MARCH 20, 2007
Thank you Senator Madigan and members of the Senate Transportation Committee for this opportunity to share with you why the Commonwealth Foundation believes that leasing the Pennsylvania Turnpike is in the best interests of both the state and the taxpayers of our Commonwealth.
Since you have already received our full report—The Emerging Paradigm: Financing and Managing Pennsylvania’s Transportation Infrastructure and Mass Transit—I will keep my testimony short so as to allow more time for questions and answers.
Let me begin by stating our operating premise. If we agree with the Pennsylvania Transportation Funding and Reform Commission that we need to find an additional $965 million annually to fill a funding gap for our roads, highways, and bridges, then the question that remains is how to pay for these important and legitimate economic development investments.
Traditionally, transportation infrastructure is funded by taxes and fees. Yet, as demonstrated by the Commission, the traditional funding approach is falling short as demands on our roads, highways, and bridges are exceeding the supply of taxes and fees.
Fortunately, there is an alternative to raising taxes on the magnitude of $1 billion. By engaging in a Public-Private Partnership on the Turnpike, policymakers leverage private capital to help pay for our transportation costs while generating benefits that neither traditional funding nor the proposal from the Turnpike Commission can provide.
First, the Turnpike Commission’s so-called “Public-Public Partnership” is merely an iteration of the inadequate funding paradigm employed today, with a bonded indebtedness twist. Unfortunately, this scheme further burdens—rather than relieves—the people of Pennsylvania with higher transportation costs.
What Pennsylvania needs is new paradigm—one that many cities and states across the nation are employing to meet their transportation funding needs. By partnering with the private sector, policymakers will be able to access currently untapped capital resources, as well as shift the financial risk and burden off of the taxpayers. Some will suggest that this sounds too good to be true. The reality, however, is that governments have long failed to utilize the power of the private sector in the delivery of public services, including transportation.
It is important to note that the public sector retains full control of its transportation infrastructure and services. A concession is neither a divesture of responsibility nor a sale of an asset. It is merely a contractual partnership whereby the expertise of both the public and private sector are maximized.
In fact, a Public-Private Partnership contract will provide a far greater level of openness, transparency, and accountability than can the current PennDOT or Turnpike model. The contract can and should specify permissible increases in toll fares, maintenance standards such as snow removal, road kill removal, and surface remediation. The public benefit of a Public-Private Partnership on the Turnpike is that the state determines the terms and conditions of the contract while retaining ownership of the asset. If the private sector partner fails to perform and adhere to the contract specifications, the public protections can range from financial penalties to the nullification of the contract and the return of operational control of the asset to the state.
In sum, the advantage of a Public-Private Partnership paradigm is that most, if not all, concerns about performance expectations and costs to the public can be adequately mitigated by the General Assembly and Governor. This level of accountability simply cannot be matched by the traditional funding and management model.
It is not often that Pennsylvania lawmakers can choose between raising taxes and fees and reducing costs and improving services. Yet a Public-Private Partnership offers that potential. Across the nation, such partnerships have proven to generate greater financial resources and have increased the quality of services for citizens. We hope the General Assembly embraces a Public-Private Partnership on the Turnpike instead of raising taxes, fees or increasing the states bonded debt to pay for our current transportation needs.
Thank you again for this opportunity, and I look forward to answering your questions.
Matthew J. Brouillette is a president and CEO of the Commonwealth Foundation (www.CommonwealthFoundation.org), an independent, nonprofit public policy research and educational institute based in Harrisburg.