Response to 2008 FHWA chief counsel Marc Lemon from Penn Pike

William Capone, a spokesman for the Pennsylvania Turnpike Commission has sent us a two page letter in response to our report (link) of comments by Marc Lemon chief counsel of the Federal Highway Administration in 2008 on the I-80 tolling application. The letter contests Lemon's theme that the Turnpike Commission ignored advice FHWA gave on what was legally required in the application to allow FHWA to give a favorable ruling.

The Turnpike letter can be downloaded here:

http://www.tollroadsnews.com/sites/default/files/PTC-Lemon.pdf

Lemon concedes our report was likely wrong in dating a meeting to July. He'd remembered it as being in the summer. For the rest he says our report was correct in saying that at that meeting and several others the Commission or its consultants were told clearly they needed a solid business plan for I-80 corridor improvements, a solid traffic and revenue study and fair market valuation of I-80 by a reputable, independent firm.

Lemon told us in response to the Turnpike letter:

"Consider the source. They are unhappy that we in the Bush Administration rejected their application because it failed to meet the requirements of the ISRRPP, and still does. ISRRPP was never intended to be a panacea for state transportation funding failures. It has specific requirements that must be met and my meeting with them focused on what they needed for their application."

"Apart from the date you wrote an accurate report. However a 'he-said/she-said' argument now about one meeting serves no purpose. We had many meetings with them over a couple of years and we went through the requirements. We tried to help them. We suggested things that would strengthen their case. They knew what they had to do to, and in my judgment they didn't do it and they haven't done it on the third go around. But the decision is not mine any more."
 
Jim Ray who was federal highway administrator at the time says he doesn't want to comment on the new third  I-80 application. But he says the  FHWA followed "a fair and transparent process" the first two goes around. He adds:

"The initial application contained a number of deficiencies, including those dealing with the planned reconstruction projects on I-80, evidence of consultation with affected MPOs, and the basis for classifying payments to PennDOT as an operating expense.  These deficiencies were clearly laid out in a (FHWA) memo dated December 12, 2007, and the Turnpike was invited to revise its proposal.  As can be seen in the September 11, 2008, memo, the Turnpike and Pennsylvania DOT did not sufficiently address the Agency’s concerns in its revised application.”

Ray urges people to reread those memos, which he says reflected a consensus within FHWA/USDOT and a concern to make a ruling based strictly in law.

Dec 2007 memo: http://www.tollroadsnews.com/sites/default/files/USDOT071212.pdf

Sep 2008 memo: http://www.tollroadsnews.com/sites/default/files/USDOT080911.pdf

Act 44 the July 2007 state law providing the framework for tolling I-80 makes it tough for the Turnpike Commission to meet federal requirements for tolling.

State legislators laid down what the Turnpike had to pay the state on an annual basis for tolling I-80. So in presenting their case to the Feds the Turnpike has to almost reverse engineer the fair market value estimate from the annual 'rent' they are required by law to pay the state.

You'd normally have fair market of a road for tolling established first, ideally by competitive bids, but otherwise through a reputable firm making their best assessment of what the asset was worth. Only after market value was determined would you nominate annual rental or fees. In Pennsylvania it was done backwards - rent set first by law, then a market value had to be found - 'contrived' perhaps - to justify the annual rent payments.

TOLLROADSnews 2009-12-15