Pennsylvania Turnpike Commission running up huge undisclosed debt - critics charge

The Pennsylvania Turnpike Commission is running up way larger debt to fund I-80 lease payments to the state than so far disclosed, according to calculations by the Commonwealth Foundation, a Harrisburg thinktank which is doing major research and publicity in favor of the private sector lease.

They say the Turnpike Commission's revisions to toll plans for I-80 - such as allowing first toll passes in a trip free - will require debt of $44b rather than $14b publicized earlier by the Commission.

The Commission has committed to lease payments to the state DOT of nearly $1 billion a year from the beginning of the 50 year public-public concession on the presently free interstate. Toll revenues only build slowly to pass that level of payout so the plan depends on carrying growing debt for many years. Small reductions in early revenue can therefore balloon to much larger amounts in the middle and later years if they put off the crossover date.

The Foundation analysts use three debt service coverage ratios to model three different financial scenarios (see table nearby).

The Commonwealth Foundation says: "Pennsylvania taxpayers and toll payers will now be paying this debt long after the Turnpike Commission’s 50-year lease agreement to toll I-80 expires under Act 44. The Pennsylvania Turnpike Commission has not publicly revealed the total debt payment of these bonds, so the Commonwealth Foundation calculated the unpaid debt after 2057 to be between $38 and $73 billion (even after paying $74 billion in principal and interest over the first 50 years). The accompanying chart provides the assumptions and calculations included in the Commonwealth Foundation’s financial analysis."

Matthew Brouillette, president and CEO of the Commonwealth Foundation said in a statement: "This massive new borrowing scheme only serves to perpetuate the Turnpike Commission and it’s self-interested patrons. Mortgaging our future with the Pennsylvania Turnpike Commission is not in the best interests of Pennsylvania taxpayers and toll payers."

The Commonwealth Foundation reiterated its call on the Federal Highway Administration to reject the Turnpike Commission request to toll I- 80: "Hopefully the Federal Highway Administration will save the Pennsylvania taxpayers from the Turnpike Commission’s schemes."

"Total payment" for bond issues for I-80 Capital Expenditures, I-80 Monetization (payments to PennDot), and Turnpike Monetization were calculated by the Commonwealth Foundation. These estimates are based on total payments of 2.5 times bonds issued (low debt scenario) to 3.5 times bonds issued (high debt scenario). While total debt service of 3.5 times the amount borrowed is unusually high for debt service, it is consistent with payments of the Turnpike Commission for Capital Expenditure borrowing, and the series of bond issues for I-80 CapEx, I-80 Monetization, and Turnpike Monetization completely retired within the life of the deal.

They cite their sources: Pennsylvania Turnpike Commission, I-80 Revised Tolling Application, July 2008 http://www.paturnpike.com/I80/pdf/Appendix%20F%20through%20L.pdf, Sept 2007 PTC Report

The Turnpike Commission has not responded, yet, to the Commonwealth Foundation report. They have claimed that 60 to 80% of the traffic getting first-toll-free trips would not otherwise use the Turnpike, and on that basis have downplayed the loss of revenue.

We've reported that FHWA have decided in internal discussion that the Commission's application to toll I-80 cannot be allowed under present US law, but nothing has been officially announced. A US Government announcement on the contentious issue is expected quite soon.

TOLLROADSnews 2008-09-02