Financing and Managing Transportation in PA

Commonwealth Foundation report recommends Public-Private Partnerships

Harrisburg, PA — Today, the Commonwealth Foundation released a new report, The Emerging Paradigm: Financing and Managing Pennsylvania’s Transportation Infrastructure and Mass Transit, which examines the potential for Public-Private Partnerships (P3s) in transportation. The Emerging Paradigm highlights successful transportation P3s across the nation and internationally, and examines the potential for leasing the Pennsylvania Turnpike and utilizing competitive contracting in mass transit.

Last November, Governor Ed Rendell’s Pennsylvania Transportation Funding and Reform Commission recommended $1.7 billion in additional transportation spending for highways, bridges, and mass transit. As part of his 2007-08 budget proposal, Governor Rendell included funding options which include a possible lease of the Pennsylvania Turnpike to a private contractor to generate $965 million annually for roads and bridges.

The decision to explore a lease of the Pennsylvania Turnpike represents the emergence of a new funding paradigm in transportation policy across the nation. Instead of relying solely on traditional revenue sources—gas and vehicle taxes—state and local transportation agencies are increasingly looking to supplement those sources with private investment through Public-Private Partnerships (P3s). P3s can build new infrastructure, maintain existing infrastructure, and operate existing services, including mass transit.

“We applaud the Governor’s willingness to explore a Turnpike lease as a solution to our transportation funding and management needs, particularly as an alternative to higher taxes,” said Matthew Brouillette, president of the Commonwealth Foundation and co-author of The Emerging Paradigm. “The leasing of toll roads have been successful in other parts of the country and internationally, both in terms of generating new revenue and in the delivery of quality service.”

The Emerging Paradigm explores the P3 experiences of other states and cities. For example, in 2005, leases of two toll roads—the 99-year lease of the 7.8-mile Chicago Skyway and the 75-year lease of the 157-mile Indiana Toll Road—garnered the City of Chicago nearly $2 billion and the State of Indiana more than $3.8 billion. The upfront payment to Indiana is generating more than $500,000 in interest per day to fund its transportation needs without raising taxes or fees.

“Additionally, Governor Rendell and lawmakers need to expand the utilization of P3s beyond just the Turnpike. Particularly, P3s could be utilized in the delivery of mass transit services in Pennsylvania,” said Brouillette.

Governor Rendell’s budget proposal included a new 6.17% Oil Company Gross Profits Tax to generate $760 million in new mass transit subsidies. The Emerging Paradigm examines how Pennsylvania could utilize “competitive contracting”—a form of a public-private partnership—to better finance and manage mass transit.

American cities like San Diego, Denver, Los Angeles, San Francisco and Boston, as well as foreign cities such as London, Copenhagen, Stockholm, Melbourne and Tokyo, have successfully embraced “competitive contracting” of transit services. Government determines the level of service and maintains oversight of the private contractor for the quality of service. “Competitive contracting” has proven to provide more efficient and mass effective mass transit services.

The Emerging Paradigm also explores additional opportunities for P3 utilization in transportation, and concludes with a discussion about the benefits of P3s and addresses the common concerns about Public-Private Partnerships.

“Public-private partnerships are being utilized by governments everywhere as a means to meet the growing transportation demands,” stated Geoff Segal, Director of Privatization and Government Reform at Reason Foundation, and co-author of The Emerging Paradigm. “Partnering with the private sector to manage assets such as the Turnpike or mass transit agencies gives policymakers an alternative to raising taxes or fees.”

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The Policy Report, The Emerging Paradigm: Financing and Managing Pennsylvania’s Transportation Infrastructure and Mass Transit, is available here (3MB).

TheCommonwealth Foundation is an independent, non-profit public policy research and educational institute based in Harrisburg, PA.

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