Penn Pike's Joe Brimmeier trumps state Governor - comes out of fight with growing road portfolio

The Pennsylvania Turnpike Commission's (PTC) Joe Brimmeier has trounced Governor Edward Rendell, coming out of an eight month long political fight with his Turnpike Commission's control of the venerable Turnpike system untouched. In addition he has legislative support to take over 500km long (311 mile) I-80 and other major free interstates - the feds permitting.

Democrats in the legislature were virtually solid for the Turnpike sponsored multi-billion monetization plan while the Republicans were divided, the GOP leadership losing metro area pols to the Turnpike's plan.

The 297 page legislation passed yesterday (2007-07-17) 124 to 79 in the state house and 30/19 in the state senate. Governor Rendell who proposed privatization of the Turnpike in a longterm concession worth $12b to $18b has given up on that, and is due to sign the bill today.

Under HB1590 as finally agreed the PTC will quickly become a billion-dollar-plus revenue per year state monopoly agency reaching into every corner of the state and with political leverage to dominate state government. With legislative clearance to hike tolls on the mainline 25% in 2009 and to toll I-80 and other interstates it will become the nation's top grossing tollroad authority in 2010 or 2011.

The bill make provision for the Turnpike Commission's proposal for a "public public partnership" with the state Department of Transportation (PennDOT) to lease I-80 for fifty years and toll the presently free interstate in return for annual payments starting at $450m.

It authorizes borrowing up $5 billion by the Turnpike pledging motor license fund revenues as security, though debt service will attempt to use toll revenues. Another $4.6b of new debt is planned based on toll increases on the existing turnpike and tolls on I-80. That is in addition to already approved new debt of about $5b for reconstruction and widening of the existing Turnpike.

The legislation spells out that borrowings by the Turnpike in addition to being usable for the costs of the Turnpike's own properties may be used for:

- expenses of the state Department of Transportation

- amounts due to the Department for the lease of I-80

- improvements to interstates converted to tolling (tollroad conversions)

- any repayment required to the federal treasury to allow tolling of toll-free roads

- "any other amounts payable to the (state) or to the department" (a nice broad mandate to raise money for the state)

HB1590 gives the PTC full discretion to set toll rates subject to bond covenants giving bondholders rights in circumstances of default: "Tolls shall not be subject to supervision or regulation by any other state commission, board, bureau or agency."

It creates a Public Transportation Trust Fund to consolidate transit funding and adds Turnpike (PTC) contributions starting at $300m/year in 2007/08, plus a contribution of $450m to PennDOT for support of free highways and bridges. That rises to $350m for transit and $500m for PennDOT in 2008/09 and to $400m and $500m in 2009/10, and each is due to grow by 2.5%/year thereafter.

I-80 which east-west across the state slightly north of center and and to some extent competes with the Turnpike mainline which is I-276/I-76/70, and I-76 (going from east to west). The lease of I-80 will be for 50 years and extendable.

If the I-80 tolling falls through - it needs federal approval since it was built largely with federal aid and has received maintenance money too - the PTC pays PennDOT a base "rent" of $200m and an extra support payment of $250m/year.

Citigroup plan

Citigroup was heavily involved in devising the Turnpike scheme incorporated in HB1590 and the house appropriations committee refers to various scenarios modeled by them in a fiscal note. Citigroup estimated that "monetization bonds" of $3.57b will have to be floated on mainline system tolls and $1b on I-80 tolls in addition to the $5b bonds floated against motor license funds. It will take until 2027/27 before the tolls will fully fund the payments the Turnpike is making to the state for transit and free roads. Until then the debt will be growing in order to make the annual payments to PennDOT.

Citigroup in their modeling of HB1590 assumed:
- 2.5%/yr increases in traffic for 20 years, 2.0% thereafter
- tolls increase 25% in 2009 and 3%/yr thereafter

I-80 toll revenues to start at $400m+ in 2010/11

The legislation calls for the PTC to apply to USDOT for the converting I-80 to a tollroad and PennDOT is required to assist in providing needed information. The Turnpike and PennDOT are to enter into a lease agreement by Oct 15 2007.

Legislation provides that the I-80 toll system "shall consist of what is commonly referred to as an open system with no more than ten toll collection points." That will allow a lot of short distance free trips because the road has over 60 interchanges.

The financial model used in the legislation assumes tolling starts on I-80 in 2010/11. Toll points on the mainline will be located to pick up mostly long distance traffic allowing considerable free short distance traffic in between. Toll revenues would finance $1.1b in improvements to I-80 and relieve PennDOT of about $100m in annual expenses it has been incurring on upkeep of the road - which is a heavy trucking route between Chicago and northern New Jersey/New York.

Toll revenues on I-80 are expected to be $412m in 2010/11, $435m 2011/12, $459m 2012/13, and is expected to increase by 3% due to toll increases plus a volume increase each year (about 5%/yr?).

500km (311 miles) in length I-80 spans the state east-west from New Jersey in the east to Ohio in the west. By our count it has 63 interchanges. I-80 opened in sections between 1953 and 1970. Tolling has been suggested since the 1940s. PennDOT is notorious for its poor maintenance of the road which has at various times been judged the worst interstate in the country. In a recent (2007-02-14) ice storm while the Pennsylvania Turnpike was maintained open throughout, I-80 and other PennDOT interstates were closed for several days.

Average daily traffic ranges between the mid 20ks and the high 60ks. Longdistance trucks are well over 10k/day. The interstate is unusual in that it goes by not a single decent sized city in its whole length in Pennsylvania.

The legislation also provides for the PTC to do studies of tolling other interstates, with specific approval required for each from conversion.

Diversion of traffic by tolling is required to be studied and quantified - before tolling and within a year of tolling being implemented.


New violation enforcement powers

The new law gives the Turnpike more explicit power than previously to use video enforcement evidence to demand toll payment and penalties from the owner of a vehicle photographed violating. A motorist who claims the vehicle was being used by another person must:
- testify they were not operating the vehicle at the time
- submit to questioning about who was operating the vehicle
- provide that person's name and address

Last minute move to head off competition

The Republican leadership was pushing a proposal as recently as last week to allow private competitors on new toll projects in the state - a policy urged consistently by Rick Geist, former chair of the house transportation committee, now the ranking Republican. Local newspapers report that the Turnpike's CEO Joe Brimmeier managed to undermine support for competition by promising to find money for completing a much wanted section of tollroad south of Pittsburgh that the Turnpike had previously said was unfundable.

Circulating among politicians was this letter by Brimmeier addressed to House Majority Leader Bill DeWeese (Dem, Waynesburg) : "As per our recent discussions and after consultation with our Commission, pleased be informed that Phase II of Uniontown to Brownsville will be the next section of the Mon-Fayette Expressway (MFE) to be completed."

There was no timetable mentioned in the letter for building the $450m 13km (8 mile) section, but the letter plus discussions were apparently sufficient to undermine support for opening up the state to concessions on new projects.

House majority leader Bill DeWeese (Dem, Greene Co) said he would not have supported HB1590 without Brimmeier's commitment to the MFE Uniontown to Brownsville. DeWeese said he was convinced that Brimmeier would deliver on his promise with an announcement shortly and that "dirt will be flying on the Uniontown to Brownsville connector in the ensuing months."

The southern sections of the Mon-Fayette Expressway – often disparagingly referred to as pork pikes – have such low traffic volumes and run through such expensive-to-build-in country that prospective toll revenues will barely support operations and maintenance without being able to service capital investment at all. In the name of revitalizing the depressed Monongahela Valley they have been built in disjointed segments over 40 years - each segment requiring the kind of rare confluence of political and economic forces that just came together over Uniontown-Brownsville.

Opponents say I-80 discriminatory and scheme loads risk on taxpayers

House Republican leader Sam Smith said he voted against HB1590 because it singled out users of I-80: "If we’re looking at tolling I-80, then we better look at tolling other border-to-border roadways such as I-95, I-79 and I-81. (General tolling of interstates) is fair and it makes sense."

Republican head of the house transport committee Rick Geist was very critical of the debt load: “We have a massive transportation infrastructure problem in Pennsylvania that must be addressed, but the plan approved today is absolutely the wrong approach to fixing the problem. We’ve chosen to go $11 billion into debt and give unprecedented power to the Pennsylvania Turnpike Commission."

"I see this as an irresponsible deviation from the pay-as-you-go philosophy that Pennsylvania has followed to pay for transportation. This harkens back to the days of the Shapp Administration, when that administration virtually bankrupted PennDOT with huge debt load.We’re still paying off that debt."

Geist introduced a bill HB555 which would have authorized toll concessions, introducing private sector money and avoiding putting taxpayers in hock, but the bill has gone nowehere due to opposition from the Turnpike Commission.

Federal permission in question

Geist also thinks HB1590 is too dependent on gaining federal permission to toll I-80 saying: "We’ve done all of this on the assumption that the federal government will approve the tolling of I-80. That approval remains in question, and if federal approval is not granted, it will compromise the Turnpike Commission’s ability to repay the debt and put the solvency of the Commonwealth’s Motor License Fund in jeopardy if the Turnpike defaults."

USDOT people have mixed feelings about the I-80 plan. On the one hand they support tolling the interstates as a progressive move towards broader pricing of roads. On the other hand they see current law as making it difficult to approve tolling I-80.

In the US Congress committee chairs James Oberstar and Pete DeFazio remain stubborn defenders of the tax-&-grant "earmarking" system heavily entrenched in five yearly "TEA" legislation, and are opposed to tolls.

In a visit to central Pennsylvania Oberstar said he was "not a fan of tolls" which he called a "short-term, one-time, here-and-now fix, not a program."

Of tolls on I-80 he said: "They're taking existing capacity, built with federal highway trust funds, and charging you twice for it by putting a toll on it. It's not fair to taxpayers. That breaks the trust of the highway trust fund. Tolls, as we've seen in Indiana and Chicago, can be diverted to other purposes."

Diversion to other purposes is of course the principal rationale of the giant tax-&-grant xyzTEA schemes of the US Congress. Oberstar is concerned others are getting in on his act, encroaching on his turf! It remains to be seen if he can do anything about it.

TOLLROADSnews 2007-07-18 ADDITION 2007-07-19 11:20