Allegheny Institute: Failed Attempt to Toll I-80 Costly to Taxpayers

The Federal Highway Administration (FHWA) rejected the plan to toll Interstate 80. Tolling I-80 was the linchpin of Pennsylvania’s transportation funding under Act 44 and was to provide funds for road and bridge repair as well as mass transit. As we pointed out in previous Policy Briefs, the notion of tolling a federal highway to pay for other projects was doomed from the start.

According to an FHWA memorandum, the agency concluded that the plan to toll I-80 did not meet the requirements as set forth by federal law-specifically that "there is no basis to conclude that the proposed lease payments are legitimate operating costs".

In other words, the federal government requires that toll revenue be used to repair and rehabilitate the road being tolled, not to subsidize other roads or mass transit.

The FHWA’s main focus was on the lease agreement between the Pennsylvania Department of Transportation (PennDOT) and the Pennsylvania Turnpike Commission. Prior to making the final determination that the lease payments were questionable, the FHWA repeatedly asked both agencies to justify the lease price, but no justification was forthcoming. In addition to the lease, they cited an "absence of sufficient traffic and revenue studies and the adequacy of the financial plans." Unfortunately, adopting a scheme first and worrying about the details or consequences later is all too commonplace among policy makers.

Indeed, a phone call or letter to the FHWA about the Legislature’s plans to toll I-80 as contemplated by the drafters of Act 44 could have prevented the months of waiting for an answer, not to mention the expenditures of undoubted millions of dollars to prepare and file the applications and prepare the lease payments. It reflects very poorly on those who drafted and pushed the bill that there was no real effort to ascertain an opinion from FHWA before enacting legislation that is now in shambles. This act was to be the solution to funding the state’s massive transportation improvement needs.

The lease agreement between the Turnpike Commission and PennDOT does not contain specific provisions of what would happen in the event the FHWA rejected the conversion of I-80 to a toll road. However, Section 15.7 of the lease says that in the event the FHWA determines the conversion of I-80 is inconsistent with federal law "the Parties shall use their reasonable, good faith and diligent efforts to agree upon and effectuate the appropriate amendments to, or modifications of this [lease] Agreement at the earliest possible time." The question is; why was the lease not automatically voided when the FHWA rejected the tolling plan? After all, why is there any need for the Turnpike Commission to control the road? The whole purpose
of leasing I-80 was to generate toll revenue to repair other state roads and bridges and fund expensive mass transit systems. Lease payments would be made to PennDOT who would in turn use the money to carry out these two objectives.

Using money from the tolls collected on the existing Turnpike system to satisfy all the funding requirements envisioned in Act 44 is not an option. First of all, the Turnpike toll system collects only $600 million or so per year, barely enough to meet all its needs, obligations and operating expenses. Paying off the $2.5 billion in new debt recently incurred will be a daunting task and will likely consume much of the coming 25 percent increase in Turnpike tolls on January 1, 2009 and three percent each year afterward. This money was borrowed to make payments to PennDOT as required under Act 44.

Act 44’s call for tolling I-80 and leasing the road to the Turnpike was obviously an 11th hour ploy to derail the Governor’s plan to lease the Turnpike. It likely will have done the job even though I-80 is not going to be tolled. The $2.5 billion in new debt has made the Turnpike less attractive and undoubtedly pushed down bid prices from what they might have otherwise been. Moreover, the time elapsed since Act 44 was passed has given officials and opponents of the lease plan time to make the Turnpike less attractive to potential lessees and to shore up their anti-lease positions. This is an unfortunate side effect regardless of one’s position on whether the Turnpike should have been leased earlier or not.

Public policy should never be carried out by passing legislation with provisions virtually guaranteed to run afoul of federal law, especially when the ruling of federal officials could have been easily obtained before passing the legislation. The wasted time and taxpayer money expended creating the lease of I-80 and applying for permission to toll it can never be recovered.

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Frank Gamrat, Ph.D., Sr. Research Assoc.
Jake Haulk, Ph.D., President
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