Citigroup analysis for Turnpike shows tolling PA/I-80 as cash cow making it ineligible for fed OK

Posted Wed, 2007-12-19 22:01

The Pennsylvania Turnpike Commission has released to legislators some of the Citigroup financial numbercrunching used to lobby for Act 44 and the tolling of I-80. But they continue to refuse to release what they have referred to as the basic "Citigroup Analysis" which is the mainstay of their financial model.

The materials released, the product they say of Citigroup "technical assistance" demonstrate conclusively that I-80 is not eligible for tolling under federal law. That law requires that the state produce a financial plan for the interstate to be tolled anew that uses the proposed toll revenues exclusively for the expenses and investments and debt service on the interstate being tolled.

The Citigroup spreadsheets however show I-80 being envisioned as an enormous cash cow for projects elsewhere in the state - making it impossible for the feds to approve the Turnpike's application to toll.

For example p11 of "Funding Pennsylvania's Transportation System: Creating a Public-Public Partnership," March 20 2007 is a powerpoint slide headed "Tolling I-80 - Cashflows". It says "Conversion of I-80 to a toll road could provide the Commonwealth (Pennsylvania) with more than $17 billion in excess revenues between FY2011 and FY2045" and it has a table and a graph underneath substantiating that.

In the early years there is no capital expenditure proposed for I-80 at all so that large surpluses of current profits can be siphoned off for the rest of the state. Only in the out years is capital expenditure proposed for I-80 and then it is tiny compared to the toll surpluses.

In 2015 toll revenues are put at $407m, operations and maintenance (O&M) at $137m and debt service $29m, capital expenditure is zero for "excess toll revenues to the Commonwealth" of $304m.

By 2025 some capital expenditure on I-80 has kicked in - some $58m - but this is swamped by planned toll revenues of $719m against which $203m is spend on O&M, $66m on debt service leaving $392m as "excess toll revenues for the Commonwealth."

Another slide p13 shows I-80 excess revenues as totaling $19.82b 2008-2045 and debt service as $2.53b leaving $17.32b as excess revenues for the rest of the state over 34 years 2011 to 2045 or an average of $509m/year.

The I-80 cash cow gets even more prolific as the year goes on. A new version of the presentation prepared also with Citigroup help under the title "Pennsylvania Highway and Transit Funding Analysis - Technical Assistance for the General Assembly" dated June 19, 2007 p6 shows "I-80 revenues available for Pennsylvania" as starting at $271m in 2011 and rising to $1,482m in 2045 and $1,655m in 2047 or $28.06b over 36 years or an average $779m/year.

The surpluses to be garnered from I-80 have grown about 50% between March 20 and June 19. No explanation from Citigroup as to how these extra billions were conjured up.

These presentations apparently are the results of a more detailed and extensive analysis and modeling by Citigroup.

Citigroup Analysis continues to be suppressed

The Turnpike continue to refuse to release to legislators what they have called the "Citigroup Analysis." This Citigroup Analysis is a mainstay of the Turnpike's "Response to Request for expressions of Interest" to PennDOT dated Dec 22 2006. They discuss a "Citigroup Analysis" as the basis for their assertion a public-public partnership is superior to a public private partnership.

They state: "Citigroup’s financial analysis verifies that in each scenario, the Commission can generate a greater upfront payment through a tax-exempt bond financing than a private concessionaire can through a debt/equity financing. Under a 75-year lease with future toll increases consistent with the Commission’s recent trend in toll increases, the concessionaire could pay $12.35 billion in upfront proceeds; the Commission $13.41 billion." (p5,6)

And they have a footnote: "The Citigroup Analysis should be read in its entirety to understand the assumptions and qualifications in the results stated therein. A copy of the Citigroup Analysis is on file with the Pennsylvania Turnpike Commission." (p5)

Despite the Turnpike Commission's statement in cold print that the Citigroup Analysis needs to be read in its entirely they won't let anyone read it!

I asked Allen Biehler, state secretary of transportation when I saw him after a press presentation in Harrisburg in the spring whether his department had a copy of the Citigroup Analysis saying I couldn't get it out of the Turnpike (surprise) and he said "No they haven't shared with us either."

Cost of the Citigroup assistance

How much is all this Citigroup assistance costing the Turnpike Commission?

The Turnpike say: "Citigroup provided services at no cost to the Commission."

Don't they say you get what you pay for?