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Study: Pennsylvania Turnpike Is One of the Country's Least Cost-Efficient Toll Roads

Report shows that recent Democratic Caucus study on possible Turnpike Lease is "unusable" and "seriously flawed"

April 10, 2008

Los Angeles (April 10, 2008) - The Pennsylvania Turnpike is one of the country's least cost-efficient toll roads, spending a whopping 62.4 percent of its toll revenues on operating and maintenance costs. Of 35 toll roads studied, only the Massachusetts and West Virginia turnpikes spend a higher percentage of their toll revenues on operating costs, according to a new report by the Reason Foundation, a free market think tank that has advised the last four presidential administration on transportation issues.

By comparison, the New York State Thruway has 51 percent more lane miles and handles 83 percent more vehicle miles traveled than the Pennsylvania Turnpike, but its annual costs are $39 million lower.

Over the last seven years the Pennsylvania Turnpike's operating costs have more than doubled from $181 million in fiscal 2000 to $370 million in fiscal 2007. During that same time, the U.S. inflation rate was 23.4 percent, so the Turnpike's costs grew at 4.5 times the rate of inflation.

"Anyone who doesn't believe competition can make the Pennsylvania Turnpike a better, more efficient road is kidding themselves," said Robert Poole, co-author of the report and director of transportation studies at Reason Foundation. "The data strongly suggest that a world-class toll road operator could generate substantial cost savings-which means they could afford to pay a premium to the state to lease the Turnpike."

The Reason Foundation policy brief examines the recent report "For Whom the Road Tolls" written for the House Democratic Caucus, which suggested the state should not lease the Turnpike to the private sector.

Reason Foundation's review of that report finds major errors and concludes, "There are three major flaws in the 'For Whom the Road Tolls' study's financial analysis, which render its findings unusable as a basis for decision-making about alternate courses of action regarding the Pennsylvania Turnpike."

The Democratic Caucus report "ignores significant differences between investor-owned toll companies and public toll agencies," according to the Reason Foundation brief.

It also points out that "For Whom the Road Tolls" fails to make an apples-to-apples comparison of proceeds that would be generated from leasing the Turnpike and the proceeds expected from Act 44, the massive transportation funding law enacted in Pennsylvania last year.

Reason finds the Democratic Caucus study assumes, with complete certainty, that the ACT 44 plan to toll I-80 will generate $26 billion even though it is highly unlikely the federal government will approve the plan to toll I-80. If the feds reject this plan, as many observers expect, the only certain proceeds under Act 44 would be worth $7 billion, which is likely to be far less than what a Turnpike lease would produce.

"It is misleading and irresponsible for the Caucus report to treat the Act 44 revenue as essentially certain, while simultaneously downplaying the Turnpike's revenue potential in various lease options," Poole said. "By failing to accurately compare these options using the exact same traffic forecasts, time periods, and toll rates, the Caucus report's assessment is useless. To determine the full value of a Turnpike lease, the state should carry out the bidding process and select the highest bid that meets the public-interest requirements."

The Reason Foundation report also suggests that tolls on the Turnpike will actually be higher under Act 44, where toll increases will be unlimited, than under a lease with a private company, where toll increases will be legally capped by the long-term lease agreement.

"There is obviously a major opportunity at the Turnpike to make big efficiency gains," said Peter Samuel, editor of TollRoadsNews.com and co-author of the report. "Instead of focusing on raising toll rates and losing drivers, investors will see the Turnpike’s high operating costs as a major attraction and opportunity for greater efficiency.”

Full Report Online

The Reason Foundation policy brief, Pennsylvania Turnpike Alternatives: A Review and Critique of the Democratic Caucus Study, by Robert Poole and Peter Samuel, is online at www.reason.org/pb70.pdf.

Reason Foundation's transportation research and commentary is available online at http://www.reason.org/transportation/index.shtml.

About Reason

Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason produces respected public policy research on a variety of issues and publishes the critically acclaimed Reason magazine. Reason Foundation also produces Reason.tv, featuring short documentaries hosted by Drew Carey. For more information, please visit www.reason.org.

Contacts

Robert Poole, Director of Transportation Studies, Reason Foundation, (310) 292-2386
Peter Samuel, Editor, TollRoadNews.com and Senior Fellow, Reason Foundation, (301) 631-1148
Chris Mitchell, Director of Communications, Reason Foundation, (310) 367-6109



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