Tag Archives: PA Turnpike

Turnpike tolls rise for the 10th consecutive year

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Summary: For the 10th straight year the Pennsylvania Turnpike Commission (PTC) is raising tolls. It is doing so and will continue to do so for the foreseeable future, as a result of legislation from 2007 that mandates the PTC to remit $450 million annually to PennDOT.  While many decry the rate increases, they also forget the misguided legislation that creates this situation.

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While we have written about this before (Policy Briefs: Vol. 7, Nos. 18, 38, 46 and 59; Vol. 12, No.5; Vol.13, No.3 and Vol. 14, No.2), it is worth repeating how the PTC arrived at this point.

In 2007 then-Governor Rendell sought to lease the mainline turnpike to fund the state’s transportation system of roads, bridges and mass transit.  That plan met with heavy resistance from all sides.  The Legislature then crafted what would become Act 44 of 2007.  The crux of Act 44 was to transfer ownership of Interstate 80 from PennDOT to the PTC.  The PTC would then toll Interstate 80 and give PennDOT $900 million per year beginning in fiscal 2009 and then rising 2.5 percent each year thereafter.  That money would then be split between road and bridge projects and mass transit.

But, as the Institute warned on several occasions at that time, tolling Interstate 80 required permission from the federal government.  Federal government guidelines require that any toll revenue from a federal interstate highway must be reinvested in that highway—and not on other purposes as was proposed in Act 44.  After asking for permission and being denied three times, Act 44 had to be revised. Even though permission to toll Interstate 80 was not granted, the revised legislation kept the PTC on the hook for payments to PennDOT, albeit at a reduced rate of $450 million per year starting in fiscal 2011 (after paying $750 million in fiscal 2008, $850 million in fiscal 2009 and the full $900 million in fiscal 2010).  Act 89 of 2013, which raised the oil company franchise (gas) tax to help fund road and bridge work across the commonwealth, reduces PTC’s remittance obligation to PennDOT to $50 million starting in fiscal 2023.

As mentioned above, the money from turnpike tolls was to be shared between road and bridge work and mass transit. Strangely and perhaps questionably, the money going to support mass transit is not mentioned in recent news reports although is clearly a vital part of the revised Act 44. Of the current $450 million payment made to PennDOT, the PTC’s Comprehensive Annual Financial Report (CAFR) from fiscal 2018 notes that $200 million of the scheduled annual payment supports road and bridge projects and $250 million supports transit throughout the commonwealth.

Thus, more than half of the mandated payment goes to the state’s transit systems. It does so by placing this money in the Public Transportation Trust Fund, which was created through Act 44, along with money from the state sales tax, lottery funds for the Free Transit for Senior Citizens Program, state bond funding for capital projects and the remainder of the Public Transportation Assistance Fund (after funding payments on existing debt).  According to the Port Authority of Allegheny County’s Single Audit for fiscal 2017 (most recent available), it received $205.9 million from the Public Transportation Trust Fund (requiring a local match of $33.7 million) that year.

In order to make this $450 million payment to PennDOT, the PTC has been issuing debt for that purpose for several years.  Total debt issued by the PTC includes non-traffic related debt linked to the Oil Franchise Tax revenues and Motor License Fee revenues (PTC’s fiscal 2018 CAFR).  Only debt issued against mainline tolls are used for the Act 44 payments.  In fiscal 2007 the total mainline outstanding debt was $1.7 billion ($8.93 per vehicle).  For fiscal 2018 that amount has ballooned to $12.2 billion ($60.70 per vehicle)—more than seven times greater in just 11 years.  So far, the PTC has paid PennDOT $6.1 billion in Act 44 payments since fiscal 2008.  Thus, of that debt total of $12.2 billion, 50 percent is the borrowing to cover the mandated payments to PennDOT.

Meanwhile, gross toll revenue has nearly doubled, rising from $624.5 million in fiscal 2008 to $1.2 billion for fiscal 2018.  While toll revenue may be able to cover the mandated $450 million payment to PennDOT and even the total interest and bond expenses, the PTC still has its own expenses to meet.  Total operating expenses for fiscal 2018 were $874.1 million.  The loss before capital contributions (operating revenues minus operating expenses plus PennDOT payments and the total interest and bond expense) for fiscal 2018 was $647.9 million.

All this borrowing has severely eroded the PTC’s financial position.  In fiscal 2018 the PTC had total assets of $8.9 billion and total liabilities of $14.5 billion for a total net position of -$5.6 billion.  With an increasingly negative net position—and the decreases in the net position have been happening annually since fiscal 2008—the cost of borrowing will almost certainly rise over time.

So how have the toll increases affected traffic on the system?

In fiscal 2008 there were 189.6 million vehicle transactions on the turnpike system with 164.1 million passenger vehicles and 25.5 million commercial vehicles.  By fiscal 2018 the number of vehicle transactions bumped up by just 6 percent (201.2 million).  Passenger vehicles transactions rose by just 5 percent over the period while commercial vehicle transactions jumped by 12.5 percent.  It has affected the composition of traffic as 86.6 percent of vehicles using the turnpike in fiscal 2008 were passenger (class 1) vehicles and in fiscal 2018 that had declined by nearly one percent (85.8 percent).

Importantly, however, the number of miles traveled has declined for both classes of vehicles. In fiscal 2008 revenue miles per passenger vehicle stood at 27.2 miles and for commercial vehicles it was 51.3 miles.  In fiscal 2018, passenger revenue miles per vehicle fell slightly to 26.7 while for commercial vehicles it fell more dramatically to 45.2 miles (12 percent).  Perhaps commercial vehicles are not able to pass along to their customers the increased cost of using the turnpike and may be finding alternatives to using the system.

The decision to use toll money to fund Pennsylvania’s transit problems—both road and bridge and mass transit—was a very poor one.  It has placed the PTC at a disadvantage as it needs to keep borrowing to meet obligations and raising tolls to make it work. At some point the toll increases will start to adversely affect the usage of the system, as the revenue miles traveled data is starting to show, especially with the commercial vehicles.

Another problem soon to face the commonwealth is a lawsuit filed by a truckers’ association that the strategy to use toll revenues to fund something other than the road itself runs afoul of federal law.  It was successful in suing New York, which used tolls to fund improvements to its canal system and have now turned their attention to Pennsylvania.

As a result, the PTC is not making current payments to PennDOT and instead putting that money aside pending the outcome of the lawsuit.  What if federal courts find for the truckers again?  Will they win back-tolls? And how will the current governor and Legislature react regarding transportation funding?  Needless to say, this lawsuit and possible ramifications of a ruling against the Pennsylvania Turnpike Commission will be extraordinarily important and will require close monitoring and analysis.

More on the PA Turnpike and Mon Fayette Expressway

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Summary: An earlier Policy Brief found the case for building the Turnpike extension from Route 51 to I-376 in Monroeville to be unpersuasive. Analysis of additional, updated information for the Mon Fayette Expressway, the other two completed toll roads in Southwest PA and the Turnpike system makes an even stronger case against building the extension.

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An April Policy Brief (Volume 17, Number 17) laid out the case against spending nearly $2 billion on the proposed 13 mile Turnpike (PA 43) link from Route 51 to the Parkway East at Monroeville.  The current 48 miles of the Mon Fayette toll road extending from Route 51 in Jefferson Hills Borough to the West Virginia border cost $1.69 billion, half of that was for the 17 mile segment between Uniontown and Brownsville—the last segment completed and opened in 2012.

The unanswered question at the time the April Brief was written was how the Mon Fayette Expressway (MFE) and the other local Turnpike connectors have been performing.  Thanks to Right-to-Know provisions, data for the past eleven years for vehicle traffic and toll revenue for the Beaver Valley Expressway (PA 60), Mon Fayette (PA 43) and Amos Hutchinson (PA 66) in Westmoreland County have been compiled and delivered by the Turnpike Commission.

As background, it is useful to note the completion dates for these roads. Beaver Valley was completed in 1992; Amos Hutchinson was finished in 1993. The 48 miles of MFE was completed in five phases—1st in 1990, 2nd in 2000, 3rd in 2001, 4th in 2002 and the 5th in two stages in 2008 and 2012. Thus, the first two fully completed roads have been in existence for 24 and 25 years, certainly long enough for traffic usage patterns to be developed.  For the MFE, traffic has grown over time as new phases opened including a near 20 percent bump up since the 2012 completion of the 5th phase.

Unfortunately, traffic on the Beaver Valley Expressway (BVE) peaked in 2008 at 8,601,180 vehicles.  In 2016 traffic was 7,695,911, down 10.5 percent from the peak level.  However, toll revenue rose 69 percent from 2008 to 2016 even with the decline in traffic volume.  Most of the rise in revenue is attributable to ongoing toll rate hikes over the period although some of it could be due to a higher percentage of trucks (which payer higher tolls) using the road. The data supplied by the Turnpike Commission does not break out vehicle volume by type of vehicle.

Vehicle count on Amos Hutchison jumped by nearly 3,000,000 to 7.8 million between 2006 and 2008.  However since 2008, traffic has been fairly flat with some slight growth up to 2011 followed since by a slow year by year decline back to the 2008 level. Notwithstanding the lack of a gain in net traffic volume over the 2008 to 2016 period, toll revenue jumped by 68 percent.  Toll rate increases account for most of this boost in toll collections.

For each of these toll roads, it appears likely that continuous hikes in toll costs have had a chilling effect on traffic volume growth.

For the MFE, traffic climbed steadily between 2006 and 2011, rising about 2 million to 10.7 million vehicles. With the 2012 opening of the link between Uniontown and Brownsville that permits uninterrupted travel from Route 51 to the West Virginia border, traffic has climbed 30 percent above the 2011 level, reaching 13.96 million.  Toll collections climbed 187 percent from 2008 to 2016 to accompany a 53 percent rise in traffic.  The big gap between traffic and collections reflects the ongoing rise in toll rates as well as the undoubted lengthening of the average trip following the final segment completion that allows end to end travel with the accompanying higher toll charges per trip. In this regard, note that toll revenue per vehicle rose from $0.82 in 2008 to $1.54 per vehicle in 2016, an increase of 88 percent attributable to both higher toll rates and longer trips following the opening of the “missing” connecting link.

Bear in mind that the $7 million increase in annual toll revenue on the MFE since 2012 must be viewed in the context of rising toll rates and the fact that the connecting final link cost $849 million. Indeed, this finding prompts a series of questions about how well the Southwest Turnpike highways are doing compared to the rest of the Turnpike system.

Several measures will be used to compare the performance of these elements of the PA Turnpike system including; revenue per vehicle, revenue per mile of road, share of Southwest road mileage as a percent of total system, and share of revenue as percent of total.

By way of background, using data from the Turnpike’s 2016 Comprehensive Annual Financial Report, it is learned that in 2016 the PA Turnpike system consisted of 552 miles of completed roadway, had $1.031 billion in toll revenue from 198.3 million vehicles—171 million cars and 27.3 million commercial vehicles.  The Turnpike also has bond debt of over $11.7 billion, had $471 million expenditures on operating services and debt payments of $574.7 million.

The Turnpike employed 2,068 people in 2016 with salaries and wages of $161 million and employee benefits of $118 million—an average of $57,000 in benefits per active employee. With the borrowing required for its own capital needs and the $450 million or so borrowed annually to cover a mandated transfer to the Department of Transportation, the Turnpike moved to a cumulative net negative position of $4.6 billion in 2016.

The three Southwest Turnpike (excluding the Southern Beltway) toll roads have a combined 77 miles of highway and in 2016 collected a combined $47.2 million from 29.4 million vehicles. Thus, the Southwest toll roads account for 14 percent of total system miles, 4.6 percent of all Turnpike toll revenue and 14.8 percent of vehicles using the system.

Individually, the MFE accounts for 8.7 percent of Turnpike mileage but only 2.1 percent of total system revenue. The BVE represents 2.9 percent of mileage and 1.2 percent of PA system revenue and finally, PA 66 has 2.4 percent of system miles and 1.4 percent of system revenue.

Total Turnpike system revenue per vehicle in fiscal 2016 was $5.20—with cars at $3.44 and commercial vehicles at $16.26.  In the Southwest, revenue per vehicle in 2016 ranged from $1.54 on MFE, to $1.59 on the BVE to a high of $1.87 on PA 66. Although, the data provided by the Turnpike Commission for the Southwest roads did not include total miles driven or the breakout of type of vehicle it is almost a certainty that the lower collection rates per vehicle in the Southwest compared to the system total are due to both shorter trips and much lower use by commercial vehicles.  Note that the average car trip system wide was 27 miles and commercial vehicle 45 miles.  The BVE is only 16 miles in length and PA 66 only 13 miles. Trips on those roads could not possibly come close to the system average trip lengths.

Revenue per mile of toll road provides an interesting comparison. For the Turnpike system excluding the three Southwest toll roads in 2016, toll collections were $2.1 million per mile of highway. MFE toll collection per mile was $447,916; BVE revenue per mile was $762,500 and PA 66 had $1.12 million per mile.

Thus, neither of the three Southwest Turnpike highways came close to the rest of the Turnpike system in terms of revenue per mile of road with MFE collecting less than a fourth as much as the rest the system.

Finally, the cost of construction of the three Southwest toll roads is instructive. The BVE cost $15 million per mile and was completed in 1992; PA 66 cost $20.5 million per mile and was opened in 1993. The 48 miles of MFE were completed in stages over a 24 year period of construction at an average cost of $35 million per mile. The last stages completed in 2008 and 2012 cost $50 million per mile. At a capital cost of five percent, that segment would have to produce $42 million in revenue ($2.5 million per mile or five times the current MFE average) in order to justify its construction on a cost-revenue (benefit) analysis of the road.

In sum, the increasing cost of construction on MFE has far outpaced both traffic and revenue collected. The proposed thirteen miles of extension from Route 51 to I-376 are projected to cost nearly $2 billion, a figure that is almost certain to rise during an actual multi-year construction project.  That would represent $150 million per mile in cost, triple the per-mile cost of the last 17 miles of MFE completed. The extension would need to produce $78 million in toll collections annually to justify the construction costs on a cost-revenue basis—that is $6 million per mile, three times what the Turnpike system currently generates. And the $78 million does not include the annual costs for maintenance, toll collections and administration.

To justify this proposed thirteen mile extension, the proponents need to show with rigorous and credible analysis that the projected vehicle usage, projected toll revenue and economic impact on the community would be sufficient to warrant the massive use of tax dollars from the wholesale fuel tax for the project. There are presumably far more productive optional uses of the funds. If not, why not simply roll back the tax and give consumers across the state a break from the extraordinarily high gasoline prices the tax is creating in Pennsylvania?  Those higher fuel prices and the escalating tolls that are necessary to fund Turnpike borrowing that supports public transportation are almost certainly having a negative impact on the state’s economy.