On some Puget Sound roads, lighter traffic for drivers is translating to a gloomy financial picture for the state.
Transportation officials are eyeing toll increases and other financial maneuvers as the coronavirus pandemic keeps some drivers at home, lowering toll revenues once expected to help pay off key road projects.
Traffic is down by about half on the Highway 520 bridge and in the Highway 99 tunnel, after steeper drops earlier in the year. Neither the bridge nor the tunnel is expected to meet pre-pandemic budget projections, and toll increases are likely on both routes next year.
“We’re really in crisis management mode for the 520,” Deputy Treasurer Jason Richter told state lawmakers Nov. 30.
Traffic plummeted across the state this spring as people worked from home or reduced their travel. Although highway traffic has largely rebounded, a lack of congestion in places like downtown Seattle can entice drivers to avoid toll routes like the downtown tunnel. On routes that are tougher to avoid, like the Tacoma Narrows Bridge, more drivers have returned.
All told, the state expects to collect $72 million less in toll revenue than had been forecast from March through October. That’s a 45% decrease, with losses likely to continue into next year.
A drop in toll revenues scrambles plans for how the state will pay off costly projects, like the Highway 520 bridge and the downtown tunnel. In a worst-case scenario, the state could fail to make its debt payments, endangering its credit ratings, though state officials insist that’s virtually impossible.
Instead, the state proposes using toll increases, highway project reserve funds and other shuffling of state transportation dollars to cover losses.
The trend is playing out nationally.
Toll traffic was down about 25% across the country in the third quarter of this year compared to 2019, according to the ratings agency Fitch.
As people stayed home — but continued to shop and order online — routes with commercial truck traffic saw less of a dropoff than commuter routes, said Pat Jones, executive director and CEO of the International Bridge, Tunnel and Turnpike Association, a trade group for agencies that operate toll roads.
Some agencies are putting off new interchanges; others are spending their reserves or restructuring their debt, Jones said.
The 520 floating bridge, opened in 2016 across Lake Washington, presents a significant challenge for state lawmakers.
To pay for the bridge, the state used gas tax money and took on about $1.7 billion in debt, around $909 million of that backed by tolls. Of the toll-backed bonds, about two-thirds are also backed by state gas tax revenue and then by the state’s general fund, if tolls fall short. The state is looking to refinance a $300 million federal loan backed solely by tolls.
Richter said his office expects various efforts to stave off the most dire possibilities.
“I don’t see any situation where the general fund would be involved in these toll facilities,” he said in an interview.
To backfill money needed to pay the debt, the state has tapped a reserve account for the 520 bridge and plans to continue drawing down that account. The treasurer’s office proposes also using money from fines paid by drivers for late toll payments. That move would need approval from the state Legislature.
Most noticeable for drivers: Toll increases on 520 are likely as early as next summer, according to the Washington State Transportation Commission, which sets toll rates.
Today, drivers of standard vehicles pay between $1.25 and $6.30 depending on the time of day and whether they have a Good to Go pass.
Drivers will have to wait and see just how much those rates may increase. Too many factors are unknown, like how long new work-from-home trends will last and what may happen in the upcoming legislative session, said Carl See, deputy director at the state Transportation Commission. The commission should know more about rate increases in the spring, See said.
Balancing the need for toll revenues with increasing tolls is a “catch 22,” said Sen. Curtis King, R-Yakima, warning that raising tolls too much could just further discourage drivers from using toll roads.
In the Highway 99 tunnel, the state predicts deficits for years to come. Toll revenue is down about 45% in the tunnel from March through October, a loss of about $7 million so far.
Unlike the 520 bridge, the tunnel does not have a substantial reserve account to draw on, leaving the state looking to toll increases or savings in operations costs. Richter told lawmakers the tunnel, which opened last February, “never really hit its stride financially speaking.”
While much of the tunnel was funded by gas taxes, the state pays back some tunnel bonds with tolls. The state first repays those bonds with gas tax money and then replaces the tax money with toll revenues. The gas tax is used for a long list of state roads projects, and the drop in toll dollars puts new strain on that arrangement in the state budget.
If the state can’t repay its costs from other sources, “that money is going to have to come from, basically, other projects,” Richter said.
The state sees new uncertainty on the Eastside, too.
Toll lanes on Interstate 405 and Highway 167 — usually a reprieve for rush hour drivers willing to pay to escape backups in the general-purpose lanes — were expected to help finance future expansions on those highways.
Traffic in I-405 toll lanes fell by more than 80% in the depths of this spring’s stay-home orders and is now down by about half. In the toll lanes on 167, traffic is down by about a quarter.
State lawmakers last year approved a plan to sell bonds and pay them back with toll revenue as a way to raise money to widen the highway between Bellevue and Renton, and to complete other projects.
With tolls evaporating, the future of those plans is up in the air.
The Transportation Commission says there are no immediate plans to increase toll rates on I-405.
On the Tacoma Narrows Bridge, traffic is recovering faster. With fewer alternatives for drivers, traffic on the bridge is down only about 15% compared to last year. But the bridge is still likely to need more in state loans than once expected because of lost toll revenue.
The state began loaning money to pay off debt on the bridge after debt costs rose.
Instead of the $13 million loan once expected over the next two years, the bridge will need at least $25 million, according to the Transportation Commission. A 25-cent toll increase there is already expected as soon as next summer.