Tuesday, May 22, 2007
Rising Tolls
The Governor has proposed three solutions to the transportation funding crisis facing the Commonwealth’s roads and bridges. The first solution, and the one favored by the Governor, involves the long-term leasing of the Pennsylvania Turnpike to private investors; the second has at its crux the creation of a new tax-exempt authority to allow for the private management of the Turnpike; and the final alternative would follow the Turnpike Commission’s plan of raising existing tolls as well as tolling Interstate 80.
Either way tolls along the Pennsylvania Turnpike are going to increase—the only question is by how much. The solution that should result in the smallest increase in tolls will be the first—privatizing the toll road. Experience from around the country indicates that toll increases are limited by legislation. Not only are states regulating tolls, but some states also regulate the rate of return earned by the private operator. Obviously the more stringent the regulations, the lower will be the overall bid for the Turnpike.
To date the expected payment has fluctuated from a few billion to as high as $30 billion—the Governor’s advisors are now estimating $18 billion. The true value of the road will not be known until all of the restrictions and conditions are stipulated and the bidding process is undertaken. It is to be kept in mind that ownership of the road will still rest with the Commonwealth. If any private lease holder were to violate the agreement, then the lease would be voided and the state would then retake control of the road.
Of the three options advanced by the Governor and his advising team, privatizing the Turnpike makes the most sense for the citizens of Pennsylvania. Not only does it eliminate the patronage-ridden Turnpike Commission, it will provide the Commonwealth with much needed capital to deal with the pressing road and bridge repairs.
However, it is time for the Governor to share with the Legislature the letters of interest he received last December. There is no need for secrecy about this. That only breeds distrust and animosity toward moving forward with the lease plan.
Either way tolls along the Pennsylvania Turnpike are going to increase—the only question is by how much. The solution that should result in the smallest increase in tolls will be the first—privatizing the toll road. Experience from around the country indicates that toll increases are limited by legislation. Not only are states regulating tolls, but some states also regulate the rate of return earned by the private operator. Obviously the more stringent the regulations, the lower will be the overall bid for the Turnpike.
To date the expected payment has fluctuated from a few billion to as high as $30 billion—the Governor’s advisors are now estimating $18 billion. The true value of the road will not be known until all of the restrictions and conditions are stipulated and the bidding process is undertaken. It is to be kept in mind that ownership of the road will still rest with the Commonwealth. If any private lease holder were to violate the agreement, then the lease would be voided and the state would then retake control of the road.
Of the three options advanced by the Governor and his advising team, privatizing the Turnpike makes the most sense for the citizens of Pennsylvania. Not only does it eliminate the patronage-ridden Turnpike Commission, it will provide the Commonwealth with much needed capital to deal with the pressing road and bridge repairs.
However, it is time for the Governor to share with the Legislature the letters of interest he received last December. There is no need for secrecy about this. That only breeds distrust and animosity toward moving forward with the lease plan.
