"Cauldron of corruption" charge casts doubt on I-80 tolling in Pennsylvania

Posted on Mon, 2009-11-30 06:14

Former US congressman and state senator John Peterson calls the Pennsylvania Turnpike Commission a "cauldron of corruption" and the state Senate's "patronage pit" in a column running in state newspapers. He calls on the general assembly to abolish the Commission and place the Turnpike's tollroads under the state department of transportation.

Peterson cites wellknown incidents:

- the Governor's firing of Turnpike Commission chairman Mitchell Rubin for accepting a no-work contract from imprisoned state senator Vincent Fumo plus Rubin's wife's conviction and imprisonment for corruption

- allegations by former labor relations manager Donald Kovak that he was fired by the Commission for refusing to reinstate a politically-connected toll collector who had assaulted a motorist

- Turnpike staffer Michael Palermo pleading guilty to accepting no-work 'contracts'

- a federal investigation into various dubious contracts including a Valley Forge contract bid at $90m that ran to $181m

- a state investigation into pay-to-play in Turnpike contracting

The former congressman who is prominent in the opposition to tolls on I-80 picks up on criticism of the Commission's use of an obscure Louisiana firm, Provident Capital Advisers - renamed as such immediately before the consulting work with the Turnpike - for the critical task of valuing the Turnpike's proposed I-80 concession as part of the new effort to gain US government toll permission.

Peterson says: "The U.S. Department of Transportation has denied the Turnpike’s application twice. Approving the application this time around and enormously expanding the Turnpike, amidst federal and state investigations, would be an egregious display of irresponsible public policy."

see http://www.centredaily.com/opinion/story/1644824.html

Brian Chase energizes opposition to Turnpike

Peterson is not the only politician energized in part by investigations conducted by Brian F Chase, an independent consultant and former toll finance expert at Nossaman and Carlyle. Chase spoke to a packed hearing held by the state House Republican policy committee in Harrisburg recently. His comments have been publicized throughout Pennsylvania and provide a major new theme in campaigns by local representatives against the Turnpike Commission's plans to toll I-80.

Chase blew the whistle on the Turnpike's hiring of Provident Capital Advisors LLC, the questionable Baton Rouge Louisiana firm. Chase said he'd never heard of the company cited as valuation experts in the Turnpike's submission to the Feds. So out of curiosity he tracked its origins through Louisiana state company records.

The company was constituted by a name change from Provident Healthcare Coalition in June right around the time it provide a "fair market valuation" of I-80 for the Turnpike to use in their third shot at getting the federal permit.

“I find it hard to believe that the FHWA would have much confidence in an entity that only came into existence a few days before it issued the opinion,” Chase said at the Harrisburg hearing.

Provident Capital Advisors so-called is an affiliate of a non-profit called Provident Resources Group which manages healthcare centers and prisons.

"Why not (employ) a name investment bank?" Chase asked rhetorically. He cited Houlihan Lokey as having a stellar reputation as a assessor of fair market value, and Citigroup as another obvious candidate to do the work among many others well qualified.

Improvident "hired gun"

Provident was a "hired gun," he said.

The Provident opinion cited only older toll concessions extensively written on, mentioning none of the more recent ones, giving the impression the Provident paper was based on a Google search rather than actual knowledge of concessions.

Further Chase said the Provident opinion lacked any analysis of the timing of capital expenditures and the links between them and traffic growth. It also provided no explanation of how lease payments were calculated, despite a specific request for such an explanation by USDOT when the previous Turnpike Commission applications for US approval were rejected.

Chase suggested that USDOT/FHWA get their own independent valuation of the I-80 franchise before making a determination as to whether the application to toll I-80 meets the requirements of federal law. He said allowing the Turnpike to provide an appraisal was rather like an applicant for a loan choosing their own appraiser and the bank being asked for the loan having no say.

Chase said that the Turnpike concession was unusually weak in placing no legal obligations on the Turnpike Commission to improve I-80.

$2.5b of improvements to I-80 were merely promised

"There’s a difference between a promise of proposed improvements and a legal obligation to deliver those improvements. There’s no legal obligation here.”

State Act 44 in which the I-80 toll concession was laid out was a hurriedly passed law, Chase noted, designed to avert an immediate financial crunch at the end of a financial year.

It overlooked a key ingredient of any good tolling proposal - that the great bulk of the proceeds must go back into the facility being tolled and the corridor where users were being asked to pay.

It was not suitable as a financing mechanism for transit systems in metro areas remote from I-80, Chase said.

Turnpike spokesmen make an eloquent case for tolling I-80 on efficiency and equity grounds, and their toll proposal provides for a lot of local travel free of tolls between toll points.

But their choice of so-called Provident Capital Advisors to advise on the key fair market value issue could prove a fatal blunder. The only explanation offered by Turnpike spokesmen has been that they needed someone outside the mainstream to be sure they were independent. Provident is surely outside the mainstream, but the 'independent' part is an impossible sell.

Financial desperation v dire legal status of Turnpike

Working in favor of I-80 tolls is the dire condition of public transit finances in Pennsylvania and the sheer numbers of representatives from metropolitan districts versus those from the more sparsely populated area along I-80. Under Act 44 Turnpike payments to the state of $900m this year drop, starting July 1 to $450m/year if I-80 is not tolled.

Even before the I-80 tolls have been approved the state is seen to be heavily dependent on them!

So it's a question of whether the dire finances of the state trump the dire legal and political status of the Turnpike as described by Peterson. Simply put the unanswered question is whether the Turnpike's leadership can stay out of jail long enough for the I-80 toll issue to be settled in their favor with the help of the Obama administration.

http://www.paturnpike.com/I80/