourists, students and businesses will experience dramatic increases in the costs of regular travel which, combined with high gas costs, can have a serious adverse impact on the economy of our State.  Hypothetically, for example, the proposed toll actions would result in an increase of more than $3,000 per year for a commercial trucker to make three round trips weekly from Williamsville to Albany.  

To sum up, I believe the Thruway Authority should:

  • Call off the July 2008 toll hike, and
  • Postpone all future toll hikes until a comprehensive analysis of operations is completed.

Moving forward, the Comptroller’s Office will continue to be engaged in this process.  This coming year, I will examine Thruway Authority operations more closely through additional audits.  I have asked my audit staff to begin an immediate review of capital program management, to be conducted on a fast track.  In addition, we will further review internal controls such as procurements and payroll, outside agreements and canal operations.

Recent audits provide nearly three dozen specific recommendations for financial and management improvements for the Thruway Authority to complete before considering any toll increase. These include:

  • Maximizing current revenue streams.
  • Improving financial controls over capital spending.
  • Prioritizing capital projects to facilitate adjustment in times of revenue shortfalls.
  • Adding project detail to management reports on capital spending.
  • Improving accuracy of revenue forecasts.
  • Analyzing costs of operations prior to considering any toll increases.

Finally, since 1992, the Thruway Authority has spent approximately $700 million to support the Canal Corporation. Between 2008 and 2012, current estimates project another $395 million will be needed. There is no question that this will continue to affect the Thruway Authority’s financial position.  It’s probably time to take the canal away from the Thruway Authority and start to focus on how the canal should be financed and how it should be used as an economic development tool.  I believe we have several options which should be explored immediately through a bi-partisan effort, including the transfer of the canals to the Federal government and exploring lease of assets to private entities.

We have shared our conclusions with the Thruway Authority.  Before any further toll increases are considered, our recommendations must be addressed.


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