Higher Taxes, More Debt Coming Down the Pike

Commonwealth Foundation warns against transportation funding proposal

Harrisburg, PA — Today, the Commonwealth Foundation warned against the higher fees and long-term debt encompassed in the transportation funding proposals winding their way through the General Assembly. For months, legislative leaders have stated their intent to provide a transportation funding and reform plan that provides the “highest quality service at the least cost to taxpayers.”

“Unfortunately, the transportation funding plan passed by the Senate Transportation Committee last night meets neither goal. By ignoring transportation reform, legislators are doing taxpayers a great disservice,” said Matthew Brouillette, president of the Commonwealth Foundation. “This proposal would attempt to raise funds by tolling Interstate 80—a plan that is most likely illegal.”

In a letter to House Transportation Minority Chairman Rick Geist (R-Blair), the Federal Highway Administration stated, in no uncertain terms, that the federal government would not approve tolling I-80 to pay for other roads or mass transit. While there is an alternative tolling program under federal law, only one slot remains open and with several states competing for it, and it is intended for interstates in dire need of congestion reduction. For most of its length, I-80 does not fit this definition. Nevertheless, the funding in this transportation bill is dependent not only on tolling I-80, but also generating hundreds of millions of dollars in surplus revenue from I-80 tolls—a prospect that is highly unlikely according to the FHA.

“It would behoove legislators to take a step back and determine if this proposal is feasible—and even legal—before rushing to pass it,” said Brouillette.

The new I-80 tolls are just one of many new costs to taxpayers in the proposed legislation. The bill would also enable the Turnpike Commission to float $5 billion in bonds over the next ten years. These bonds would be paid back from the Motor License Fund—the gas tax and vehicle fees—costing taxpayers over $8 billion over the life of the repayment plan.

“This debt plan most certainly will require future tax and fee increases to pay for it,” said Brouillette. “Expanding the Turnpike Commission’s bonding power and going deeper into debt would be a boon to Turnpike Commission bond lawyers, but a boondoggle for Pennsylvania’s taxpayers or motorists.”

Furthermore, by refusing to consider proposals to lease the turnpike, legislators are passing up a unique opportunity, which would raise an estimated $1.6 billion annually for the state. A Morgan Stanley study found that a long-term lease would yield nearly double the revenue the Senate plan would generate—without tolling I-80, without enacting new taxes, and without issuing any new taxpayer-financed debt. Additionally, the highest bids on recent toll road leases in Chicago and Indiana exceeded the estimated price range by over 80%.

“Perhaps worse than the lost revenue, the Senate proposal requires a 25% hike in Turnpike tolls in 2009, with a 3% percent increase per year thereafter—at a minimum,” said Brouillette. The Morgan Stanley report estimated that the minimum toll increase under the Senate plan would result in $8.3 billion more in tolls over the next 28 years than a lease with tolls increased by the rate of GDP growth each year.

The Commonwealth Foundation has maintained that only competitive bidding can ensure the greatest efficiency and end the “good-old-boy” system that currently plagues Turnpike Commission. “The plan currently before lawmakers moves Pennsylvania in the opposite direction of reform by expanding—rather than limiting—the authority of one of the nation’s largest patronage cesspools,” said Brouillette.

For many years, the Turnpike Commission has been a source of political patronage and nepotism. Despite recent pronouncements of “cleaning up their act,” the webzine Toll Road News uncovered that current CEO of the commission Joseph Brimmeier recently hired his son, a cousin, two sisters, the son of his godmother, the son of a county party chairman, and the son of a Congressman.

Also benefiting from the Turnpike Commission is Senator Vince Fumo. Included in the 139-count federal indictment against the Philadelphia senator are allegations that a Turnpike consultant earning $220,000 over two years completed no apparent work for the Turnpike Commission, but instead managed Fumo’s 100-acre Harrisburg farm. “It is no surprise that this plan is virtually identical to that proposed by the Turnpike Commission—and pushed by its lobbyists, costing the public $26,000 per month—or that Senator Fumo is one of the strongest supporters of this plan,” said Brouillette. “Despite all the talk about ‘reform’ in Harrisburg, there are still plenty of ‘old guards’ trying to protect and expand their fiefdoms.”

“Despite the clear anti-reform nature of this legislation, policymakers should not be rushing to pass transportation funding policy which may not be legal, would excessively burden taxpayers and motorists, and fails to offer any reform of transportation services simply to get out of Harrisburg in time for summer vacation,” said Brouillette. “Competitive bidding can lead to both greater revenue for our state’s transportation infrastructure and a lower price tag for taxpayers.”

# # #

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

– 30 –