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Act 44 alone won't raise enough money for transportation
By Matthew Brouillette and Leonard C. Gilroy, AICP
Pennsylvania lawmakers should reconsider the money they left on the table earlier this year after rejecting Gov. Rendell's initial plan to lease the Pennsylvania Turnpike to a private-sector partner. Such an agreement could generate billions of dollars needed for transportation infrastructure and transit systems without raising taxes, adding tolls, or incurring more taxpayer debt.
Amid increasing doubts about the viability of Act 44 of 2007 - the law that permitted the Pennsylvania Turnpike Commission to raise money by putting tolls on Interstate 80 - the governor will soon announce a short list of teams that will make multi-billion-dollar bids for a potential turnpike lease.
Last month, 34 financial, engineering and management companies submitted 14 proposals to the Pennsylvania Department of Transportation, for operating the turnpike. If Rendell obtains a high-enough bid, he plans to take that offer to the General Assembly for consideration. The legislature would do well to give the idea serious thought this time around.
Increasing public backlash to Act 44 has prompted Rendell to revive his turnpike-lease plan. To begin with, Act 44 fails to address the identified annual transportation funding need of $1.7 billion. Despite billions in new bonded debt, higher turnpike fees, new tolls on I-80, and no plan to achieve meaningful congestion relief, Act 44 provides less than half the money needed to repair and maintain transportation infrastructure.
Additionally, Act 44 is predicated on federal approval for tolls on I-80, an outcome in doubt given recent communications from federal officials to the turnpike commission, and Act 44's failure to comply with federal rules on adding tolls to interstates. If the turnpike commission is denied permission to add tolls to the 311-mile road, then the shortfall in revenue for infrastructure only grows. And the people of Pennsylvania will be on the hook for the billions in bonded debt incurred by the turnpike commission.
Lastly, from a "good government" perspective, it doesn't make sense to reward the turnpike commission with even more power, size and authority. The commission is hardly a model of transparency, accountability and efficiency. Indeed, its long history as a patronage playground for the Pennsylvania Senate is well-documented.
By contrast, a properly written lease of the 514-mile Pennsylvania Turnpike under a public-private partnership would drive out the corruption and waste of the turnpike commission while generating a large infusion of privately raised capital, eliminating the need for more debt, more fees and more taxes. Under a lease agreement, the state could hold its private-sector partner to high and rigorous standards through a performance-based contract. If the company failed to comply with the terms of the agreement - whether related to snow or road-kill removal, maintenance requirements, or road-widening projects triggered by high traffic volumes - it could be financially penalized or even stripped of its contract.
Projections suggest that a lease could generate at least $1.7 billion annually - the amount needed to close the long-term funding gap. The final amount, of course, will not be known until the bids are in.
Indiana decided it wanted to fully fund its long-range transportation plans through a public-private partnership on the Indiana Toll Road. After reaping nearly $4 billion for the lease of the 157-mile highway, the state reinvested that money into transportation infrastructure projects. Today, the Hoosier State is the only one in the nation with a fully funded, statewide transportation plan. Because of this one public-private partnership, Indiana will be able to expand and modernize its transportation network and confront its major challenges in moving people, businesses and goods into, out of, and around the state.
Regardless of how the Act 44 issue plays out, Pennsylvania is at a crossroads. Business as usual - higher taxes, higher fees and higher debt - will not deliver the infrastructure that could meet the transportation needs of the 21st-century economy. Policymakers need to embrace a new paradigm for highway funding and operation, and teaming with the private sector offers that. Even better, it does so without more debt or tolls on I-80.
Matthew J. Brouillette is president of the Commonwealth Foundation in Harrisburg, PA (www.CommonwealthFoundation.org). Leonard Gilroy is director of government reform at the Reason Foundation in Los Angeles. An archive of Gilroy's work is here. Reason's transportation research and commentary is here.
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