ICC puts strain on Maryland’s transportation funds


The flyover ramps of the Intercounty Connector at Route 29. (Mark Gail/The Post)
November 22, 2011

The 18.8-mile Intercounty Connector, which opened in full Tuesday, could be the last publicly funded highway built in Maryland for a generation, as the state’s tolling agency, which financed its $2.56 billion construction, reaches its debt limit, local transportation experts said.

Financing for the six-lane toll road linking Interstate 270 in Montgomery County with Interstate 95 in Prince George’s County leveraged the Maryland Transportation Authority’s statewide toll collections.

But the transportation authority’s debt capacity is tapped out from borrowing to build the ICC and $1 billion in express toll lanes on I-95 northeast of Baltimore, state budget analysts said. Mounting debt recently prompted the authority to raise tolls statewide as the authority also struggles to maintain its aging bridges, tunnels and roads.

“You’re probably looking at another 20 years before we see another major road like this be built,” said Lon Anderson, a spokesman for AAA Mid-Atlantic.

Supporters say the ICC provides a vital east-west link long missing from Maryland’s highway network, but some critics worry about the toll road’s long-term financial effects. They say the ICC’s hefty price — it’s the most expensive road Maryland has ever built — has hamstrung the state’s transportation finances for years.

“The state has mortgaged its transportation future in many ways to the ICC,” said Montgomery County Council member Phil Andrews (D-Gaithersburg-Rockville), a longtime critic of the highway. “The opportunity cost of building the ICC has been huge, because it’s foreclosed improving many other roads.”

Whether the highway proves worth the investment — and at what cost — will play out over the next 10 to 30 years in several key measures: how many vehicles the ICC absorbs from local roads, time saved by motorists who use it, job growth from companies that rely on it to attract workers, and the impact it has on local streams and air pollution.

“The road, from an economic standpoint, will pay for itself many times over,” said Maryland Comptroller Peter Franchot (D), who helped put together the ICC’s financing plan in 2005 when he represented Montgomery in the General Assembly.

‘Wouldn’t be built’

Borrowing heavily to build a mega-project is par for the course in transportation. What’s different about the ICC debt is how the state plans to pay it back.

Like other states, Maryland has found that gas tax revenue traditionally used to finance road-building hasn’t kept pace because more fuel-efficient vehicles have eaten into gasoline consumption and politicians have been loath to raise the tax. With the ICC, Maryland began shifting transportation construction costs to toll payers, as Virginia has done to help finance a Metrorail extension and to widen the Capital Beltway.

The ICC “wouldn’t be built without tolls — that was the reality of the cost of building that road,” said former Maryland transportation secretary Robert L. Flanagan, who oversaw the ICC financing plan for then-Gov. Robert L. Ehrlich Jr. (R).

“It cost $2.5 billion,” Flanagan said. “There was no way that kind of money could be raised in any other way besides using toll revenues.”

The effects of that shift are just being felt in Maryland, where tolls had remained among the lowest on the East Coast for decades because the state relied on them primarily to maintain and operate seven bridges, tunnels and highways — not to build new ones.

Borrowing to build the ICC and I-95 express toll lanes while funding rehabilitation work on other toll facilities will cause the authority’s total debt to reach nearly $2.8 billion in fiscal 2017 — just below the state tolling agency’s debt limit of $3 billion, according to the authority. That leaves the agency with little flexibility to borrow more without again raising tolls, whether to add capacity or do major “system preservation,” such as replacing or expanding the 71-year-old Harry W. Nice Memorial Bridge in Southern Maryland, according to state budget analysts.

The authority’s annual debt service payments will jump from $25 million in fiscal 2007 to about $190 million in fiscal 2021, an authority spokeswoman said. In fiscal 2017, about a quarter of the authority’s total revenue is expected to be spent on debt service, and a third of those payments will go toward the ICC borrowing, the spokeswoman said. The final bond payments for construction of the ICC and the I-95 express toll lanes will be made between 2041 and 2046.

‘At a standstill’

The ICC is also the first transportation project to tie up a chunk of Maryland’s future federal highway funding. In addition to paying off the toll-backed bonds, the state must commit about $87 million of its federal highway funds to other ICC bond payments every year through fiscal 2019. An additional $51 million in federal highway funds must be paid in fiscal 2020. Those ICC bond payments now consume about 15 percent of the state’s annual federal aid, but that percentage could grow if federal allotments to states shrink, as some members of Congress have suggested could occur because of budget pressures.

“In terms of increasing capacity, we’re at a standstill for roads, transit, anything,” said Warren Deschenaux, director of the Office of Policy Analysis, the professional staff for the General Assembly. “If [money] is all tied up in debt service, you can’t do much else. It’s like being house-poor. We’re road-poor.”

Deschenaux said more statewide toll increases will be “inevitable” to cover the growing debt payments, particularly if commercial trucking, along with other traffic dependent on the economy, doesn’t rebound quickly from the recession.

Maryland Transportation Secretary Beverley K. Swaim-Staley, who chairs the transportation authority board, said the most recent toll increases will cover the authority’s expenses “for at least a few years.” Those increases included passenger tolls on the Chesapeake Bay Bridge rising from $2.50 to $4, with a jump to $6 in July 2013. She said she’s not concerned about the authority’s financial health, noting that Maryland transportation bonds attract the highest rating.

Fitch Ratings recently gave the authority a “stable” outlook, noting the state’s willingness to raise tolls when necessary and the relative affluence of Washington area motorists. It also noted that drivers in the traffic-clogged area have limited options.

Construction on the authority’s next likely major project — fortifying or replacing the Nice Bridge — is at least a decade off, when toll revenue, it’s hoped, will have rebounded enough to cover more debt, Swaim-Staley said. The state’s self-imposed debt limit for the authority is conservative, she said, and separate from the Transportation Department’s and state’s borrowing capacities. The General Assembly could lift the authority’s debt limit if needed, she said, although she said it is a “high bar” for the legislature to do so.

“I’m not concerned,” Swaim-Staley said. “I think once the ICC is in operation awhile and people are used to it being there, it will absolutely prove to be a financial success.”

ICC supporters say traffic is so bad through central Montgomery that plenty of motorists will pay up to $4 each way, or up to $24 for tractor-trailers with an E­-ZPass, to travel the entire route. That would relieve traffic on narrow local roads, such as Route 28 and Muncaster Mill Road, that weren’t designed to be commuter thoroughfares or truck routes.

The ICC directly connects Montgomery’s job-rich I-270 corridor with more affordable places to live, such as Howard and northern Prince George’s counties, while opening up jobs around Baltimore-Washington International Marshall Airport, Fort Meade and Laurel to more Montgomery residents.

Most important, supporters say, the ICC will attract and keep companies in Montgomery that can use the road to reach BWI. State officials say the drive between Gaithersburg and the airport will drop from 71 minutes on local roads to 37 minutes on the ICC.

The General Assembly approved the ICC financing plan, Flanagan said, because “I think people understood the ICC was needed and that it will play a very positive role in Maryland’s economy going forward.”

‘It will be much easier’

Although motorists have remarked on the often empty feel of the ICC’s first 7.2-mile segment, which opened in February, state officials say those weekday vehicle counts are tracking 1 percent above projections. They say they expect it will take several years for traffic volume to ramp up, but they’ll keep tolls high enough to ensure the ICC remains free-flowing.

Keith Ballenger, vice president for Adventist Home Care Services, said he’s eager to use the ICC three to five times a week to travel between offices in Colesville and Rockville. He estimates he’ll cut his drive time in half by avoiding the Capital Beltway — which also will help the company’s nurses and therapists reach more patients across Montgomery.

“It will be much easier knowing we won’t hit the gridlock that we hit every day on the Beltway,” Ballenger said.

But the toll rates are giving some pause. Jim Franceschini, fleet manager for United Shellfish on Maryland’s Eastern Shore, said he’s not sure whether he’ll direct truck drivers to use the ICC when delivering seafood to Montgomery restaurants and stores. Franceschini said his drivers avoid the morning and evening rush and get around fine on back roads.

“The tolls are pretty high on it,” Franceschini said of the ICC, “so we may avoid it just for that reason.”

Still, he said, he’ll weigh the toll against the cost of keeping refrigerated trucks idling in traffic. “If the Beltway is swamped, I won’t tell them to sit in traffic if they can jump on [the ICC] and get back home, because the fuel prices are what kill us,” Franceschini said.

Local transportation observers say that if Maryland motorists want new or wider highways, the state’s next alternative would be allowing private companies to build and operate roads for a profit. That, of course, would lead to motorists paying more tolls.

“I think 25 years from now, we’ll look at the Intercounty Connector and say, ‘My God, how did we live without it?’ ” said Anderson, of AAA. “I think we’ll look at the ICC as a game-changer for many, many lives in our region.”

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Katherine Shaver is a transportation and development reporter. She joined The Washington Post in 1997 and has covered crime, courts, education and local government but most prefers writing about how people get — or don’t get — around the Washington region.
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