Mid Bay Bridge End Game

The Mid Bay Bridge Authority recently announced that it wants to implement an early toll increase on its already high tolls in order to assure financing for their bond reissue on May 13th.   Increasing tolls so investors don’t get jittery is a pretty clear sign bridge finances are in trouble.

Long ago the managers of the bridge opted for a growth strategy that forgot that a government run business is there to provide the most service to citizens at the least cost.  Instead of paying with cash, over the years the MBBA  used debt to expand access routes, build toll booths, defer operator costs, and build the Bridge Bypass Route, all on the MBBA credit card, so to speak.  That car traffic might actually go down didn’t enter their thinking.  Car traffic since 2006 is now down about one million cars a year, despite a very modest upward bump in recent years.  According to the Bay Beacon Newspaper, the bond refinance will reduce the amount of tolls required to service expenses to $19.7 million.  The problem is, the Bridge took in only $17.56 million last year.  I seriously doubt increasing tolls will increase revenues or users, but, then again, I don’t work for the government.

The Bridge is entering the end game where they spent too much and will never have enough revenue to cover costs, which is par for the course for American governance.

The Local Budget Scam Explained: An Example

By Karl Denninger
From my back yard — literally….. the bridge is visible out my back door.

Vest says it is a cold hard fact that tolls on the Mid-Bay Bridge will not increase to $7.50 next year. It is likewise written in stone, he said, that there will be no bridge toll hike of any amount before Oct. 1, 2015, the beginning of the 2016 fiscal year.

….

In fact, the Mid-Bay Bridge, built with $81 million in bonds in the early 1990s, these days carries a debt load of $260 million.

That’s why it is possible, Vest concedes, that if the Bridge Authority does find it needs to raise tolls for the third time in its existence, the cost of the trip across could go from $3 to $4 for two-axle vehicles and $2 to $3 for SunPass holders.

Nobody is talking about how the bridge went from $81 million in bonds to $260 million outstanding.

Nor are they talking about the “fact” that the terms of the bonds dictate that tolls must (if necessary) rise.

Even if doing so cuts use, and thus the total revenue falls, producing a death spiral.

Which, incidentally, has happened already not so far away (Garcon Point anyone?)

The problem with these projects is that they invariably obtain their “go ahead” from the local residents predicated on two promises — first, that they will be built and operated on time and on budget, and second that the bonds will be retired and once they have been the tolls will be lifted or reduced to that which is necessary only for ongoing maintenance.

The latter never happens and the former almost-never does.

The people responsible for that gross dereliction of duty, resulting in the tripling of the bridge’s debt, from the County Commissions on to these “authorities”, never, ever face prosecution or even debarment from public office for the outrageous deception they run on local residents in the promises they make and never keep when it comes to these “projects.” Never mind that if I screwed someone in the private sector to this degree I would, and the Commissioners and Authority “trustees” should, find themselves on the wrong end of a felony conviction.

But see, political promises carry no weight and are utterly unenforceable even when they screw the taxpayer blind. As a politician you can make claims that you have absolutely no rational backing for or even lie outright and when your “projections” and “expectations” turn out to be crap nothing happens to you for buying votes with what proves up to be a pipe dream or worse.

Instead of being accountable these very same public officials now make excuses and tell us how “wonderful” the cut of 20 minutes will be on our mythical trip that they dream will fill the coffers and pay the coupon on said unsustainable and outrageous debt — debt that their outrageously unrealistic expectations and projections caused to triple from what was originally proposed and agreed to by the people in the first place.

The “add-on” extension now being constructed is responsible for $143 million of this debt. But there is no evidence — absolutely zero in fact, even based on the rosiest of projections — that the bond issues outstanding will be retired on or before the roadway requires resurfacing.

Indeed, had there been any record of the Authority being able to pay down debt predicated on operating revenue the problem, and debt, wouldn’t exist — right?

The inevitable resurfacing and upkeep in coming years will be yet another expensive act that will in turn requiring issuing even more debt.

This is a “tiny” little ponzi scheme in the grand litany of lies and scams promulgated by County Commissions and “local authorities” of all sorts, from these feifdoms to school boards, all over the land, backed up by bond issuers at banks who “help float” debt that mathematically cannot be retired on or before additional capital expense in maintenance and repair becomes necessary.

The banks, for their part, don’t give a damn provided they get their fee. The accuracy of their projections for sustainability and paydown of the debt issued, just like everyone else’s, are never coupled to accountability.

Indeed I’m willing to bet that under any reasonable estimate of actual historical use and toll collection, less operating expense (salaries of the toll collectors, routine maintenance and inspections, etc) the bond issues can never be retired when the imputed operating costs, including resurfacing and other work on the expected intervals, is taken into account.

Those in the “authority” and County Commission who think that traffic will rise to meet the required revenue are flat out of their minds.

The fact of the matter is that ramping toll costs over the last years have already prompted WalMart and Publix to build stores on this side of the bridge. WalMart is open now and Publix will be soon; the earth-moving equipment is in daily operation on that project right now.

That has and will continue to reduce, dramatically so, the “need” for local residents to cross said bridge and thus reduce the number of trips — and the tolls collected.

The market has and will continue to spit in the face of the Okaloosa County Commission and MidBay Bridge Authority, reducing their pipe dreams of “efficiency in transportation” (not to mention their delusions of grandeur) to ash.

The market, of course, has a long history of doing exactly this quite efficiently; as price rises the utility value ex-cost to the local residents decreases. That increased net cost in turn causes businesses to find a reason to make it easier, faster and cheaper for residents to avoid paying said price.

Oh sure, the theory goes, the county can******the tourists, right after they spend $5 million in advertising to herd them in on their vacation so they can get bent over the fish-cleaning table while their wallet is vacuumed out. And let’s not kid ourselves — for those tourists who don’t have a SunPass (that would be nearly all of them) when they get surprised by the all-automatic plaza on the extension and are forced to pay $11.50 (which will show up in the mail when they get home) that is likely to have a rather serious impact on their view of this area — and not in a good way either.

But heh, the MidBay Bridge Authority will cackle at their playing of the proverbial troll.

The question is whether said tourists will come back to be screwed again, and if not, what happens to those precious “bonds” and their demanded coupon.

PS: The rolling of that debt, historically thus far, has been made possible only due to the secular decline in interest rates over the last 30 years. That secular decline is now over which means that all such projects that cannot retire their debt from operating revenue before it comes due are inevitably going to blow up in the coming years and decades. This is a mathematical certainty Mr. Vest.

The Mid Bay Bridge – Who Loses?

 The Okaloosa Board of County Commissioners (BCC) will soon perform the annual chore of unanimously approving the Mid Bay Bridge Authority (MBBA) Budget for 2013. It is a pity that this important county government function has become nothing more than going through the motions.

It is routine for MBBA budgets to get rubberstamped every year without critical questions of any kind. Even though the Mid Bay Bridge and bypass is by far the largest public works project in the County, none of the past Commissioners, and maybe some of the current ones, think there is anything for them to question. To them, the Mid Bay Bridge and bypass are an absolute good. Even the scope of the budget review has been limited by how the County Attorney has interpreted controlling legislation. The MBBA budget is currently around $15 million, but only about $700,000 of that (the administrative budget) gets presented to the Commissioners to approve. The rest remains under the exclusive control of the MBBA. The matter is put out of sight, out of mind, and out of public scrutiny quickly and efficiently.

Ask yourself who benefits from our County Government being run like this?

The companies involved in building the bypass benefit. A large chunk of the $280 million dollars of MBBA debt (on its way to $350 million) is for construction.

Real estate companies along the new bypass benefit. They get access to a publicly paid highway that allows the development of relatively inaccessible land in the Northern part of Niceville. Local homeowners benefit from higher land value.

The Mid Bay Bridge Authority certainly benefits. Their salaries are good (Jim Vest, the Executive Director, makes $200,000+ per year) and their job security is second to none because there is little to no competition for them to face of any kind. They get autonomy that would make royalty jealous, since even royalty had to contend with a peasant revolt every now and then.

The Board of County Commissioners benefit. They look like they are managing a successful project. This is very much in the BCC’s self- interest because, as we have recently seen with the Florida Auditor General’s report, they have problems keeping County government accountable. For them, the fewer areas of public contention the better. Nor do debt or high tolls for their neighbors worry them. Paraphrasing Commissioner Wayne Harris, if people think tolls are too high, they don’t have to use them.

Are there any losers?

You bet there are. The public is the big loser. The BCC and the MBBA forgot that Government management is always about providing the most services at the least cost to the public. There are 20,000 people who need the bridge and bypass daily. They will soon pay $9 round-trip, or about $2000 a year. Had bridge authorities paid attention to paying off debt, instead of expanding, we might have had a bridge with a 50 cent toll. That would have been a real boost to economic development, and real assistance to Okaloosans when times are tough.

Poor strategic planning caused this. The MBBA built its future on the idea of unlimited growth; that expansion was justified because more and more cars would use the bridge and bypass every year. Since 2005 there have been fewer and fewer cars paying tolls. In short, the MBBA is spending more and taking in less. The BCC, unquestioningly, went along with this.

Objective observers see the problem. Fitch’s bond rating agency rated MBBA bonds one step above junk. The State legislature is making rumblings about taking away the MBBA autonomy. Unfortunately, this is all too late as the money has been spent, and the debts will be unsustainable. Eventually, these massive costs will be spread out to all Florida taxpayers. They will then be hoisted on the Federal Government who will print money to pay for them. Meanwhile, the travelers and workers in the county will keep on paying high tolls forever.

The BCC can’t make up for 20 years of neglect, but it would be nice for once if they’d stop just going through the budget motions, and come to understand what they’ve done to the citizens they serve.

Pete Blome is a retired military officer and Chair of the Northwest Florida Libertarian Party

 

 

Okaloosa’s Complacent County Commission

Pete Blome addressed the Board of County Commissioners for Okaloosa County 17 May 2011 at the meeting where the budget for the Mid Bay Bridge Authority, a Florida Special District, gets reviewed and approved by the Commissioners IAW Law 2000-411. The County Commissioners in the past have routinely approved the bridge budget without public discussion, and they did so here as well by unanimous vote.

It is Pete’s opinion this Authority had the wrong financial plan from its inception. Instead of paying off bridge infrastructure and passing the savings to the bridge users, the Mid Bay Bridge Authority has steadily added an average $10 million a year in debt since its creation in 1994. Toll have steadily gone up, and when a large expansion project, called the bypass, is finished tolls may rise as high as $9 round trip to get from Crestview to Destin. Like the proverbial cash cow, bridge users have been set up to pay high tolls forever.

Pete isn’t the only one who sees the poor planning of the Mid Bay Bridge Authority. Fitch’s Bond service recently gave Bridge Bonds a BBB rating, one step above junk.

The Okaloosa Board of County Commissioners allowed Pete 3 minutes to address them.

Thank you, sirs, for allowing me to speak.

Since I have only a few moments, I would like to ask this board to consider a few questions about the Mid Bay Bridge Authority that were not brought up at this meeting.

How does an increased toll across the bridge, as high as $9 when the bypass road is complete, help anyone in Okaloosa County? It doesn’t.

When will the bridge debt be paid off? Never.

Who believes automobile traffic is going to increase to levels to make this Bridge Authority solvent?

It has gone down for 5 years in row. I certainly don’t.

If this Authority can’t remain solvent, what are you, as the approving authority of the Bridge Budget, going to do about it? Will it be to simply pass off the costs of the bridge to the whole state of Florida as Senator Gaetz has suggested?

This board has routinely rubberstamped budgets submitted by the Bridge Authority. Who has this served? Certainly not the citizens of Okaloosa.

The Mid Bay Bridge Authority is not a minor matter. It will represent $350 million dollars in debt before it is finished. Yearly tolls for a regular user will be greater than most people’s property taxes. One out of ten Okaloosans need this bridge for their livelihood, and they are purposefully being bled dry by government through bad planning and apathy.

The MBBA thought about everything except the people it is meant to serve.

And this course of events has been enabled by this board.

Thank you.

The Biggest Unseen Problem In The County

For years now, the Libertarians in Okaloosa County have been alone pointing out the fiscal mess that is the Mid Bay Bridge Authority.

It is a monstrous case of our County Commissioners shirking their supervisory duty according to the law, of a bridge authority thinking trees will grow forever to the sky, and then the state getting involved and spreading the pain over every taxpayer in Florida. Everyone in the Government was thinking of themselves, but no one was thinking about those that use the bridge. The bridge user will now have to pay, and pay, and pay.

But most people don’t see it. Non-bridge users don’t care. Neither does the Tea Party which is rapidly becoming a booster club to give venues for Republicans to focus on anything but what is important.

And it isn’t like the Bridge is a minor program. With the exception of federal projects at Eglin AFB, the Mid Bay Bridge is by far the single most expensive program going in the County. When the Bypass construction is finished, the Authority will have $350 million dollars in debt on its books. That’s a whopping debt for a county of 180,000 people.

Years ago our County Commission decided to exclude the MBBA from its financial statements because of accounting differences between the bridge and the County. Of course, this change did have the effect of making it look like the County had no role in the Bridge budget.

But the law, 2000-411, gave supervision of the operational budget to the Board of County Commissioners. That’s why they have to vote on a bridge budget every year. Mr. Jim Vest, Executive Director for the Bridge, has claimed that this is a mere $700,000 out of a $13 million dollar budget. He thinks nobody except the Bridge Authority, unsupervised by either the County or the Governor, should oversee the remainder. THe BCC goes along with it.

In any case, the BCC has routinely rubberstamped Bridge Authority Budgets with no discussion at all.

With such power, it is no surprise the Bridge Authority thought it could do whatever it wanted.

The Bridge was built cheaply and quickly in 1994. Instead of paying off debt, and passing the savings on to the public, the MBBA decided to continuously expand.

On average, they added $10 million in debt every year since construction started.

The new Bridge Bypass can only be fiscally sustainable if vehicle traffic kept growing every year. But traffic has gone down for five years in a row. I think it will decrease more in the future. The Authority will now have to use all of its current income just to pay interest on its debt. That means more toll hikes are coming in the future.

Don’t believe me? Fitch’s Bond Service rates MBBA bonds at an abysmal BBB, one step above junk for all the reasons I just spelled out.

According to Rep. Brad Drake of Defuniak Springs, we have MBBA Executive Directors, who are paid $200,000 a year for this poor performance.

Now the State of Florida is proposing to eliminate any toll discounts for Sunpass users as it prepares to take over operation of the bridge.

And we have the people of Okaloosa who will have to pay $9, roundtrip, forever, to get from Crestview to Destin.

Senator Gaetz says a State takeover will save the State of Florida $24 million dollars, but those are phony savings. The toll payer will see nothing but higher tolls.

A state takeover will only widen the pool of payers for the debt to all the people in Florida, who had nothing to do with this mess.

In the meantime, the Mid Bay Bridge becomes a never ending cash cow for the bottomless pit of Florida State finance.

There is probably no chance anymore that this money problem can be fixed. But, in my opinion, heads should roll over this matter.

The Board of Directors of the MBBA should be fired by the Governor.

The Executive Directors should be fired by the Board of Directors.

And the County Commissioners should be fired by the people of Okaloosa for making 18,000 people a day pay through the nose for government incompetence.

Mid-Bay boondoggle: Reconsider the costly road we are on

Published in the Destin Log, April 26, 2010 4:36 PM

In a month or two, the Okaloosa County Commission will cast its annual vote about one of the largest government financial enterprises in the county, the Mid-Bay Bridge Authority Budget.

The Mid-Bay Bridge, and the authority that runs it, are no minor matter. The tolls cost a regular bridge user $3 a day, or $15 a week, or $780 a year — even more if you are a visitor or do not use the SunPass system. This is a significant expense for anyone.

A key factor in this discussion is that the Bridge Authority financial report is “dependent to Okaloosa County” but the county decided sometime in the past to not include it in general purpose financial statements. This is because of accounting differences between the county and the Bridge Authority.

If it were included, the current Bridge Authority debt would represent more than a doubling of the total county commission liabilities, from $130.4 million to $291 million dollars. Future debts caused by funding the $190 million dollar road expansion currently under construction can only get bigger.

The key question to be asked about the road expansion is “will future road traffic justify such costs?”

I do not think so.

The idea that vehicular traffic will appreciably grow in the future is a flawed concept. It has fallen four years in a row.

America is undergoing fundamental economic change. The country as a whole is overburdened with a mountain of debt. Federal taxation is set to explode over the coming year.

The recession will continue to put a damper on summer vacation traffic, and fuel is likely to permanently go up in price in both real and nominal terms, which will reduce vehicular business and vacation traffic.

Furthermore, who knows what effect new auto regulations will have on people using their cars? Future government regulation of vehicles will probably make them more expensive, making them less available, and further reducing money left over for vacations and business travel.

The purpose of any government agency is to provide a service that the private sector cannot provide and to do so at the least cost. The best government services are those that are debt free and cost the user little.

Instead of adopting a strategy of keeping costs to a minimum, paying off debt, and then passing on the savings to those who work and use the bridge, the Bridge Authority has opted for a strategy of expansion.

It will prove to be a costly mistake, with greater debt and higher tolls in our future.

I ask you to consider:

•The bridge cost $67 million to build.

•$12 million dollars has been spent on tollbooth and access road expansions already.

•The bridge and road infrastructure costs roughly $3 million a year to operate and maintain.

•It takes in roughly $12 million dollars a year in tolls.

•It pays roughly $6 million dollars a year in interest payments, leaving $3 million a year to be used for capital projects that will cost $190 million.

If the Bridge Authority road expansion plans continue, there will be bigger government debts funded by fewer people paying tolls.

Mid-Bay Bridge Traffic will not be able to support the debts that the Bridge Authority is currently accumulating, at least not without another toll increase.

Instead of this situation, I propose the Bridge Authority finances be organized to pay off debt and lower tolls.

Had the bridge authority been organized in the past to pay off debt, it is conceivable the tolls could have been as small as 50 cents one way instead of the $1.50 they are now. This would have paid for operations and maintenance and even the accumulation of a prudent emergency fund.

I urge the BCC to review and make a determination about stopping the Capital Improvements Project, and save thousands of users the extra costs associated with high bridge tolls.

There is a real chance of having more road than we need.

The County needs to change assumptions about growth. Reorganize the Bridge Authority finances to pay off debt. Turn the bridge into a low-cost service to the county.

Remember, the only thing worse than having to pay a high toll, is for your kids to pay a higher one for underused roads.

Pete Blome is a Niceville resident and chairman of the Libertarian Party of Okaloosa County. The group’s Web site is libertarianpoc.org

The Mid Bay Bridge takes its toll

If you work in Destin and live north of the bay, you probably use the Mid Bay Bridge. The bridge costs you $3 a day, or $15 a week, or $780 a year.

That is a significant sum of money, and about half of all people who use the bridge have the Sunpass system implying they have regular business on the Emerald Coast. Just imagine if the bridge tolls were reduced to 50 cents or so, mainly to maintain and operate the bridge. People would keep in their pocket a yearly amount equal to the individual Federal tax rebate.

So why doesn’t that happen?

Tolls are about government priorities, and, like most government bureaucracies, the Mid Bay Bridge Authority (MBBA) is focused on expansion. They expanded the toll plaza, they want to expand the access road from SR20 to the bridge, and periodically the idea of a second span gets floated in the press. Growth is so American and seems to be what matters to the MBBA, not necessarily the most bridge for the least cost.

Bridge use has gone down the last two years, and future traffic will probably be less. So is this focus on growth wise? Times are hard in the USA, and they are going to get harder. Growth plans that expect an increase in automobile traffic like we’ve seen in the USA for the last 50 years fly in the face of permanently higher fuel prices and a weaker economy. There is a real chance of having the tolls support more road than we need.

But reducing debt and passing on the savings to the public is guaranteed to be the most bridge for the least cost. A review of how bridge money has been used shows that paying off debt has not been a priority. As of 2007, the MBBA accumulated $155 million in current bond debts. In the previous 14 years of operation they paid off $10 million in bonds plus $15 million loaned to it by the Okaloosa County Commissioners. They have also made $117 million in interest payments.

At the same time, the MBBA collected $413 million in total revenue, and are now sitting on $93 million in cash and investments.

Considering the bridge cost only $67 million to build in the first place, and recently had a $6.5 million toll booth expansion, the MBBA seems to be accumulating a nice nest egg at your expense.

Paying off debt and reducing tolls is in the County’s best interest. Besides the obvious benefit of everyone paying less, there would probably be a boost to local business as people have more money to spend on stuff they like instead of an extra tax to get to work. Visitors here would have extra money to spend on businesses that line the route. An additional benefit would be less funding in general for the government bureaucracy that, as any Libertarian knows, would hinder other unnecessary growth.

The residents of Okaloosa County are far from powerless in this matter. The MBBA must submit its operating budget every year to the Board of County Commissioners for approval. Paraphrasing the amendments to the Florida statutes (FS 86-465 and FS 88-542), the County Commissioners may increase or reduce the total amount requested under the provisions of the bridge budget as the County Commission deems advisable. Let your commissioner know that lower tolls are better than expansions that will take decades to pay for.

After all, the only thing worse than having to pay a high toll is for your kids to pay a higher one for underused roads.

Peter J. Blome

(Peter J. Blome is a retired military officer and Secretary of the Libertarian Party of Okaloosa County. He can be contacted at blomep@cox.net)