Tag Archives: PennDOT

PAT’s Coming Windfall

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The long sought after special “funding” stream has become reality for the Port Authority (PAT). A funding stream that had been lobbied for by a number of groups in the Pittsburgh community for many years. With the passage of the transportation bill in November, the wheels have been set in motion to begin substantial additions to funds dedicated to roads and bridges as well as for mass transit in Pennsylvania.  Over the next four and half years through fiscal 2017-2018, funding for roads and bridges in the state are forecast by the Department of Transportation (DOT) to rise to $1.65 billion per year. Meanwhile, additional funding for mass transit is projected to climb to just under $500 million per year by 2017-2018. Projections show the increase in funding for transit at $60 million in the last half of the current fiscal year as the bill’s provisions are implemented and then climbing to $355 million next year and on up to the half billion level over the following two years.

 

So what does this mean for PAT? Based on PAT’s base year operating allocation as a percentage of all base year transit funding—24 percent as determined by the DOT—we can estimate the amount PAT is likely to receive from the newly enhanced allocations specified in the transportation bill.  By the way, the 24 percent figure is very close to the percentage mentioned in the transportation bill for purposes of allocating funds to transit asset improvement. It is very likely that the $30 million in annual supplemental funding agreed to by the Governor has lifted PAT’s share of transit funding out of the 24 percent range.

 

Note that for FY 2013-2014 PAT has budgeted state basic assistance at $163 million along with the Governor’s special allocation of $30 million for a total of $193 million in state money. At that same time, by way of comparison, revenue from fare box collections is budgeted at just $82 million.

 

Meanwhile, for 2014 Allegheny County has forecast $40.5 million in combined drink tax and car rental tax revenue. Of that revenue $30 million has been allocated to cover the required match from the state. That leaves about $10 million which could be used to cover the required match for the $60 million in new state funding that could be forthcoming according to the DOT. Bear in mind that the RAD board is providing $3 million to help cover the $4.5 million match requirement for the Governor’s contribution of $30 million that is over and above the state’s normal formula determined funding.  An important question here would be: In light of the jump in state funding that is coming, will RAD be as favorably disposed to continue granting dollars to an agency some of its members were loath to support in the first place?

 

By way of background, the drink and car rental taxes were authorized by state law in 2007 to generate funds to be used by the County to support mass transit, in particular to produce revenue to meet the state’s 15 percent local match requirement to receive state operating funds.  In short, the new taxes were designed to relieve the pressure on the County budget and to allow the County leadership to avoid having to make serious spending cuts or raise property taxes. As was noted at the time, the two taxes were inappropriate ways to subsidize mass transit but were instituted anyway. The County missed a golden opportunity to generate local revenues for transit support when it earlier adopted a local option sales tax to be used for purposes other than transit. The sales tax is a broad based tax paid by most residents and is therefore a far more equitable way to fund a widely used public service.

 

Assuming the drink and car rental tax revenue will continue to generate revenue in the $40 million range in the near term perhaps growing a million or so per year, by 2018 the revenue might reach $44 million.  The County does have the authority to boost the drink tax percentage to 10 percent from the current 7 percent level. But that will be met with great opposition from owners of restaurants and bars.

 

Will $40 to $44 million be enough to meet the 15 percent matching requirement for the increased state funds in the years ahead or will other funds have to be diverted?  Alternatively, will the state begin to waive the match requirement or lower it? In the current fiscal year, if the state’s $60 million estimate for new transit revenue is correct, PAT will receive about $15 million of that, necessitating a local match of $2.25 million. An amount easily handled by the $10 million surplus of drink tax and car rental tax revenue, unless it is being used for other purposes.

 

In FY 2014-2015, the state expects $355 million in supplemental funding of which PAT’s share will be approximately $85 million—requiring $12.75 million in additional match.  One might reasonably assume that the Governor’s supplemental contribution would go away in light of the increase in new funding. If that happens then the net rise would be only $55 million, needing a match of $8.25 million from the County.  The County could manage that out of projected drink and car rental taxes with or without the RAD funds, assuming the state’s basic operating grants are not increased as well.

 

In short, with $40 million to use as a match, the County can cover $267 million in total state funding, about a $100 million above the recent operating grant level. That presupposes the County is willing to use all of the special tax revenue to fund the match requirement.  It could well be the current surplus in that revenue is being spent on other transit projects and might be hard to shift back to meeting matching needs.

 

On the other hand if, or when, the state supplemental funding rises to the $125 million level and the base year operating grants, augmented by the 5.6 percent annual adjustment factor, continue to rise, the drink and car rental tax as currently constituted will not be enough to cover the match.  But it would be a nice problem for the County and PAT to have.

 

The big question for PAT: What will you do with all that additional funding? It would be reasonable to expect that the unions, having made concessions they were adamantly opposed to, will begin to demand some reinstatement of benefits. And with contracts coming due in a couple of years, management will not be able to cry poor as a result of having been made the beneficiary of large sums of new money.

 

Transit riders and workers should thank all the people who lease and rent cars, Turnpike users, tire buyers, and sales tax payers, fee payers, traffic fine payers and people buying alcoholic drinks in Allegheny County for their very generous support and subsidization of mass transit.

Another Year, Another Hike in Turnpike Tolls

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Another year and another toll increase for users of Pennsylvania’s Turnpike system.  For the sixth consecutive year, tolls will rise for travelers paying with cash (E-Z Pass fares were not raised in 2012).  Turnpike tolls have been boosted to cover the cost of rising bond obligations incurred to satisfy 2007’s Act 44 requirement that the Turnpike contribute $450 million to PennDOT annually.

 

As we had written in past Briefs (Volume 12, Number 5 and Volume 13, Number 3) the Turnpike will need some legislative help to lighten this debt burden as the cycle of issuing debt and raising tolls cannot continue for the fifty years outlined in Act 44.  In late 2013 that help arrived with the passing of Act 89 of 2013 which reduces the amount owed by the Turnpike from $450 million to $50 million—in the fiscal year (FY) ending in 2022.  While any help is welcome, the damage may already have been done.

 

For FY 2004 the amount of mainline bonds outstanding (those issued against toll revenue) was just over $1.13 billion[1]. In May 2007, before Act 44 was passed, that debt total climbed by 46 percent to reach $1.7 billion.  By May 2013 the amount had jumped above $7.5 billion—an increase of more than 560 percent over 2004 levels and 350 percent higher than in 2007.  With a strategy of borrowing to satisfy Act 44 requirements and using toll revenues to pay them off, the amount of mainline debt will continue to rise dramatically for the foreseeable future.  An official from the Turnpike Commission was quoted in news reports that their bond ratings have been solid, so there appears to be little outward worry.

 

However there are two main reasons to worry. First; interest rates for the past few years have been very low, making borrowing cheap and offering extraordinarily favorable refinancing opportunities.   Through its quantitative easing policy, the Federal Reserve has kept interest rates historically quite low purportedly to promote the national economic recovery. This has kept the growth in debt service on these bonds from rising as rapidly as the debt growth itself. In 2004 the debt service on the mainline bonds stood at $81.1 million before rising to $111.5 million in 2007 (38 percent).  In 2013 that amount swelled by 185 percent to $318.9 million.  Thus, the increase to the debt service of these bonds grew by a slower rate than the amount of debt issued.  Even though debt service is currently manageable, debt service will inevitably rise as more borrowing is incurred, even with low interest rates, and to make matters worse it is a virtual certainty that interest rates will eventually move higher.

 

The second reason to worry is that Turnpike traffic levels have been flat over the past decade or so.  The mainline Turnpike offers the best route to traverse the southern part of the state, connecting west to east from border to border.  Customer demand is highly inelastic in the short run and usage levels do not drop appreciably in the face of price hikes.  This is borne out by the data.  Since FY 2008 (before the first hike) to FY 2013 there were the six consecutive cash toll increases and yet gross toll revenue increased nearly 33 percent with the total number of vehicles using the Turnpike virtually unchanged (down less than one percent) over the period.  To be sure, there must have been some effect on traffic over the period in light of the improvement in the state’s economy and the very modest upturn in national economic activity. One would have expected some significant pickup in traffic absent the toll increases.  Indeed, the traffic did rise to recover to the 2008 level in 2011 and 2012 but dropped back to 2004 readings in 2013.

 

But within the years we can see that the growth in gross toll revenue was rising at a decreasing rate.  From FY 2009 to FY 2010 gross revenues increased 12.5 percent.  Then from FY 2010 to FY 2011 growth was less than 6.5 percent and the increases got smaller from 2011 to 2012 (4.4 percent) and again from 2012 to 2013 (3 percent) despite the constant toll hikes.

 

Are motorists starting to react negatively to the toll hikes by finding alternative routes to travel?  While the number of vehicles has not changed much since FY 2009, within the last three fiscal years the change to the number of passenger vehicles on the Turnpike’s roads have been decreasing (up one percent, down 0.16 percent and down 0.77 percent).  The number of commercial vehicles using the toll roads over the last three fiscal years has been increasing, albeit at a decreasing rate (3.8 percent, 1.3 percent, and 0.33 percent respectively).

 

However, a more telling indicator kept by the Turnpike is revenue miles.  From FY 2008 to FY 2013, this measure had fallen by 4.5 percent.  FY 2009 had the largest fall of nearly 3.75 percent, but FYs 2010 (-0.69), 2012 (-1.19), and 2013 (-0.03) all had setbacks as well.  Only 2011 had a modest one percent uptick.

 

But revenue miles per vehicle points to a possible reduction in usage.  FY 2007 represents the high-water mark for both revenue miles per passenger vehicle (27.69) and per commercial vehicle (51.84) for the last ten years.  In FY 2013 the average passenger vehicle using the Turnpike traveled 26.81 revenue miles—about three percent lower than in 2007.  However, commercial vehicles on average traveled 46.17 revenue miles—nearly eleven percent fewer miles than they did in 2007.  In fact, commercial revenue miles per vehicle had been steadily declining since that peak.  This measure shows that commercial customers may be more sensitive to the fare increases than originally thought as they have shaved more than 5.5 miles off an average trip.  This could eventually be problematic for the Turnpike as commercial vehicles pay more per mile than passenger vehicles.  It could also cause problems for municipal and state roads as this measure suggests that commercial vehicles are substituting state or local roads for the Turnpike.  Of course commercial vehicles do far more damage to roadways and bridges and that may translate into higher costs for those entities.

 

All told, the continual borrowing by the Turnpike and the raising of tolls has not produced a crisis as yet but there is every reason to be concerned as the debt piles up and tolls reach levels that begin to drive significant traffic off the Turnpike.  Once the toll reaches a level that leads to stagnation or decline in revenue, the financial situation will become extremely problematic. As it stands, the annual $450 million contribution to PennDOT is scheduled under the recent transportation bill to continue through FY 2020-21.  The reliance on permanent historically low interest rates is not a prudent strategy.


[1] All financial data from 2013 Turnpike Comprehensive Annual Financial Report:  http://www.paturnpike.com/geninfo/PTC_CAFR_13-12_final.pdf .  The Turnpike Commission’s fiscal year ends on May 31.

Rural and Urban Roads: Does One Subsidize the Other?

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In an informational piece put out by the Greater Pittsburgh Chamber of Commerce and the Allegheny Conference on Community Development, the point is made that “…in densely populated urban areas, there just isn’t enough space to fit the roads that would be needed to move people around.”  The message of the piece attempts to persuade rural lawmakers to approve funding for mass transit. 

 

 

The main argument is that in the five Pennsylvania counties with the smallest populations (Cameron, Sullivan, Forest, Fulton, and Potter), there are more feet of state-funded roads to serve a single resident (142) than there are in the five Pennsylvania counties with the highest populations (Philadelphia, Allegheny, Montgomery, Bucks, and Delaware) (5 feet per resident).  The advocacy document concludes from those statistics that gas tax collected from urban areas moves to rural areas to fund road work and in return rural counties should be willing to move funds to urban areas to fund mass transit-which is necessary because of the lack of adequate road mileage.

 

This conclusion is based on a superficial evaluation and is not supported by rigorous, thoughtful analysis.  First of all, the amount of state tax dollars spent on state roads is not simply a function of the number of miles of road but must also take into account usage levels, i.e., vehicle miles traveled on the roads and the types of vehicles using the road.  Act 68 of 1981, directs PennDOT to distribute road money to county maintenance districts, “in the following manner: (40% RPQ + 15% BMD + 30%LM + 15% VM).”  RPQ is the relative pavement quality index measuring the condition of the highway, BMD is the bridge maintenance deficiency index, LM stands for lane miles, and VM stands for vehicle miles traveled.  Thus only part of the funding is based on the number of miles located within the county, the remaining variables take into account condition of roads, bridges and vehicle miles traveled.  Municipalities receive money from the liquid fuels tax based on a formula that takes into account local road mileage, and population levels so that more populated municipalities receive more funding.   Counties receive liquid fuel tax money based on a ratio of a county’s gas consumption relative to statewide consumption (based on the late 1920s). 

 

But the crux of the argument implying miles of road is the only determinant of funding is not accurate.  Usage plays a role as well.  In fact PennDOT considers truck traffic more heavily than it does car traffic, as heavier trucks do more damage to roadways.  In Allegheny County for instance, the Parkways, Routes 28, 51, and 65 are all very heavily traveled roads requiring a lot of upkeep.  Rock slides on Route 28 are notorious. There are a considerable number of large trucks on these roadways making deliveries and hauling goods contributing to their deterioration. 

 

Beyond usage levels, bear in mind that in urban areas the major roads will have, on a per mile of mainline roadway, very large numbers of interchanges, overpasses, as well as on and off ramps that also must be maintained.  Also Allegheny County (as well as other urban counties such as Philadelphia and Dauphin (Harrisburg)) has a number of very old, very large bridges that are in almost constant need of maintenance such as the Ft. Pitt, Ft. Duquesne, Liberty, and many others.  Finally, note that Allegheny County has a number of very old, expensive to maintain tunnels on principal arteries-Ft. Pitt, Squirrel Hill and Liberty. 

 

Secondly, the Pittsburgh Chamber and Allegheny Conference advocacy piece does not take into account who is using the highways and where gasoline or other fuel taxes are being collected. For example, traffic on Interstate highways through rural counties is almost certainly dominated by vehicles passing through the counties.  Indeed, a large share is coming from out of state and headed toward another state. This factor presents an extremely complicated situation as to who should pay and how to collect revenue. Ideally, users would pay a toll to cover costs of maintaining them but if all Interstates that are already built start tolling, then Pennsylvanians (cars and trucks) will get hit when they travel both in state and out of state.  Thus, the notion of tolling must be thought through carefully. In the case of I-80 and I-79, there might be a persuasive argument but if trucks get off and begin using non-Interstates to avoid tolls will the state come out ahead?  There is no way to say with any certainty without serious research and analysis.

 

Just to illustrate how complex all this is, here is a more detailed look at the usage issue.  Using the Pennsylvania Department of Transportation’s (PennDOT) 2012 Fact Book[1], we can look at some roadway facts. 

 

According to the Fact Book, PennDOT is responsible for nearly 39,800 linear miles of roadway in the Commonwealth.  The five urban counties in the advocacy piece have more than 3,700 PennDOT linear miles while the five rural counties mentioned have more than 1,300 miles.  Thus the five urban counties have three times more linear miles of PennDOT roadway than the five rural counties in the comparison.  They also have more local municipal roadways by a nearly 13 to 1 ratio.   As mentioned above, linear miles is one factor in the funding formula for additional maintenance funds and the five urban counties in the formula actually have the advantage over the five rural counties, even if  the per resident basis seems to suggest otherwise.  The conversation should be about maintaining the roads and the use of scarce state resources to do so.  Usage plays a very important role as it implies wear and tear-the greater is the usage, the more often a road will need maintenance.

 

PennDOT’s measure of usage, Daily Vehicle Miles of Travel (DVMT), for these counties shows that the five most populated counties had a total of more than 78.7 million DVMT, representing about 28 percent of the statewide total.  Allegheny County leads the way with 23.15 million.  The five counties with the lowest population totals had just over 2.48 million DVMT-about three percent of the statewide total.  Only one rural county in the list tops one million DVMT and that is Fulton County which has part of the Turnpike running through it (19.15 miles).

 

To broaden the comparison, PennDOT’s Fact Book breaks out the two measures into rural and urban roadways in the Commonwealth’s 67 counties.  According to PennDOT, there are 73,885 (62 percent) linear miles of rural roadways and 45,801 (38 percent) in urban areas.  However, the urban road system receives two thirds of the DVMT (184 million of 277.3 million) and would be subject to more wear and tear and of course require more funds.  Looking at it on a DVMT per mile basis shows usage in urban areas is greater than rural areas by a 4 to 1 ratio.

 

Total System

Linear Miles

DVMT

DVMT/Linear Miles

Rural

73,885

93,207,444

1,261.5

Urban

45,801

184,085,599

4,019.3

 

The idea that more miles per resident necessarily means more funding for maintenance per resident is not an automatic conclusion. Maintenance depends heavily on usage and other factors as the PennDOT formula indicates.  Before any claim of who is subsidizing whose roads can be made persuasively, a lot more research has to be done to answer the important questions outlined above. 

 

Clearly, if one is going to argue that rural taxpayers should subsidize mass transit on the grounds that urban vehicles are paying taxes that support rural roads more heavily than rural road users are supporting urban roads, then a far more in depth look at road usage and maintenance costs and who uses the roads and where the taxes are paid must be undertaken.  It is well known that damage to roadways is strongly tied to the weight transiting the roads. As mentioned above truck traffic is an important variable used by PennDOT in their evaluation of roadway maintenance for this simple reason.

 

There is one last point to be made. Mass transit users are already heavily subsidized.  Fare revenue covers only 25 to 30 percent of operating costs.  The state is providing a large portion of the remaining revenue to cover expenditures. It would be better to ask local communities who want mass transit to provide additional financial support to put a referendum question on the ballot to approve a local option sales tax or other broad based tax to raise money for buses and/or light rail.  Those who benefit the most from a service should pay the most for it.

 

[1] Latest data available is 2010.  http://www.dot.state.pa.us/FactBook/index.html

 

PennDOT Nixes Parkway East Ramp Closing Plan

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Congratulations to PennDOT. It has wisely and prudently decided not to go ahead with a scheme to close two westbound ramps on the Parkway East during rush hours. 

 

 

The plan was based on a University of Pittsburgh study that examined possible ways to improve flow through the Parkway East corridor. 

 

Three options were evaluated. The proposal to close the Ardmore Boulevard and Braddock Avenue westbound ramps showed the greatest improvement in traffic flow and reduction of travel time. At the peak rush hour traffic period the study group found an estimated time savings of five minutes for the morning Parkway trip. Unfortunately, the study failed to answer many of the questions about what would happen to traffic on surface streets as Parkway users entering at Ardmore Boulevard and Braddock Avenue were forced to find other ways to Oakland, Downtown or other points west.  They did recommend a number of street changes to improve traffic flow in the affected area but it is not at all clear what the added traffic would do to congestion patterns or travel times  and possible impacts on local residents headed to schools or to work inside the affected areas.

 

In all likelihood there are many drivers from outside the affected area who are already using routes on surface streets to avoid the Parkway backups. Adding more traffic to those streets would certainly not be advisable.

 

The greater point is that saving five minutes per day for drivers coming from Churchill or Murrysville does not appear to be an adequate benefit to balance against the additional travel times and congestion problems likely to be created on  the surface streets.  The question arises; why should people living closer to the City be inconvenienced significantly so commuters from farther out can save five minutes?  Moreover, if commuters from farther out are saving five minutes will that encourage more to get on the Parkway at rush hour to the point that eventually the five minute savings is eliminated?  Except that the new rush hour flow would have replaced the Ardmore and Braddock ramp users.

 

No one doubts that Parkway traffic is bad and frustrating at rush hour.  The system was designed for traffic flows much lower than the road is being tasked to carry. Then too, there is the decades long bottleneck issue-the Squirrel Hill Tunnel. The two tunnel lanes of traffic can only hope to accommodate 3,600 to 4,000 cars per hour safely. And this assumes there are no other bottlenecks downstream from the tunnel sufficient to slow the exit of traffic from the tunnel-that is, traffic is free flowing after the tunnel. If well above 4,000 cars per hour are trying to get through the tunnel at the rush hour peak, there will inevitably be a backup and the queue of cars will get longer the longer the peak demand lasts. Widening the approaching road to three lanes is not an effective option since all the traffic has to slow to allow merging and the two lane limit of capacity will control throughput.

 

As long as the tunnel is setting the limit to the number of vehicles per hour transiting the Parkway East to the Oakland and Downtown exits, all traffic engineers can do is work to insure that traffic maintains a good speed entering the tunnel so that braking doesn’t create a chain reaction causing traffic to come to a full stop. As long as speed can be maintained above a minimal level entering and moving through the tunnel, throughput can be sustained at capacity levels.  There is not much else that can be done.  No one has seriously suggested adding lanes to the tunnel or finding a way to add lanes that bypass the tunnel. 

 

There are alternative approaches to reduce the long transit times that impose costs on the commuters in terms of time spent on the road. First, get permission to levy a toll on users of the Parkway during rush hour to encourage drivers to leave before or after the peak travel times. That will probably require Federal legislation and would not be popular with many drivers, although for the convenience of a faster commute there might be some drivers who would gladly pay a peak hour toll.

 

Second, develop light rail or faster express buses to move people from points east into Oakland or Downtown. It is too bad that over half of a billion dollars was spent on the North Shore Connector that could have been far better used to build several miles of busway or light rail. Many will deride the idea, but if the eastern suburbs and towns further east are going to add Parkway using commuters in future years as has happened over the past, the crowded situation on the Parkway will get worse.  At some point, the travel time will reach a point that it will deter any further growth of commuters that rely on the Parkway.

More in the Building Collection of Famous Last Words?

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"Turnpike Head Says There is No Immediate Crisis".

Responding to a rising chorus of concerns about the Turnpike Commission’s annual borrowing of $450 million to meet its Act 44 obligation to PennDOT, the Commission head and the PennDOT Secretary say in effect, "move along there is nothing to see here." They contend there is no immediate crisis looming for the Turnpike. Their story is the Turnpike is cutting expenditures and raising toll rates adequately to meet debt service requirements. That means every year it must squeeze at least enough out of Turnpike users to cover the latest borrowing and of course that is accomplished through continuous rate hikes.

Moreover, the $450 million per year new debt is not all the Turnpike’s borrowing needs. In order to upgrade and maintain the old system, it has an extensive capital program underway that also necessitates additional borrowing. According to Moody’s summary, the Turnpike is scheduled to borrow $5.3 billion over the next 10 years for the capital projects. This in addition to the Act 44 borrowing. Of course, unless the Turnpike is kept in fairly good condition user levels will fall, something that would be disastrous for the Commission’s finances.

The other claim by the Commission head and the PennDOT Secretary is the Turnpike’s bond ratings are still high. That is true but Moody’s rating of March 2012 contains a negative outlook and lays out a number of challenges facing the Turnpike’s finances. Then too, as it does with municipal bonds, Moody’s gives great weight to the ability of the Turnpike to raise revenue through increased tolls. Indeed, it compliments the Commission for its independence and willingness to raise tolls. But as Moody’s points out raising tolls is only useful as long as demand for the Turnpike remains very inelastic. That simply means cars and trucks do not have viable alternatives between many travel points in the southern portion of the state and will bear high toll rates, at least at levels seen so far.

But as first year economic students learn, unless a product has no substitutes and is an absolute necessity, there is a price beyond which further increases will reduce revenue. That is, demand becomes elastic. How far away we are from that is hard to say. With a strong growing economy, the inelasticity can extend to higher prices. With a deep recession, raising prices will become extremely problematic. The Turnpike is in effect betting on virtually non-stop growth.

Beyond these considerations, one must be alarmed at the willingness to pile up debt in massive quantitites so the government is not forced to find other sources of revenue for PennDOT. That is the essential point here. The Turnpike is being used as a substitute taxing body and its users are contributing to roads and bridges throughout the state. It is a great asset that is being milked; perhaps to the point of catastrophic damage.

No crisis yet. That is the assertion. But looking around the state and country we see so many other cities, authorities and even states who are staring into a financial abyss. California, Illinois, San Bernardino, Birmingham, the Port Authority of Allegheny County, Pittsburgh pensions, the city of Harrisburg. And the biggest of all, the US government, accompanied by gigantic problems in Europe. Greece and Spain kept believing the crisis was not here yet. Now look. Warning signs are everywhere and each threatened player keeps saying "we’re still ok". Just like 2007 and 2008 when anyone with eyes to see knew the housing bubble was about to collapse. But what soothing words officials kept repeating that we should not be alarmed, all is well. And the problem is as long as the rating agencies bury their heads in the sand and pretend not to see the dangerous buildup of debt, the larger the amassing of debt. When the correction comes, it is much worse than if the rating agencies had looked at macro forces and downgraded some borrowers to discourage reckless borrowing.

Light is Finally Dawning on Turnpike Debt Growth

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govt state

In January of this year, the Pennsylvania’s Auditor General proclaimed that the Pennsylvania Turnpike was “drowning in debt” to which the Turnpike CEO responded that it was “simply not true”.  He elaborated by saying that the Turnpike “has developed a sound, fiscally responsible approach to meet all of its financial obligations…”.  Seven months later, in another news article, the CEO’s attitude seems to have changed a bit as he admits that the Turnpike cannot continue its policy of raising fares and issuing more and more debt for the long term.  But given the circumstances he claims this is the best the Commission can do and the strategy does not pose an immediate threat. In other words, we are okay in the very short run, but this is going to get very messy in a couple of years.

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Turnpike Drowning in Debt?

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highway

Recently Pennsylvania’s Auditor General stated that the Pennsylvania Turnpike is “drowning in debt”.  This characterization was disputed by the Turnpike’s CEO as “simply not true” and that the Turnpike “has developed a sound, fiscally responsible approach to meet all of its financial obligations…”  So which is it?  Is the Turnpike’s financial condition sound or is the Auditor General correct in raising a red flag?  To get an unbiased picture of the situation it is important to examine the large rise in debt over the last few years and the major causes of the borrowing. A principal reason for the debt increase is a provision of Act 44 of 2007. 

 

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A Great Train Robbery?

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In a blog this past April we wrote about Pennsylvania’s efforts to get a piece of the money that would be recirculating due to the rejection of a rail project in Florida. Pennsylvania wanted to use the money to (yet again) improve the speed of travel between Harrisburg and Philadelphia. In early May the state got $40 million to dedicate to that corridor.

So what of the western half of the state? A PENNDOT study said "increasing service from Harrisburg to Pittsburgh is a logical progression to create a successful corridor linking most of Pennsylvania". But don’t look for travel time to be anything remotely like the connection in the eastern part of the state: right now a five hour trip from Pittsburgh to Harrisburg would be reduced to a four hour trip, and even that won’t happen in one fell swoop, but rather incrementally. One consultant at a meeting on Monday discussing the idea said "the likelihood of reaching 110 mph in this corridor is unlikely at this point…what we’re really talking about is higher-speed rail."

And again, it won’t be a far stretch to imagine that there will be recurring requests for money to make the "somewhat faster" connection happen.