Massachusetts Turnpike OKs higher tolls

BOSTON Feb 24 (Reuters) - The Massachusetts Turnpike Authority's directors approved a two-part toll hike on Tuesday that would not go into effect if the legislature approves an alternative, a 19-cent hike in the gasoline tax.

The Turnpike risks defaulting on some of its debt by the end of June unless it gets more revenue, and the toll hikes would raise $100 million.

Turnpike Authority Executive Director Alan LaBovidge, just before the board approved the toll hikes by a four to one vote, said: "It (the toll increase) provides sufficient revenues to meet legally required bond coverages."

If the legislature rejects Democratic Governor Deval Patrick's plan to raise the gasoline tax to 42.5 cents, one of the nation's highest fuel taxes, drivers in the Boston area would pay an extra 25 cents to take the Turnpike. They would pay a total of $1.50, starting on March 29, and $2.00 starting on July 1.

Tolls for Boston tunnels would first increase $2.00 to $5.50 and then rise to $7.00.

Like many municipal issuers, the Turnpike has had problems with interest rate swaps backed by troubled bond insurers.

Moody's Investors Service in mid-January said it will monitor the risk that the Turnpike will have to make a termination payment for five swaps it has with UBS AG (UBSN.VX) that were insured by Ambac ABK.N.

UBS has rescinded a so-called event notice that would have allowed it to collect a total of nearly $455 million as of January 14, the credit agency explained. (Reporting by Kevin McNicholas, Writing by Joan Gralla; Editing by Kenneth Barry)