Pennsylvania Senate GOP has Turnpike Lease Study

An analysis of potential Turnpike lease by Moody’s, commissioned the the PA Senate Transportation Committee, was released yesterday. Their findings are that a Turnpike lease might be beneficial, that $12.8 billion is a fair price, all things considered, and that price would yield about $590 million annually for the state. From the report summary:

A compelling argument can be made that a turnpike lease could be constructed to benefit both the Commonwealth and a private operator. Notably, by shifting the Commonwealth’s turnpike resources into other assets, the state government’s overall fiscal condition would be less sensitive to fluctuations in economic activity. Likewise, a private firm with holdings in other countries and states could invest in the turnpike in order to diversify its assets and shelter them from risk. …

By factoring in assumptions about future inflation and interest rates, turnpike profits over time can be translated into their current cash value. The present value of a 75-year lease of the turnpike is estimated at $16.55 billion. However, a private firm bidding for the lease would not be willing to offer the full value of the asset. The private operator would also need to be compensated for taking on considerable risk. …

Under the baseline scenario of a $12.8 billion gross bid invested in a fund structured to match that of the Pennsylvania State Employees’ Retirement System, $590 million per annum in infrastructure spending could be supported over the lifespan of the lease.

The estimate of $590 million annually is pretty much in line with our estimate (and doesn’t include taxes paid, savings on payments to the Turnpike Commission, or the cost of state policy) – and significantly higher than the Turnpike Commission’s payments under Act 44, absent I-80 tolling.

This study was largely a waste of taxpayer dollars, as it contains little information you couldn’t get at And if Senators were waiting for these findings, that is unfortunate, as the Turnpike Commission continues to go deeper into debt.

If the Senate is serious about considering a Turnpike lease in the new session – and we have reasons to be skeptical of that – we have some recommendations of how to proceed.