Wagner's Warning on Turnpike Debt Not Exaggerated

JANUARY 10, 2012 | by ELIZABETH STELLE

TurnpikeAuditor 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.



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