Posts Tagged transportation

Road to Ruin: PennDOT Drains Turnpike Cash


The Pennsylvania Turnpike is America’s first superhighway.  It also has become one of the most expensive roads in the country to travel.  If you are in a passenger car driving the entire length of the turnpike from the Delaware River Bridge in the east to Gateway in the west it will cost you $42.30 if you pay cash, $30.32 if you have an E-Z Pass.

Traversing the Pennsylvania Turnpike gets more expensive for truck traffic, significantly more expensive.  That same east-west trip for the heaviest and largest of trucks costs $1,634.35.  As if that isn’t bad enough, recent annual fare hikes are projected to continue into the foreseeable future.

Pennsylvania is known as the Keystone state and for good reason.  Geographically we are centrally located for both north-south and east-west traffic destined for some of the nation’s most populous cities.  For decades the turnpike has been a key traffic route, but now both freight haulers and passenger cars are seeking out other routes – such as Interstate 81 that, while a bit out of the way for some, charge no tolls.

These facts have not escaped the attention of state Auditor General Eugene DePasquale who recently sounded alarm bells over the turnpike’s fragile fiscal situation.  In his audit of turnpike practices DePasquale said: “The plan for the turnpike’s financial future relies on projections calling for a 215% increase in toll revenue between 2015 and 2035 and a 44% increase in traffic volume through 2044.  However, traffic volume has remained relatively flat over the last decade.”

These two projections are inherently contradictory as basic economics dictates that consumers use less of a product as prices rise – especially if prices rise at a much faster rate than the income of the purchaser.  Thus, we can expect the past decade’s “relatively flat” traffic volumes to either remain so, or perhaps even decline as such significant toll hikes continue to be implemented.

It would be easy to blame mismanagement and the turnpike commissions’ often criticized hiring and contracting practices for these annual rate hikes.  But, in this case the problem has been caused by the state legislature, not by turnpike administration.  Act 44 of 2007 requires the Pennsylvania Turnpike Commission to make payments of $450 million per year to the Pennsylvania Department of Transportation (PennDOT).  PennDOT then spends the money on highway maintenance and on subsidizing mass transit operations.  Since the passage of Act 44, $5.2 billion in fare revenue has been diverted from turnpike operations to PennDOT.

Act 44 was passed with the unrealistic expectation that Interstate 80 would be converted to a toll road operated by the Pennsylvania Turnpike Commission. That revenue would offset the mandated subsidy to PennDOT.  State officials appealed to both the Bush and Obama administrations for approval of the scheme, but were rejected. As a result the turnpike has been saddled with making annual payments to PennDOT and no source to fund those transfers except annual fare hikes.

The legislative mandate is also having another impact: the turnpike is reducing planned spending on maintenance, improvements, and expansion. An ambitious rebuilding plan that includes expansion of the turnpike to six lanes in many areas has already been reduced by $1 billion over the next ten years.  DePasquale pointed out the folly of the situation stating: “You can’t cut back on construction and increase traffic 44%, especially while jacking up the toll rates.”

The subsidies to PennDOT are scheduled to end in 2022, but by then the turnpike’s financial situation will be dire. Worse, legislators will then have to determine how to fund the insatiable appetite for subsidies required by the state’s money-losing mass transit systems.

This problem should have been addressed two years ago when the legislature passed and Governor Tom Corbett signed into law a defacto 30-cent per gallon increase in gasoline taxes.  That would have been the time to end “haphazard funding gimmicks” such as Act 44 and placed both the Pennsylvania Turnpike and PennDOT on solid financial footing.

It didn’t happen then. But it needs to happen now before, as Auditor General DePasquale concluded, the system collapses “and leaves the turnpike and people who rely on public transit systems across the state in a world of hurt.”

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.  His e-mail address is lhenry@lincolninstitute.org.)

Permission to reprint is granted provided author and affiliation are cited.

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Wrong Turn: Legislature must deal with growing turnpike debt


State Representative Peter J. Daley (D-Washington County) recently called on top leaders at the Pennsylvania Turnpike Commission to resign citing a $7 billion debt racked up by the toll road agency. But, if Representative Daley wanted to hold accountable those truly responsible for the commission’s fiscal mess, he should simply look in a mirror.

It is true that in recent decades the Pennsylvania Turnpike Commission has not been a paragon of fiscal virtue. But, prior to enactment of Act 44 in 2007 the commission was reasonably financially sound – although facing significant demands for upgrading its aging infrastructure.

Then along came Governor Ed Rendell who, in his zeal to protect the patronage-riddled Southeastern Pennsylvania Transit Authority (SEPTA), upended what had been a fragile balance among the state’s competing transportation needs. With mass transit hemorrhaging hundreds of millions of dollars each year, Rendell simply “flexed” or moved federal highway funds into the coffers of SEPTA and other transit agencies. That left the Pennsylvania Department of Transportation (PennDOT) without the funding needed to fix and maintain roads and bridges.

To plug that hole, Rendell & company decided to vest in the Pennsylvania Turnpike Commission the tolling of Interstate 80. The funds generated from the newly tolled trans-state highway would then be used to pay debt service on bonds issued to provide PennDOT with the money it needed to address what Rendell termed a “transportation crisis.”

And so Act 44 became law. And the Pennsylvania Turnpike Commission began borrowing heavily to comply with the law’s requirements that it help fund PennDOT. The Allegheny Institute in Pittsburgh reports that the turnpike commission had $2.5 billion in outstanding debt when Act 44 was passed. Today, that debt has ballooned to $7.4 billion including nearly $3 billion in payments to PennDOT. The balance of the debt has been incurred by the turnpike to fund badly needed upgrades to turnpike system.

The scheme fell apart when the U.S. Department of Transportation denied permission for the state to toll Interstate 80. Rendell blamed the decision on the Republican Bush Administration, but the department reached the same decision after Obama Administration appointees took control. Absent toll revenue from I-80, the turnpike commission was left with only one option to fund debt service payment: raise tolls.

And raise tolls they have done. Worse, turnpike travelers can expect significant future toll increases. While the turnpike is the most convenient east-west route across Penn’s Woods, it is not the only highway. Thus as tolls rise, more and more traffic – especially lucrative truck traffic – will find ways to avoid the turnpike. That will result in less revenue even while debt service continues to rise.

Despite the fact it has been nearly four years since the tolling of I-80 was scuttled the General Assembly has failed to go back to the drawing boards to rescind or revise Act 44. Turnpike managers are left with no option other than to keep borrowing and raising tolls to remain in compliance with the law. Each year the legislature delays dealing with the problem drives the Pennsylvania Turnpike Commission further into debt.

Thus Representative Daley seeks to cast the blame on others for the failure of himself and his colleagues. And the situation will only continue to get worse. As debt at the turnpike mounts, credit rating agencies are going to downgrade its bond rating. This will increase borrowing costs adding to the commission’s fiscal woes. Tolls will rise to uncompetitive levels, decreasing turnpike traffic and lessening toll revenue. To complicate matters even further, the siphoning of resources to comply with Act 44 will leave the turnpike commission without the money it needs to fund maintenance and improvements to the oldest limited access highway in the world.

Although the Pennsylvania Turnpike Commission has suffered from less than stellar management, the real solution to its growing debt lies not at the toll road agency, but rather under the capitol dome. Governor Tom Corbett and the legislature must address the fiscal calamity caused by Act 44 and end the draining of turnpike resources.

That, of course, is but one small part of addressing Pennsylvania’s growing transportation needs. After repealing Act 44, significant reform is needed at the Pennsylvania Turnpike Commission. PennDOT’s funding needs must be addressed. Unrealistic union contracts and excessive patronage at the state’s mass transit agencies must be curbed.

It is a tough tangle of problems to be addressed with powerful competing interests at play. But, Pennsylvania requires an efficient transportation system to remain competitive in today’s economy. It is time for our elected officials to make the tough choices needed to fix the problem.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal.   His e-mail address is lhenry@lincolninstitute.org.)

 

Permission to reprint is granted provided author and affiliation are cited.

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