Pennsylvania DOT signs 50 year lease for Penn Pike to toll I-80

Pennsylvania DOT (PennDOT) and the Turnpike Commission announced today in a joint press release they have signed  the 50 year lease agreement for tolling I-80 as provided for by state Act 44. The second sentence of the press release states: "Under Act 44, the commission will transfer $83.3 billion to PennDOT for transportation projects throughout the state (over the 50 years of the lease)."

The text of the I-80 lease is not being made public but the announcement says a summary of the lease along with a copy of the application to the feds to toll the interstate will be posted soon to www.paturnpike.com/i80 the website set up by the Turnpike for I-80 tolling.

The lease probably follows closely the terms of Act 44 which was written around a Turnpike Commission "public-public partnership" proposal advanced as an alternative to the governor's plan for privatization of the Turnpike via bids for a longterm concession lease.

The state law makes leasing of I-80 the centerpiece of plans to enhance the financial strength of the Turnpike Commission in return for a commitment to huge lease payments to the state starting several years before tolling begins.

Lease payments start at $750m in 2008, $850m in 2009, $900m in 2010 then escalating at 2.5% annually for the remainder of the 50 year lease. Toll revenues are expected from I-80 starting in 2011 at $412m, escalating by about 5.5% a year based on an inflation adjustment of 2% and a traffic increase of 2.5%. We have calculated based on these Turnpike numbers that lease payments over the term of the lease will be about $95b and toll revenues about $85b. Toll revenues will only pass lease payments in 2045, so the deal will be a negative cash flow for 38 years.

see http://www.tollroadsnews.com/node/3186

Application to toll lodged with feds

Today's announcement also says that the formal application to toll I-80 was lodged with the Federal Highway Administration Oct 13. I-80 was built with a majority of federal grants and as a presently untolled interstate highway the US secretary of transportation can only grant permission for tolling on terms and conditions laid down in US law.

The announcement notes that in addition to the $83b the Commission says it will generate an extra $33b for I-80 improvements and other transport projects bringing total investment to $116b.

It says that over the next decade the Turnpike will more than double PennDOT's spending on I-80 and spend about $2b on improvements.

This $2b however pales in comparison to the amounts being paid for the lease. The feds even if inclined on policy grounds to grant permission to toll face the difficulty that the law seems to only allow tolling under a commitment by Pennsylvania to plow back all the toll revenues into the road being tolled.

The announcement emphasizes that the lease restricts the use of toll revenues to I-80 and other roads and bridges. None can be used directly for transit. The statement quotes state secretary of transport Alan Biehler as saying "PennDOT will use the revenue from I-80 tolls to tackle the backlog of road and bridge problems, including those in the I-80 corridor itself."

PennDOT and the Turnpike seem to be setting themselves up for criticism in refusing to release the full text of the lease document. The lease will mostly be predictable in following the dictates of Act 44 while attempting to accommodate federal law. Maybe there some escape clauses written into the lease agreement which they wish to keep secret? Or what?

The Turnpike has also so far refused to publish the financial modeling done by Citibank which underlies the its financial plans.

Governor Rendell continues to pursue a longterm lease and concession with private investors for the . This seems to be shaping up as a fallback in case the Act 44 plan collapses - which has to be rated at least a 50% possibility.  

See the text of today's announcement - a two page MSWord doc.

TOLLROADSnews 2007-10-16