Bill to privatize Penn Pike introduced in state senate

A 36 page bill, SB1280, has been introduced in the Pennsylvania Senate to privatize the business operations of the Pennsylvania Turnpike under a 50 year lease concession agreement. The text of the bill SB1280 is downloadable at the bottom of the page. It was introduced by Senator John Gordner, a Republican. An aide says it has the support of eight other senators and is hopeful of building majorities in both chambers once it is clear that Act 44 won't work because the Feds won't approve tolling of I-80.

Act 44 passed in a budget crisis last summer provided for the Turnpike Commission to borrow billions of dollars to pay around $900m a year to the state DOT based on tolling I-80, and unlimited toll increases on the Turnpike, plus pledges of motor license fees.

SB1280 would require the state's Transportation Commission to negotiate "public private partnerships" for operating the Turnpike.

The Turnpike would be divided into three sections by milemarker (MM):

1. Turnpike East I-76/276 - MM247 east to the Delaware River at MM359, 112 miles (180km)

2. Turnpike Northeast Extension I-476 - MM20 at the East-West Mainline to MM131 in Clarks Summit, 111 miles (178km)

3. Turnpike West I-70/76 - MM247 to Ohio border, 247 miles (398km) including the three western extensions

MM247 is the Harrisburg East interchange with I-283 and is overlooked by the Turnpike Commission's head offices in Highspire on the Susquehanna River.

The legislative aide told us this dvision into three is intended to open bidding to smaller concessionaires and improve competition. There would be no bar on a bidder bidding on all three concessions in order to get synergy between them. The bidders must have "majority ownership by private entities with principal places of business in the United States..."

The aide told us this is intended to satisfy nationalist sentiment in the Pennsylvania electorate while allowing international groups to participate.

The law would establish a Pennsylvania Transportation Development Fund to manage the  fee from the concession, devoting the proceeds to investments the yield of which could only be used for transportation.

All assets, liabilities staff, responsibilities of Turnpike taken from Turnpike Commission

SB1280 would on enactment transfer all the assets, functions, obligations, legal powers, and staff of the Turnpike Commission to the  Pennsylvania State Transportation Commission (PSTC) - a 15 person body comprising four leading state legislators, ten gubernatorial appointees approved by the Senate, balanced between Democrats and Republicans, and the various regions of the state, serving 6 year terms, and chaired by the state secretary of transport.

The Turnpike Commission would be extinguished.

On PSTC see

http://www.dot.state.pa.us/Internet/pdCommissCommitt.nsf/infoSTCDuties?OpenForm

PSTC to be caretaker pending concession completion

The PSTC will act as caretaker of the Turnpike while the concessioning process proceeds.

According to the following timetable in SB1280 the PSTC would supervise and approve the procurement of three concession agreements through the state Department of General Services:

- no later than Dec 31 2008 a request for proposals

- no later than June 20 2009 deadline for submissions of proposals

- a concession contract to be executed no later than Dec 31 2009

The PSTC would get an professional valuation of the concession from an independent and experienced advisor.

In the selection of concessionaires the PSTC would consider a list of at least six listed criteria - see bill.

Some of the required concession provisions are:

- concession term no more than 50 years

- the Turnpike remains state property being leased to the concessionaire

- adherence to the state "prevailing wage act"

- $850m to be set aside for development of each of the three concessioned Turnpike segments and indexed for future decades

Toll rate setting

Toll rates on the Turnpike will be increased 25% by the PSTC on Jan 1 2009. Concessionaires will be allowed to increase tolls 3 percent a year thereafter.

They may also apply to the PSTC for increases beyond the 3 percent and the PSTC may consider that application based on:

- increased usage having resulted in increased repair and maintenance costs

- significant increases in labor and materials costs

- other criteria "deemed reasonable" by the PSTC

Tolls must be the same for similar persons and vehicles traveling under like conditions.

The state DOT may exercise eminent domain powers to help the concessionaires acquire property needed for to advance the development of the roads.

The concessionaires will pay the costs of policing the roads as stipulated in the concession contracts.

No new taxes on the concession

New taxes on the concessionaires by the state or local government will be barred for the  term of the concession. All property used by the concessionaires will be regarded as state property and exempt from tax.

Other provisions of the bill provide for the PSTC to pay amounts to the state DOT at least equivalent to those provided for under Act 44: $750m for roads and bridges and $250m for transit each year, indexed.

The PSTC will have the right to issue revenue bonds based on the concession fees up to $5b, no more than $1b each year. All bonds must be timed to be paid off by the time the concessions expires.

There is a list of provisions of Act 44 which is repealed as part of the bill, notably tolling of I-80 and the cancellation of the State DOT lease of I-80 to the Turnpike Commission.

Also an authority granted under Act 44 to Allegheny County to levy taxes on alcohol is repealed.  (Note that Turnpike CEO Joe Brimmeier had a long association with Allegheny County government. They don't trust his kind to go taxing their booze?)

Downloads

Here is the text of SB1280:

http://www.tollroadsnews.com/sites/default/files/SB1280.pdf

Here is the summary released today:

http://www.tollroadsnews.com/sites/default/files/sb1280pr.pdf

Here is the press release by the sponsor Sen Gordner:

http://www.tollroadsnews.com/sites/default/files/sb1280Smry.pdf

TOLLROADSnews 2008-02-06