Wrong Turn: PA Turnpike Debt Mounts

Member Group : Lincoln Institute

State Representative Peter J. Daley (D-Washington County) recently called on top leaders at the Pennsylvania Turnpike Commission to resign citing a $7 billion debt racked up by the toll road agency. But, if Representative Daley wanted to hold accountable those truly responsible for the commission’s fiscal mess, he should simply look in a mirror.

It is true that in recent decades the Pennsylvania Turnpike Commission has not been a paragon of fiscal virtue. But, prior to enactment of Act 44 in 2007 the commission was reasonably financially sound – although facing significant demands for upgrading its aging infrastructure.

Then along came Governor Ed Rendell who, in his zeal to protect the patronage-riddled Southeastern Pennsylvania Transit Authority (SEPTA) upended what had been a fragile balance among the state’s competing transportation needs. With mass transit hemorrhaging hundreds of millions of dollars each year, Rendell simply "flexed," or moved federal highway funds into the coffers of SEPTA and other transit agencies. That left the Pennsylvania Department of Transportation (PennDOT) without the funding needed to fix and maintain roads and bridges.

To plug that hole, Rendell & company decided to vest in the Pennsylvania Turnpike Commission the tolling of Interstate 80. The funds generated from the newly tolled trans-state highway would then be used to pay debt service on bonds issued to provide PennDOT with the money it needed to address what Rendell termed a "transportation crisis."

And so Act 44 became law. And the Pennsylvania Turnpike Commission began borrowing heavily to comply with the law’s requirements that it help fund PennDOT. The Allegheny Institute in Pittsburgh reports that the turnpike commission had $2.5 billion in outstanding debt when Act 44 was passed. Today, that debt has ballooned to $7.4 billion including nearly $3 billion in payments to PennDOT. The balance of the debt has been incurred by the turnpike to fund badly needed upgrades to turnpike system.

The scheme fell apart when the U.S. Department of Transportation denied permission for the state to toll Interstate 80. Rendell blamed the decision on the Republican Bush Administration, but the department reached the same decision after Obama Administration appointees took control. Absent toll revenue from I-80, the turnpike commission was left with only one option to fund debt service payment: raise tolls.

And raise tolls they have done. Worse, turnpike travelers can expect significant future toll increases. While the turnpike is the most convenient east-west route across Penn’s Woods, it is not the only highway. Thus as tolls rise, more and more traffic – especially lucrative truck traffic – will find ways to avoid the turnpike. That will result in less revenue even while debt service continues to rise.

Despite the fact it has been nearly four years since the tolling of I-80 was scuttled the General Assembly has failed to go back to the drawing boards to rescind or revise Act 44. Turnpike managers are left with no option other than to keep borrowing and raising tolls to remain in compliance with the law. Each year the legislature delays dealing with the problem drives the Pennsylvania Turnpike Commission further into debt.

Thus does Representative Daley seek to cast the blame on others for the failure of himself and his colleagues. And the situation will only continue to get worse. As debt at the turnpike mounts, credit rating agencies are going to downgrade its bond rating. This will increase borrowing costs adding to the commission’s fiscal woes. Tolls will rise to uncompetitive levels, decreasing turnpike traffic and lessening toll revenue. To complicate matters even further, the siphoning of resources to comply with Act 44 will leave the turnpike commission without the money it needs to fund maintenance and improvements to the oldest limited access highway in the world.

Although the Pennsylvania Turnpike Commission has suffered from less than stellar management, the real solution to its growing debt lies not at the toll road agency, but rather under the capitol dome. Governor Tom Corbett and the legislature must address the fiscal calamity caused by Act 44 and end the draining of turnpike resources.

That, of course, is but one small part of addressing Pennsylvania’s growing transportation needs. After repealing Act 44, significant reform is needed at the Pennsylvania Turnpike Commission. PennDOT’s funding needs must be addressed. Unrealistic union contracts and excessive patronage at the state’s mass transit agencies must be curbed.

It is a tough tangle of problems to be addressed with powerful competing interests at play. But, Pennsylvania requires an efficient transportation system to remain competitive in today’s economy. It is time for our elected officials to make the tough choices needed to fix the problem.

(Lowman S. Henry is Chairman & CEO of the Lincoln Institute and host of the weekly Lincoln Radio Journal. His e-mail address is [email protected].)

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