Commonwealth Foundation

Turnpike

JANUARY 11, 2012

Turnpike Commission Defends Ballooning Debt

PA Turnpike Commission Following our post yesterday, the Pennsylvania Turnpike Commission wanted to make sure we saw their response to Auditor General Jack Wagner's warning on their growing debt.

The Turnpike Commission wanted to ensure bondholders that, "the PTC remains committed to meeting all its financial obligations—including obligations to bondholders—by sound management of our debt load and by reinvesting in our toll-road system."

But while bondholders (and bond attorneys) may rest assured, taxpayers and drivers should not.

Act 44 may not result in a default—as a government monopoly, the Turnpike Commission can raise tolls without threat of competition, and bonds are further backed by Pennsylvania taxpayers—but that doesn't make it sound policy.

The Turnpike Commission's Annual Financial Report (see page 24) shows that the PTC lost $523 million, $1 billion and $891 million respectively each of the last three years. That should worry taxpayers and motorists.

Indeed, Moody's rating agency latest grade of Turnpike bonds gives it a "negative outlook." Why? The Turnpike Commission needs to keep raising tolls.

The negative outlook reflects the possibility that larger than currently forecasted toll rate increases will be necessary to maintain sound financial operations and targeted debt service coverage levels. The outlook also incorporates the possibility that the turnpike could be tapped to pay for more of the state's growing unfunded infrastructure needs.

Let's not forget, Act 44 was created as an alternative to leasing the Turnpike to a private investor and manager. The claim was that a private company would ... wait for it ... raise tolls!

So is the commonwealth better off having borrowed $5 billion under Act 44 compared to getting $12 billion in an up-front lease payment?

The Turnpike Commission's persistent defense of Act 44 might make one think that its Chief Operating Officer is the Senate staffer who wrote the offending legislation.

posted by NATHAN BENEFIELD | 01:38 PM | 1 comment

JANUARY 10, 2012

Wagner's Warning on Turnpike Debt Not Exaggerated

Auditor General Jack Wagner claims the Pennsylvania Turnpike Commission is in a state of fiscal crisis following a 181 percent increase in long-term debt since 2007. This shouldn't surprise anyone; in fact, we predicted Act 44 of 2007 would burden taxpayers for a generation.

Act 44 empowered the Pennsylvania Turnpike Commission to issue billions in new bonds and raise tolls on the Turnpike every year (as well as erect toll plazas on the un-tolled Interstate-80). Following the rejection of I-80 tolling, the Turnpike Commission must pay $450 million to PennDOT each year, almost entirely covered by issuing debt, with toll hikes needed just to pay off the interest.

Turnpike tolls jumped 25 percent in 2009, and continue to increase every year—cash rates are increasing by 10 percent in 2012. Imagine how different the conversation would be today if the legislature had approved the Turnpike lease, which was projected to generate $1.6 billion annually. Instead of frantically searching for a way to repair our crumbling infrastructure and saddling taxpayers with interest of approximately $11 billion over the next 35 years, the state would be collecting interest upwards of $3 million per day.

Thankfully it's not too late to leverage private capital to fix our transportation debacle. A Turnpike lease might be off the table for now but utilizing public-private partnerships (P3s) for new projects is a feasible solution. P3s are the emerging paradigm in transportation funding of new projects because a competitive system is more efficient and effective than traditional single-provider systems.

When Massachusetts turned to competition for its highway maintenance, nearly half of the contracts were won by employee groups that competed. Massachusetts was able to lower labor input costs by 37 percent and received greater productivity in return. Enabling public-private partnerships is a great way to stretch limited tax dollars further.

posted by ELIZABETH STELLE | 01:36 PM | 0 comment

JULY 12, 2011

Turnpike Tolls Totally to Transit?

Amid all the budget turmoil, PA Independent notes the Governor's Transportation Funding Advisory Commission is looking to use tolls on Turnpike drivers—those going to the state as part of the Act 44 payments—entirely to fund transit programs (mostly in Philadelphia and Pittsburgh).

Under current law, the Pennsylvania Turnpike Commission must transfer $450 million annually from its tolling revenue to PennDOT with $200 million going to highways and $250 million for mass transit. The advisory commission will recommend using all $450 million for mass transit, with the loss in highway funding being made up by other recommendations being pressed by the commission. ...

The Pennsylvania Turnpike Commission has increased tolls in each of the past three years, ranging from a 25-percent increase in 2009 to a 3-percent increase in 2011. Tolls will increase for each of the next 46 years as part of the annual stream of revenue between the Pennsylvania Turnpike Commission and PennDOT.

Schoch said 70 percent of the turnpike’s toll revenue comes from the state’s urban areas, making the transfer of toll dollars to mass transit a worthwhile move. “The idea is that we’re charging people in the urban areas a little more to make the choice to drive rather than ride transit, and that money is going to go back to those urban areas for transit investment,” Schoch said.

Should motorists be charged for the cost of a service they are choosing not to use, rather than charging transit riders for the cost of government they do use? We'd suggest rather than charge drivers to transit, local governments should actually charge transit riders.

Moreover, as we've noted many times before, the 2006 transportation commission report read:

The Commission concludes that no additional funding should be provided for highways, bridges and transit unless a series of parallel actions are taken to reform funding structure and a number of transportation business practices.

Note the result was massive additional funding (and additional debt) and no reforms. We, of course, have a slew of ideas on how to spend transportation dollars better, including the necessity of reforming mass transit rather than just throwing more money at a broken system.

posted by NATHAN BENEFIELD | 06:30 PM | 0 comment

AUGUST 26, 2010

Turnpike Commission, PennDOT Fight Over Their Spoils

The Patriot News today reports that the Pennsylvania Turnpike Commission (PTC) and the PA Department of Transportation (PennDOT) are arguing over how much money the PTC has to pay PennDOT this year. The Turnpike Commission says $450 million, PennDOT says $922 million.

Act 44 specified the amount the PTC pays the state, but also included a clause that the amount would be $450 million if there isn't tolling on I-80. As it turns out, there is disagreement as to when that $450 million kicks in.

Really, who would have ever guessed the rushed, misguided, and ill-conceived legislation that became Act 44 would have had major oversights like this?

Of course, the Turnpike Commission has already increased tolls -- including another 10% increase on cash-payers scheduled for January -- to make their payments. Or rather, to pay off their debts, as all the payments to this point under Act 44 have been made with borrowed money, to be paid off with future tolls (and backed by Pennsylvania's gas tax).

What this really amounts to is two agencies arguing over who reaps the spoils of their plot to fleece Pennsylvania motorists.

posted by NATHAN BENEFIELD | 02:05 PM | 0 comment

JULY 29, 2010

Tough Questions for Pennsylvania Turnpike Commission

The PA Turnpike Commission (PTC) testified before the Senate Transportation Committee during this summer's special session on transportation funding. Most senators on the committee expressed concern on several aspects regarding the PTC.

Senators inquired about the new toll increase, 3% for E-ZPass users and 10% for cash paying drivers, starting January 2, 2011. Specifically, Sen. Gordner asked about news that the new toll increases will make Pennsylvania the most costly in the nation. PTC CEO Joe Brimmeier said these claims are false, and that 14 states have costlier roads.

What Brimmeier neglected to mention was the Pennsylvania Turnpike will in fact become the most expensive long toll road (roads 100 miles or longer) in the nation. It is true that some states have more expensive toll facilities, but those are limited to short range highways spurs and bridges. The Turnpike will cost 8.5 cents per mile after the toll increases.

The PTC is also $6.5 billion in debt, a debt that has nearly tripled in the last three years. Last month, Moody's downgraded its rating on some Turnpike bonds, and issued a negative outlook due to rising debt. Standard and Poor's also issued an analysis warning that steep increases to tolls will create public and political backlash. The CFO said the Turnpike has taken steps to address the bond issues that were not reflected at the time of Moody's downgrading.

Still, Sen. Earll said the debt gives her the "heebie jeebies" and that the Senate Transportation Committee will need to maintain pressure on the PTC, and evaluate whether administrative overhead is in line with the overall budget.

Both Earll and the committee chairman, Sen. Rafferty, questioned some of PTC positions with high salaries and ambiguous names, asking about their purpose. The PTC has been successful in eliminating 15 management positions and 180 collector positions, but still has nearly 2,100 employees, and still has many more workers per mile than PennDOT.

The PTC has a long history of corruption dealing with patronage, inefficiency, and litigation.

To be fair to the PTC, the commission has made some improvements, which several of the senators attributed to talks of privatizing the Turnpike (the PTC was scared into an attempt at efficiency). The Commonwealth Foundation has touted the benefits of a Turnpike lease in the past. Some steps the PTC is taking to "act more like a private business" (in the words of the CEO) include:

Outsourcing its plaza service to HMS Host and Sunoco, which is saving the expense of $170 million to build new service plazas.
A partnership with State Farm to enhance road safety through the "State Farm Safety Patrol." State Farm has paid to brand PTC-owned and operated safety vehicles.
A partnership with TransCore, to operate the "back-office" operations of the E-ZPass accounts.
Becoming more transparent through the 2008 introduction of an Electronic Bidding System. Bids are advertised on the Turnpike website.

Many senators reiterated the necessity of having more frequent meetings with the Pennsylvania Turnpike Commission in order to promote progress and observe the debt situation.

posted by NATALIE ROGOL | 11:07 AM | 1 comment

JULY 15, 2010

PA Turnpike to Hike Tolls on Cash Payers by 10%

The Pennsylvania Turnpike Commission (PTC) announced yesterday that it would be increasing tolls by 10% on cash payers and by 3% on E-Z Pass holders, beginning in January. This follows a 25% increase in Jan. 2009 and a 3% across-the-board increase in Jan. 2010.

From the AP:

The Turnpike Commission voted Tuesday to increase rates 10 percent for cash customers but 3 percent for E-ZPass users, or about two-thirds of all turnpike vehicles.

When the rates take effect Jan. 2, it will be the first time that E-ZPass users will pay less than others.

The turnpike has increased rates seven times in 70 years, including twice in the last year and a half. Tolls rose 3 percent at the start of this year after rising 25 percent in January 2009. The higher fees will produce an estimated $35 million a year.

As part of Act 44 of 2007, the PTC received approval to raise tolls each year - which they forecast would be 3% annually. Gosh, I wish some organization had warned that there was no limit on toll increases, and tolls would be likely to rise faster than projected, due to all the new debt the Turnpike Commission is incurring.

posted by NATHAN BENEFIELD | 08:33 AM | 0 comment

MARCH 1, 2010

Transportation Industry Misleads on I-80 Tolling

A couple of recent editorials in favor of the Pennsylvania Turnpike Commission's plan to toll I-80 - both by transportation industry insiders - gives some misleading info. Peter Javsicas of Pennsylvanians for Transportation Solutions has a Patriot News piece claiming I-80 tolls won't be used for transit.

But the state Mass Transit Trust Fund will receive $410 million in FY 2010-11 (and increasing amounts in future years) from the Turnpike Commission under Act 44 if I-80 is tolled, and only $250 million without I-80 tolls. That's $160 million-plus that mass transit gets, only if I-80 is tolled. Sure, they might create separate checking accounts, but the bottom line is that the push to toll I-80 is driven, in large part, by the desire to subsidize underperforming and inefficient mass transit agencies.

Jim Scheiner, a former PennDOT official, also has a letter in the Patriot News, citing the benefits of the tolling plan for I-80 drivers. Among his claims are that the proposal would spend "$2.5 billion over 10 years to upgrade I-80." Of course, this leaves out the facts that:

Pennsylvania would have spent $1.4 billion in that time on I-80 without Act 44
I-80 drivers will pay $5.3 billion in tolls over that time
$2.6 billion from I-80 tolls go towards payments to PennDOT over that time
A 2005 PennDOT study recommended against tolling I-80 because
- The "deteriorated condition" of the road had been improved
- The "benefits to users of an I-80 toll road would be insignificant for a considerable period of time"

We have identified several alternatives to tolling I-80, including repealing prevailing wage laws and using public-private partnerships to reduce taxpayer cost and improve the quality of services. However, as John Micek of the Morning Call writes, the state has no "Plan B" if and when the federal government rejects I-80 tolling.

posted by NATHAN BENEFIELD | 09:16 AM | 0 comment

FEBRUARY 12, 2010

Pennsylvania Turnpike Already Hiring Consultants for I-80 Tolling

Toll Roads News reports that the Pennsylvania Turnpike Commission is seeking bids for consultants for the conversion of the highway to a toll road. The four contracts would each be up to "a period of four (4) years or $5,000,000.00, whichever occurs first."

Of course, the PTC "reserves the right to cancel the solicitation" - not surprising, as they don't as yet have approval to toll I-80 (and according to some sources, will be denied again).

posted by NATHAN BENEFIELD | 04:37 PM | 0 comment

FEBRUARY 5, 2010

Final Nail in I-80 Tolling's Coffin?

The FHWA is expect to announce shortly that, once again, the have rejected the Pennsylvania Turnpike Commission's bid to toll I-80 across the state. Eric Boehm has the details over on PA Independent.

Where does that leave us? Here are five alternatives to tolling I-80.

posted by NATHAN BENEFIELD | 08:50 AM | 0 comment

JANUARY 26, 2010

Should the Turnpike Commission Toll I-80?

It's been 88 days since the Pennsylvania Turnpike Commission resubmitted its application to toll Interstate 80 (after being denied twice). We're told that the Federal Highway Administration will soon be decide whether or not Pennsylvania's most corrupt government agency will be given the power to tax drivers of I-80 in order to subsidize inefficient and expensive mass transit systems in Philadelphia and Pittsburgh.

Here is a video we put together in 2008 looking at the Pennsylvania Turnpike Family Tree (see full family tree below).

Since then, one of the Turnpike "family members" - former state Senator Vince Fumo - has been convicted of 137 counts of fraud and theft (many related to the Turnpike Commission) and is serving time in federal prison.

Mitchell Rubin, the former chairman, has since been removed from office and is a target of federal investigators. His wife, Ruth Arnao, was also convicted and is now in jail.

Michael Palermo, former contractor for the Turnpike Commission, pleaded guilty to defrauding taxpayers and was sentenced to five years of probation, including one-year of house arrest.

And the Turnpike Commission itself has both state and federal authorities investigating alleged illegal activities.

Is this really the organization that should control our transportation dollars and infrastructure?

Contact your elected officials and the Federal Highway Administration and let them know your thoughts. Click here for more action items.