Penn Pike proposes $1 metro area toll surcharge for transit $s

Governor Rendell's question highlighted in green: "What's this all about?" Early concessionaire - see no snow plows Voting Yes gets you a polite thank you for your interest. Does each No get you free miles on your E-ZPass account?

The Pennsylvania Turnpike has proposed a dollar surcharge on tolls at their metro area interchanges to provide a revenue stream for and to encourage use of mass transit. The proposal is one of several contained in the Turnpike's official response to PennDOT's request for private sector expressions of interest in a longterm lease and toll concession on the Turnpike. Dated Dec 22 2006 the ten page document is titled "Public Private Partnerships - Toll Road Leveraging".

The proposal for the $1 surcharge on tolls is advanced under the heading "Regional Mobility Fund." It begins by noting that the state constitution limits use of motor license funds to highways and bridges, then continues:

"However the possibility exists for the Commonwealth (state of Pennsylvania) to impose a Vehicle Facility Charge (similar to the aviation Passenger Facility Charge) to be levied as a surcharge on Turnpike users exiting the Turnpike in designated metropolitan areas."

The Turnpike suggests that the state "engage the (Turnpike) Commission to collect the surcharge on the (state's) behalf from Turnpike users."

The surcharge proceeds would be deposited in Regional Mobility Funds to support transit or other local transport priorities.

It says a $1 surcharge levied on all classes of vehicles at Turnpike interchanges in four major metro areas - Philadelphia, Pittsburgh, Harrisburg and Scranton - would generate over $150m a year, adding:

"This funding mechanism could encourage use of mass transit, while creating a stable and growing revenue stream for regional transit priorities."

Tolls on freeways

The Response document also puts on record under the heading Strategic Tolling Strategy the Commission's proposal for tolls on existing free interstate highways previously made by chief executive Joseph Brimmeier. It states that the interstate free system presently "requires substantial capital renewal, putting enormous pressure on PennDOT's annual operating budget."

There is no hint in the proposal to PennDOT as to which freeways the Commission proposes should be tolled but Brimmeier has mentioned I-80. Others which would be logical candidates due to heavy interstate traffic include I-81 and I-78.

The Response document does say "hundreds of millions" could be raised by tolls and an equivalent freed up from motor license fees to be used for other purposes. .

PTC proposes to be toll collector and debt issuer for state

"The Pennsylvania Turnpike Commission could serve as the toll collector and issuer of debt, with operations and maintenance contracted out to PennDOT or to private parties."

The Turnpike say they are prepared to review with PennDOT the revenue generating potential of tolling interstate freeways.

Borrowing what the state can't borrow legally

A third role proposed as part of a "Public-Public Partnership" between the Turnpike and PennDOT is "Acting as a financing conduit for special revenue bonds for PennDOT" to overcome the limitations of pay-as-you-go finance. It proposes pledging Motor License Fund revenues for issue of longterm limited recourse bonds. This is seen as another way to circumvent legal restrictions on the issue of bonds by PennDOT:

"Because the Commonwealth (the state) itself cannot legally issue special revenue bonds of this type, the (Turnpike) Commission could act as issuer on behalf of PennDOT..."

Apart from proposing this kind of money laundering to get around legal restrictions the Turnpike Response is full of self-serving propaganda against toll concessions so misleading they cannot be reported without correctional comments.

Profits versus "optimizing mobility"

The response alleges a "divergence of interests between the public policy goal of optimizing mobility and the private sector goal of maximizing profitability"

COMMENT: it is unclear anyone at the PTC knows how to "optimize mobility" or even what that is. The PTC is better known for its devotion to political patronage than to some theoretical goal of "optimizing mobility".

The tollroads the PTC has built have been determined by the legislature from time to time, just as any tollroads to be developed by private concessionaires would be determined by the legislature.

Locking in formulaic toll policy

A longterm concession would, the Response asserts require "locking in today a formulaic commitment to tolling policy for decades to come."

COMMENT: only be true if the concession contract provided no means for amendment or change, when in fact longterm concession contracts have carefully crafted provisions for making changes precisely so as NOT to lock in policy for decades to come. All longterm contracts have procedures for the public sector or the concessionaire to initiate the amendment process, detailing that process, and how it will be adjudicated. The general principle is neither party should suffer an uncompensated net financial loss from changes.

Only public toll authority can enhance accessibility and support economic development

The PTC says that its preservation is essential to the goal of pursuing "enhanced accessibility" and "supporting economic development"

COMMENT: a road is a road whether privately developed or publicly financed it enhances accessibility. Economic development is often the slogan under which grossly uneconomic roads are built as a favor to a politically powerful region or community, otherwise known as 'pork.'

"Ceding public control for many decades

PTC's Response says that a "longterm concession would cede control of a key transportation asset to private owners for many decades"

COMMENT: true if the longterm concession contract were a sparse one page document which said "It's yours now. Toll away" whereas in fact concession contracts contain voluminous detail of hundreds of pages whose whole purpose is to retain public control of all those elements deemed important to be publicly controlled plus provisions for amending the terms of the contract if unforeseen events occur.

Indiana and Chicago concessions both generated big toll increases

Indiana Toll Road and the Chicago Skyway are cited by PTC as providing large initial toll increases.

COMMENT: The Indiana Toll Road concession in fact provides for toll rates to be frozen until 2012 for commuters using transponders though there are increases in other tolls which were previously among the lowest in the country. Chicago Skyway has indeed seen toll big toll increases - about the same as Pennsylvania's last increases. In any case toll rates on the Penn Pike can be controlled in the concession agreement, though it is true the more restrictive the controls the lower are likely to be concessionaire bids. There are trade-offs to be considered by state negotiators.

Toll revenues the driver in concession

The PTC claims the fundamental driver for toll concessions is the projected level of toll revenues as determined by traffic and toll rates.

COMMENT: Wrong. The private sector is interested in profits which are revenues minus costs. If the concession sets toll rate caps, as most concessions do, and if the concessions set standards for levels of service, then the private sector profit maximization will be directed wholly toward greater efficiency and lower costs, and improving service to attract more traffic.

Citigroup shows public debt can raise more than a concession

PTC's response cites a financial analysis performed for it by Citigroup which purports to show that the PTC can generate a greater upfront payment through a tax-exempt bond financing than a private concessionaire can with a debt/equity financing.

COMMENT: this kind of analysis depends on hypothetical assumptions and is not an argument for pre-empting Governor Rendell's request for private sector proposals but an argument in favor of having the PTC compete on an equal basis with private sector groups so you can see what the PTC can offer in fact rather than in theory.

PTC launches website on its public-public partnership

We got this report separately but the PTC says it has launched a new website we haven't looked at yet in detail:

http://www.paturnpike.com/ppp/

Vote early and often

The site has the subtitle "Offering an Alternative to Privatization of a Public Asset". It has articles, case studies, FAQ, stuff About the PTC, legislative links and feedback. You can vote on whether you are "in favor of selling or leasing the PA Turnpike to a private or foreign company."

No prizes for guessing which way we voted, or how many times. But happy to report that despite our vote we got thanked politely for our interest every single time.

According to a Philadelphia observer the multiple voting feature has all the hallmarks of a electoral consultant from New Jersey.

TOLLROADSnews 2007-03-19