Wild Claims About a Turnpike Lease

It is sad that former Pennsylvania House Speaker John Perzel, who last year said he favored leasing the Pennsylvania Turnpike, is now striking out so wildly against the governor’s proposal. He claims in a letter to the Philadelphia Inquirer, for example, there would be “massive transitional costs,” and cites $1 billion that he asserts the state would have to pay. Such a number can only have been plucked out of thin air. In other cases of long term leases, transitional costs have been nothing like that number. Indeed, Indiana’s $3.85 billion transaction carried fees of only $19 million!

He claims too that the governor is engaging in “gross misrepresentation” about the value of a lease. Until actual proposals are submitted the real market value is truly unknown. However, in two recent transactions the private sector proposals were significantly higher than originally estimated. Unless Rep Perzel is privy to information the rest of us aren’t, I think it would be wise to wait for the actual proposals, then by all means subject them to critical scrutiny.

Furthermore, Rep Perzel claims that the Turnpike’s tolls could raise the same level of capital for the state as a private sector lease. But it isn’t toll revenues as such which support capital, rather the surplus of toll revenues over costs. The problem with the present Turnpike management is that it has very high internal costs and leaves very little surplus to service capital. The whole rationale for a lease is to unlock for taxpayers the value of a more efficiently operated Turnpike with lower costs. Rep Perzel surely knows the present Turnpike is rife with patronage and other costly management practices that no private business would tolerate.

A lease of the Turnpike offers the opportunity to extract for the people of Pennsylvania the inherent value of an abused public asset and thereby to avoid tax increases or service cuts. It presents an opportunity to earn interest instead of paying it.

By all means let the Turnpike Commission make its proposal along with private sector groups and may the proposal which serves the interests of the people be chosen.


Geoffrey F. Segal is the director of government reform at the Reason Foundation (www.Reason.org) and an adjunct scholar at the Commonwealth Foundation (www.CommonwealthFoundation.org) in Harrisburg.