Joseph Krist

Publisher

PORT AUTHORITY BUS TERMINAL

The Port Authority of New York and New Jersey released a draft environmental impact statement and a revised project plan in support of its effort to replace the nearly 75 year old Port Authority Bus Terminal, the world’s busiest bus terminal. The estimated cost of the project is $10 billion. The revised plan would include a 2.1-million-sq-ft main terminal, a bus storage and staging facility and ramps directly connected to the Lincoln Tunnel. 

The storage and staging facility will be constructed first and serve as a temporary terminal while the existing building is demolished. That will occur in 2028. The new terminal would be completed in 2032. The Port Authority is currently applying for a federal Transportation Infrastructure Finance and Innovation Act (TIFIA) loan to help finance the project. The authority is also negotiating plans for commercial development above the terminal with city officials via payments in lieu of taxes.

LONG ISLAND POWER AUTHORITY

New York lawmakers have introduced a bill, The LIPA Public Power Act which would allow the agency to distribute electricity themselves to Long Island and Rockaway residents without the need for a third-party company. The utility has effectively been managed by PSEG Long Island, an investor-owned, for-profit utility company whose contract is up in 2025. Storms have been at the center of the latest debate over LIPA. The proposed change stems from the utility company’s poor performance in responding to Tropical Storm Isaias in 2020.

As of October 2023, PSEG Long Island customers spend an average of 22.73 cents per kilowatt hour for their residential electricity, which is 11.92% higher than the average state price of 20.31 cents. If enacted, it would represent yet another change in the management and operation structure. It was a major storm that drove cries for the current arrangement. Now the winds are blowing in the opposite direction. It is not clear whether the bill has enough support to pass.

EMINENT DOMAIN

State regulators in South Dakota have rejected the initial permitting request from Summit Carbon Solutions for a pipeline through the state to transport carbon dioxide. Summit can try again and now the State Legislature is working on several pieces of legislation which would, if enacted, add protections for private property owners when pipeline companies conduct surveying, ensure better terms for landowners in agreements with pipeline companies, and add financial protections for landowners subjected to eminent domain.

Two bills failed to make it out of committee. One was a bill to prevent carbon pipelines from using eminent domain at all. The second would have required carbon pipelines to have a regulatory permit before pursuing eminent domain. The pending bills would require any person or entity looking to conduct an examination or survey on private property to have a pending or approved siting permit application with the state. It would also require 30-days written notice to the property owner. The notice must include a detailed description of the property areas to be examined, the anticipated date and time of entry, the duration of presence on the property, the types of surveys and examinations to be conducted, and the contact information of the person or agent responsible for the entry. 

The bill also would require entities seeking to enter private property for surveys to make a one-time payment of $500 to the property owner as compensation for entry, in addition to covering any damage caused during the examination. Property owners would also be given the right to challenge the survey or examination by filing an action in circuit court within 30 days of receiving the written notice. 

Under a second bill, carbon pipeline agreements would not be allowed to exceed 50 years and would automatically terminate if not used for the transportation of carbon dioxide within five years from their effective date. Landowners would be entitled to annual compensation for granting the easement, set at a minimum of $1 per foot of pipeline each year the pipeline is active. 

In Nebraska, a bill has been introduced to limit the use of eminent domain. Legislative Bill 1366 would provide that a local government, such as a city or county where eminent domain is to be used, or the Nebraska Public Service Commission, would have to vote to approve its use. The bill would also require “good faith” negotiations and providing an appraisal to a landowner, before eminent domain could be used.

The Nebraska Public Service Commission has the authority to approve only the routes of oil pipelines under current law. The proposed bill would expand that to CO2, gas and natural gas pipelines, the agency said, “and possibly other private chemical and water pipelines,” both within the state and those crossing state lines.

The North Dakota Public Service Commission decided that state rules preempt local ordinances on pipeline zoning issues. It cited state law changes in 2019 that said “the approval of a route permit for a gas or liquid transmission facility automatically supersedes and preempts local land use or zoning regulations except for road use agreements.” Before 2019, the law said state rules may supersede local ordinances, if the local ordinances are deemed unreasonably restrictive. 

The decision will enable Summit Carbon Solutions to reapply for a permit of some 350 miles of its planned pipeline in North Dakota. It was initially denied in late 2023. The reapplication proceedings could begin in one month.

MASS TRANSIT

The Washington Metro Area Transportation Authority (WMATA) is facing a $750 million budget gap for FY 2025. Earlier this year it proposed significant service cuts in the absence of additional funding for its operations from its intergovernmental funding partners. Under that plan, several stations would close permanently, rail service would stop at 10 p.m., about one-third of bus lines would be cut.

Now, the District of Columbia has made a funding proposal to increase its support for WMATA in an effort to stave off service cuts. D.C. Mayor Muriel Bowser and two Council members said the city is offering up to $200 million, on top of its fiscal 2024 operating subsidy. The funds would be used to help close WMATA’s fiscal 2025 budget deficit. The city’s proposed contribution, combined with proposed funding from Maryland and Virginia, would help WMATA cover $480 million of a $500 million gap.

PUERTO RICO ELECTRIC

The Puerto Rico Electric Power Authority (PREPA) is in the middle of its continuing fight to avoid paying off its billions of municipal bond debt. While this effort drags on, planning must be undertaken to improve and develop the electric grid on the island. This week, the U.S. Department of Energy delivered its views on efforts to diversify and strengthen the electric system in support of the Commonwealth’s climate goals.

DOE and FEMA conducted a two-year study which concludes that Puerto Rico can successfully meet its projected electricity needs with 100% renewable energy by 2050. Puerto Rico must increase new power generation infrastructure significantly—on the scale of hundreds of megawatts—to stabilize the grid and alleviate current generation shortfalls, including rapid deployment of utility-scale and distributed renewable resources and significant amounts of storage. 

Here is where the ongoing bankruptcy proceedings for PREPA get in the way. Outside funding for resilience components of the resource plan (solar, wind) to address economic equity concerns is available. On February 22, 2024, residents can apply for DOE’s Solar Access Program — a program designed to connect up to 30,000 low-income households with residential rooftop solar and battery storage systems with zero upfront costs. 

This program is being funded from the Puerto Rico Energy Resilience Fund, a $1 billion DOE program focused on improving the resilience of Puerto disadvantaged households and communities. Frequent outages continue to impact Puerto Ricans on a day-to-day basis, caused in part by the poor state of repair of the electric transmission and distribution grid and insufficiency of the current generation fleet, which is frequently unable to supply enough electricity to meet load under even normal, non-peak conditions.

This only addresses part of the problem for an agency with massive capital needs and questionable market access.

RATES, INFLATION AND BUDGETS

At some point, the realities of recent years’ inflation combined with the impact of pandemic costs was going to negatively influence budgets. On top of those factors, many governmental employers were emboldened by the pandemic to take more aggressive stances in their contract negotiations. When you put those factors together, it is a formula for budget imbalance and pressures to reduce expenditures. It’s not just a challenge for smaller less well-to-do communities. Larger richer communities are under the same pressure.

The latest example is Santa Clara County, CA. This week it issued a budget update. Last summer, the county avoided a strike with its largest union, SEIU Local 521, when it reached a deal that resulted in the largest increase in wages in two decades. Now, the cost of salaries and benefits is expected to rise $488 million, or 9.5%, between the current budget and the 2024-25 fiscal year budget. Mid-way through this year, county officials predict a $45.9 million balance at the end of the 2023-24 fiscal year. 

Like many counties, Santa Clara faces significant healthcare costs. The general fund balance is just about totally offset by a $42 million shortfall in the County’s health system.

NET METERING

The pendulum continues to swing back and forth when it comes to the level of compensation provided to utility customers with rooftop solar and excess power. Last year, states like Florida and California reduced the payment amounts available from utilities to their customers with solar. These moves have lowered the demand for solar by rendering it less economical and affordable. The outcry from customers has begun to generate support for increasing those amounts.

Two bills in the Hawaii legislature would seek to increase rates that residential and business rooftop solar system owners receive for helping Hawaiian Electric balance its power needs on Oahu, Maui, Molokai, Lanai and Hawaii island under a program approved by the state Public Utilities Commission in December and scheduled to begin March 1. Under the new system, participating customers receive a fixed fee plus bill credits for exported energy, which on Oahu is 32.9 cents per kilowatt-hour.

The legislation would mandate that program participants receive the “retail” rate credit for exported electricity, meaning the rate Hawaiian Electric customers pay for electricity, which is about 40 cents per kilowatt-­hour on Oahu. The same arguments against the increase we have seen in other states are being advanced in Hawaii. Primarily, the issue is that customers without solar power are “subsidizing” customers who produce their own power. The fixed cost base of legacy utilities would be spread among fewer customers.

Hawaii Electric claims that solar incentives between 2001 and 2015 reduced company revenues by some $105 million. That may be the real issue that the utilities have. Rooftop solar helps to weaken the monopoly on service that utilities benefit from.

In Utah, legislation has been introduced to increase the energy bill credits for energy generated by rooftop solar power. Under current laws and regulations, Rocky Mountain Power charges 10 cents for each kilowatt hour it provides. When it credits rooftop solar equipped customers, it only credits customers with about five cents per kilowatt hour. The legislation would require energy companies to credit solar owners at least 84% of the cost per kilowatt.

In North Carolina, the Court of Appeals heard arguments this week challenging Duke Energy’s net metering rates. The battle over net metering between Duke and the state has been going on for a decade. The solar industry and electric customers are claiming that the State Utilities Commission failed to follow the law when it relied on a Duke analysis of the costs of net metering in arriving at a rate. Other provisions of the law regarding timetables for adoption of new rates were drafted by Duke.

The solar industry hopes to see that the Utilities Commission conduct its own studies as required by law. In the interim, delay in the implementation of a new rate schedule would occur until a final approval from the state.

PENNSYLVANIA BUDGET

Pennsylvania Governor Josh Shapiro released his budget proposal for FY 2025. His plan would increase total authorized spending by 7% through the state’s general fund, while tax collections are projected to increase by $1 billion, or 2%. The budget proposal holds the line on taxes, and instead draws down the state’s cash reserve from $14 billion to $11 billion. The additional money is intended to fund several education initiatives.

Last year, state courts found Pennsylvania’s system of school funding unconstitutionally discriminates against poorer schools. To address that, the budget proposes a $1.1 billion increase, or 14% more, for public school operations and instruction. This is based on a school funding commission’s recommendation last month supported by his appointees. A significant portion, about $872 million, would go toward poorer schools.

A major reorganization of the state higher education system is designed to facilitate increased access and lower costs. Shapiro’s budget allots an extra $200 million, or 10% more, for the state’s higher education institutions. He hopes the program will enable tuition to be limited for qualifying students to $1000 per year. Other significant investment would go to public transportation, increasing state aid by about $280 million, or about 20%. More than half of that would go to the Philadelphia-area Southeastern Pennsylvania Transportation Authority, or SEPTA.

TRANSIT SUBSIDIES

Various strategies to combat the impact of the pandemic on mass transit utilization have been suggested in its wake. Recently, the Mayor of Boston claimed that the primary factor keeping workers on a remote basis is the cost of mass transit. Her remedy would be to put mass transit on a fare-free basis. A number of small and medium size cities have tried free fare experiments. Their use on larger systems has been limited.

In New York, the city maintains a program to limit the impact of transit costs on low income individuals. The City’s Fair Fares NYC program provides half-price transit trips to New York City residents between the ages of 18 and 64 with household income below 120 percent of the federal poverty level (currently $17,496 for an individual and $36,000 per year for a family of four), who do not otherwise qualify for reduced-price MetroCards or city-provided carfare.

The NYC Independent Budget Office (IBO) examined the cost of expanding the Fair Fares program to include New Yorkers who are aged 65 and older have disabilities, and whose income is less than 200 percent of the federal poverty level. IBO estimated the cost if Fair Fares were to completely cover the price of these riders’ transit, rather than the program’s current half-price subsidy. IBO estimates this Fair Fares expansion would cost between $27 million and $67 million per year, depending on the transit services included in the program.

NEW ORLEANS AND FLOODS

Some 19 years on from the disaster that was Hurricane Katrina, flooding remains a major issue for the city. New Orleans’ stormwater infrastructure is currently funded through property taxes. A proposal is being made that a more comprehensive funding source which would include currently tax-exempt properties be established. A stormwater disposal or drainage fee could be levied against all properties regardless of their property tax status.

The rate would be based on size for single-family properties. For all other properties, it would be based on the amount of impervious area. That allows the impact of large facilities with substantial footprints to be factored in. Think warehouse facilities and shopping malls. Stormwater fees are a long-standing tool in the municipal market and they have appeared in many forms. In this case, the fees would support the issuance of bonds.

That part of the proposal has become a real issue. The Sewerage and Water Board of New Orleans does not have a favorable image among its stakeholders. Support for the plan may require the creation of a separate entity to oversee collection of the fee and its use. The Sewerage and Water Board of New Orleans says it needs about $1 billion to upgrade the city’s drainage system over the next decade. Backers of the proposal estimate that a fee would yield some $38 million annually to support debt service.  They would like a new entity to oversee things.

HEALTH SYSTEM CREDIT PRESSURE

Novant Health operates 15 medical centers in North Carolina, including several regional referral centers. The Novant Health Medical Group has nearly 2,000 physicians and maintains numerous physician offices and outpatient centers. The system is headquartered in Winston-Salem, NC. As the result of the acquisition of New Hanover Regional Medical Center, it has major operations in three different North Carolina markets.

That acquisition has come with a cost. Moody’s Investors Service has placed Novant Health’s (NC) Aa3 long term rating under review for downgrade. Novant closed on its acquisition of three hospitals from Tenet Healthcare for $2.4 billion on January 31.  Novant Health financed the acquisition with a bridge loan, roughly doubling its debt load to some $5 billion.

The system will have to make the case that the benefits of the expanded system are enough to offset the major increase in debt. The risks from integration issues are present in all of these deals.  

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