Penn Pike chief told Interstate Reconstruction & Rehab best for tolling I-80

The FHWA after six weeks of hashing the subject around has written to Joseph Brimmeier CEO of the Pennsylvania Turnpike saying that USDOT believes they should apply for federal permission to toll I-80 under the Interstate System Reconstruction and Rehabilitation Pilot Program (ISR&RPP) authorized in TEA21 legislation as Section 1216(b). The letter dated Sept 26, signed by Jeffrey Paniati, Operations FHWA says simply that the department believes the reconstruction and rehabilitation pilot program is "the appropriate program" to which Pennsylvania should apply.

see FHWA-PTC letter

It is unclear whether the ISR&RPP program will allow the tolling as outlined in Act 44. That act was passed by the Pennsylvania legislature in July.

Selection criteria in the ISR&RPP are that the US Secretary may only approve the application if she determines that:

(a) the state can't reconstruct or rehabilitate with existing revenues (ARGUABLE)

(b) I-80 has sufficient use and condition to warrant toll collection (SURE)

(c) the plan for implementing tolls takes onto account interests of locals, regional and interstate travelers (ARGUABLE)

(d) the state plan for reconstruction or rehab is reasonable (DOABLE)

(e) the state has given preference to an experienced public toll authority (OK)

The bigger problem is the limitations on the use of revenues that must be incorporated in an agreement between the state and the Secretary providing that toll revenue from the facility must be used exclusively for:

(1) debt service
(2) reasonable return on investment of private investors
(3) costs necessary for the improvements, operations, maintenance

It is undetermined whether federal law also allows the huge annual lease payments that the Turnpike is paying the state DOT for the tolling of I-80 under the state's Act 44. In return for the 50 year lease the Turnpike is committed to paying $750m in FY08, $850m in FY09, $900m in FY10, escalating 2.5% a year thereafter (p78). The Turnpike says in one place that it will be an average of $945m for the first 12 years, a total of $83.5b over 50 years, or an average of $1,600m/year over the whole term of the lease. It also gives even larger numbers another place.

Act 44 provides (p77) that if I-80 cannot be tolled the state DOT gets $250m a year from the Turnpike. The difference - $695m a year for the first 12 years and $1,350m a year over 50 years - can be seen as what the Turnpike is paying for the right to toll I-80.

That annual lease payment doesn't seem to fit into any of the three allowable uses for I-80 tolls.

The Turnpike Commission is likely to claim that I-80 tolls are not financing the annual lease payments. It will say that borrowing and non-I-80 tolls are providing the annual lease payment money.

Money fungible

Money is fungible, so whose tolls are being used to make the lease payments becomes impossible to determine if I-80 revenues go into the same account as other Turnpike tolls.

Richard Geist, Republican leader of the state house transportation committee wrote to the feds back in June and got a letter saying what I-80 tolls can't be used for. He was told "No" by FHWA chief counsel James Ray to the following questions:

(1) Would it be permissible to use any revenues generated from tolling I-80 to provide mass transit services in Philadelphia, Pittsburgh etc?

(2) Can federal grant funds for maintenance continue to be used for I-80?

However Ray did say that USDOT "strongly supports the use of tolling and pricing as important tools to reduce congestion and manage existing and future transportation resources."

see Ray-Geist letter

Given the federal prohibition on use of I-80 tolls outside the corridor the Turnpike is promising not to divert toll money to transit.

In a Sept 26 piece "clarifying I-80 tolling misconceptions" turnpike chief Joe Brimmeier declares: "Not one dime of tolls would go to mass transit anywhere in the (state). In fact money collected on I-80 would first pay for maintenance and reconstruction on I-80, with the remaining toll revenues supporting improvements to roads and bridges throughout Pennsylvania." (It is hard to see how "improvements to roads and bridges throughout Pennsylvania" fit into the three allowed uses under the ISR&RPP)

The draft lease agreement between the Turnpike and the state DOT states:"No portion of such rent (as it calls the annual lease payments for the right to toll I-80) may be deposited in the Public Transportation Trust Fund."

Transit agencies needing subsidies will be funded by Turnpike Mainline revenue bonds, not I-80 tolls. The lease agreement between the Turnpike and the DOT will "strictly prohibit toll income collected on the interstate (I-80) from being spent on anything except highways and bridges."

In this statement Brimmeier says that the Turnpike will "supply an astonishing $116b to PennDOT for transportation system upgrades across the state over the next 50 years." That $116b is a 39% increase on the $83.5b estimate in earlier documents. These numbers are based on the monetization of a Turnpike Mainline allowed to raise tolls by 25% in 2009, and annually thereafter at 3%/year, on up to $5b of bonds backed by the state's motor license fund, and by tolls from I-80.

Secret Citigroup studies

The Turnpike's "monetization" plan to raise these vast amounts of money is based on studies for the Turnpike Commission by consultants from Citigroup.

We saw the state secretary of transportation, Allen Biehler in a meeting in Harrisburg in the spring after a presentation of the Governor's plans for the Turnpike and asked him whether he'd seen the Citigroup studies. They were first mentioned in a footnote to the Turnpike response to the first PennDOT request for expressions of interest in a concession.

Biehler told us then "No we haven't seen those studies. We don't have them. You'll have to get them from the Turnpike."

They still aren't publicly available.

see the Turnpike's I-80 Documents list http://www.paturnpike.com/I80/project/docs.aspx

Brimmeier says that I-80 will see $2b of improvements in the first ten years including lengthened ramps, some truck climbing lanes and raising clearance on some bridges over the interstate. There's no mention however of extra capacity in the eastern segment I-81 to the NJ border.

For the Turnpike's line on tolling I-80 see http://www.paturnpike.com/i80/

Moves to stop I-80 tolling

There are moves under way in both the state and federal governments to stop I-80 tolling. In the US Congress there's a bill by congressmen from the northwest to outlaw tolling I-80. Opponents are likely to introduce a bill to repeal the I-80 tolling authority in Act 44 in the state legislature shortly. One or two legislators nowfavor the governors lease concession plan to tolling I-80.

Meanwhile Gov Rendell's plan is to get concrete proposals for a longterm lease and toll concession from the private sector. Lacking legislative authority to complete a deal he nevertheless hopes that a detailed draft concession agreement together with firm bids will move the legislature to accept a private sector proposal.

Our feeling is that the odds of the Turnpike being denied I-80 tolling about about 30%.

PennDOT's Feb 2005 study of tolling I-80

PennDOT published an I-80 tolling study in Feb 2005. The state then less desperate for new revenue. The report's conclusion was ambiguous - no case now for tolling near term but perhaps in the future.

Its conclusion: "Based on the long timetable to realize benefits, the high cost of converting the road to toll, and the fact that a financial breakeven point is decades away, it is recommended that converting I-80 to a tollroad not be pursued at this time."

The report done in-house built on a feasibility study done by Gannett Fleming in 1994. It had Parsons Brinckerhoff make estimates of needed capital improvements and costs in 2004$s.

Assumptions for which we report were:

- ten mainline toll plazas in the 57 interchange 501km (311 mile) highway
- traffic of 22k to 50k/day
- heavy trucks 22% to 41%
- 8c/mile (5c/km) tolls for passenger cars, 24c/mile (15c/km) for trucks
- tolls of $2.50 for trucks and $7.50 for 18-wheelers at each of ten mainline plazas
- diversion + evasion from free traffic volumes at 8%, 12%, 19%

Without any diversion of traffic or toll evasion the modeling showed 2010 revenue of $533m.

With 8% loss this was $490m, 12% loss $469m and 19% loss $432m.

The study proposed major capital expenditures:
- $665m for toll collection infrastructure with ten full blown cash plus electronic tolling mainline plazas
- $2.2b in other improvements including 18 miles of third laning at the far eastern end through Stroudsburg (I-380 to the NJ border.)

The study found this would be financially feasible but that there would be negative cash flow for the first 20 years.

Download the 36 page study courtesy Nathan Benefield, Commonwealth Foundation.

COMMENT:

Modern toll collection won't cost anywhere near the $665m budgeted in the PennDOT study. That's for great wide elaborate stop-to-pay toll plazas with wide pavement, canopies, toll booths, barriers, the toll collectors' buildings and all that paraphernalia.

By going all-electronic the capital cost of ten mainline toll points on I-80 should be less than $100m.

The study is strange about the condition of the highway.

On the one hand it claims that the physical condition of I-80 is not a major concern following some 24 years of heavy rebuilding at a cost $1.1b or $46m/year. On the other hand it claims there remain serious deficiencies warranting $2.21b of expenditure.

Opening in sections in the decade 1960 to 1970 I-80's concrete pavement deteriorated rapidly needing complete reconstruction after 15 to 20 years use - compared to the Turnpike's 1930s thru' 1950s pavement which lasted has 50 to 60 years and the New Jersey Turnpike's full depth bitumen predicted to last 100 years or more.

1980-2005 the pavement of I-80 was fully rebuilt, and says the report: "Travelers on I-80 now experience similar ride conditions... to other Interstate highways in Pennsylvania and in other states.... PennDOT now has a far more manageable preservation cycle."

Normally when reconstructing roadway the work adds width to shoulders, adds guard rail, improves geometrics and otherwise modernizes the road where there are deficiencies. But apparently not in Pennsylvania.

Even excluding tolling-associated costs the study manages to find $2.21b of capital improvements it says are needed to bring I-80 up to "an acceptable standard."

SUMMARY: PennDOT built original pavement that requires complete rebuild after about 15 to 20 years versus 50 to 60 years on turnpikes. They do a complete rebuild 1980-2005 at a cost of $1.1b - just done. In the process of the rebuild they leave deficiencies that are estimated to cost $2.2b to remedy.

Case for finding someone new to run the road closed.

Best outcome would come from competitive proposals involving the private sector as favored by Gov Rendell rather than granting the lease/concession uncompeted to the Turnpike Commission as in Act 44.

But the Turnpike Commission will be a better stewart of I-80 than PennDOT on I-80, so it's a second best solution.

Plan amendment needed east of I-81

Tolls should be higher per mile on the far eastern stretch down to the Delaware River crossing than west of I-81. East of I-81 is where major improvements are needed including third and maybe fourth laning and new interchanges. Separate truck lanes should be studied here.

Motorists will gain the greatest benefits per mile east of I-81 so they should pay more than out west where service improvements will be modest.

TOLLROADSnews 2007-09-30