The Oklahoma Turnpike Authority was created in 1947 and tasked with constructing, operating and maintaining a limited access toll road between Oklahoma City and Tulsa.
The authority issued $38.5 million in revenue bonds for construction of the Turner Turnpike. It opened in 1953.
State lawmakers authorized that same year the construction of three additional turnpikes, and the following year a fourth. In 1955, legislators approved the cross pledging of toll revenue, meaning money collected from each would be pooled and the tolling would continue until all the bonds, systemwide, were retired.
All of these early construction projects, as well as the cross pledging legislation, were approved by state voters.
Oklahoma was among the first to install a public toll road, a user-funded financing plan that originated in Europe and spread to the United States and to the rest of the world. In the U.S., tolling systems replaced one by which state governments sold bonds for roads that often fell apart before the debt was repaid.
The sheer cost of collecting tolls pushed some states to develop another user-funded fee, the fuel tax, said Brian Taylor, professor of urban planning at University of California-Los Angeles.
A federal fuel tax was approved in the 1950s to finance construction and maintenance of the federal highway system, but its structure lent itself to stagnation as both inflation and fuel efficiency increased in subsequent decades, Taylor said.
“The problem with the fuel tax is to keep pace you have to go through the political act of raising a levy, and that became a political liability,” said Taylor, who also directs the university's Lewis Center for Regional Policy Studies. “So now there's a turn back in many ways toward tolling, and they've done that I think because they're holding their nose and saying, ‘Well, it seems better than trying to go to voters at election time and saying I tried to raise the gas tax.'”
In Oklahoma, the turnpikes kept coming. Digital technology helped reduce collection and enforcement costs in the 1990s, and by the end of the decade, the state had developed 10 tollways.
$230M in toll revenue
The Oklahoma Turnpike Authority currently oversees 606 miles of limited-access highway, almost 600 employees and is projected to collect more than $230 million in toll revenue in 2012. Oklahoma is now one of 32 states with turnpikes.
Bonding programs — as well as public-private partnerships and in some cases total privatization — are increasingly the go-to for states working to overcome dissipating federal funding, declining fuel tax value, an aging infrastructure and growing populations, according to the American Association of State Highway and Transportation Officials Center for Excellence in Project Finance, a nonprofit association.
Only four states rely solely on pay-as-you-go funding for these types of projects, according to a 50-state joint review conducted by the center and the National Conference of State Legislators in 2011.
“Transportation funding decisions are becoming increasingly critical as system needs continue to overwhelm available resources,” the report reads. “How each state meets these challenges is necessarily shaped by its distinctive approach to governing and paying for its transportation system.”
Critics of the Oklahoma turnpike system complain the owners of Oklahoma Turnpike Authority bonds are profiting off the state's public infrastructure system. That's true to some extent. For their investment, bondholders will collect about 3 to 4 percent interest in 2012, or more than $47 million.
But this type of program is not unusual, said the state's bond adviser James Joseph, head of the oversight group that reviews and approves all agency financing requests.
Authority bondholders, like the bondholders of a municipal power authority or student loan authority, include individuals and institutions worldwide that, through the investment, provide upfront project funding with the intention of profiting.
The Turnpike Authority's bonding system is a highly rated one, he said, and its bondholders are typically large financial firms, some of which sell to individuals worldwide and some of which flip the bonds on the open market almost daily.
Finding a balance
The Fitch Group, one of three nationally recognized credit rating organizations, has awarded the authority's 2011 bond series an AA- rating, second-highest on its grading scale. The New York banking organization Depository Trust Company acts as securities depository for the series.
“Whether it's the best way to finance it is somewhat a matter of opinion,” Joseph said. “Some projects are just too big to pay as you go, and turnpikes are certainly one of them.”
Taylor said a successful toll program balances the benefits of user-based funding and the ability to influence road use and traffic patterns with the time and cost required to implement the system, including collection costs, traffic delays and diversions.
A toll road is usually most economical in high-traffic areas and in states with “lumpy” transportation budgets, he said.
“If the transportation budget is pretty much flat year-to-year, it's much cheaper to pay as you go because you avoid interest charges. But if it's lumpy, like the budget is very large in '03 and '08 but much smaller in other years, then there is a public finance argument for bonding and borrowing,” he said.