No Easy Solution to State Transportation Woes

No easy solution to state transportation woes

by Suzan Erem

Interstate 80 is at the center of a debate over how to fund desperately needed repairs to Pennsylvania’s roadways.

Photo by Andy Mazur

America’s highways and bridges are in dire need of maintenance and repair, but no one can agree on how to pay for it.

As Pennsylvanians wake up to the sad condition of their own roads and bridges, the debate rages about whether to fund the fix by tolling Interstate 80 or leasing the Pennsylvania Turnpike to private investors. But the 2006 commission created to address the problem didn’t recommend either of these solutions. Instead, the bipartisan Pennsylvania Transportation Funding and Reform Commission recommended the most straightforward solution to a public funding shortage: raise taxes.

"The real story about highway privatization is the unwillingness of governments to do the responsible thing and raise the money needed to pay for vital public infrastructure," Penn State Dickinson School of Law professor Ellen Dannin told Voicesrecently. “And the reason the politicians are unwilling to raise the revenues is that the public has come to believe that taxes are evil and that somehow things the public wants, such as good-quality education or safe roads and bridges, can be created at no cost.”

Penn State civil engineering associate professor Martin Pietrucha .

"The only way you’re going to get out of this scot-free is if you take the I-80 corridor and let it secede from the commonwealth," he said.

A lease or a legacy?

When Gov. Ed Rendell advocated leasing the Pennsylvania Turnpike to private investors in 2007, Harrisburg legislators responded by passing Act 44, which authorized tolling of I-80. But the act has drawn organized opposition from conservative think tanks and business groups all along the corridor.

Now, with vocal opposition in play, the governor has revived his proposal and is expected to make a new announcement in March. Meanwhile, state agencies are moving forward to implement tolls on I-80. But they have one more hurdle they didn’t expect: approval from the U.S. Department of Transportation. The department approved tolling currently free roads in two other states as part of a pilot program for innovative ways to generate revenue. But those states have not yet gained state approval.

When Pennsylvania went to the department with state approval in hand, things got complicated. U.S. Rep. John Peterson (R-Pleasantville) continues to actively oppose the proposal at the federal level.

Because federal funds are increasingly involved in such decisions, the U.S. Government Accounting Office weighed in on the matter in February.

"There is no ‘free’ money in public-private partnerships," the GAO stated plainly about privatization. "And it is likely that tolls on a privately operated highway will increase to a greater extent than they would on a publicly operated toll road."

The GAO accused the U.S. Department of Transportation of amplifying the benefits of privatization while downplaying the tradeoffs and potential costs to the public associated with a loss of control, lack of accountability and higher tolls.

Leasing a public entity to a private one, the GAO explained, reverses incentives for fiscal responsibility and accountability. The agency’s report reiterated concerns raised by the U.S. Public Interest Research Group in November 2007 that the apparent bounty gained by a lump-sum payment on a long-term lease often falls short of the value of the lease on several levels.

Private investors expect a good return on their investments. Therefore the private leasing system is geared toward low investment in maintenance, repair and wages, and high return in the form of the highest possible tolls the market will bear. Fewer but higher tolls may pay off for investors but force drivers to increasingly utilize free alternate public routes. This, in turn, would increase the cost of road maintenance for taxpayers.

Then there’s the organized opposition to privatization, including the Teamsters union, which represents thousands of workers on the turnpike.

"I’m committed to having the Pennsylvania Turnpike remain in the control of the state of Pennsylvania and the people who use it," said Jock Rowe, secretary treasurer of Teamsters Local 77. "If they lease the thing for 99 years, they’re never going to get back control of it."

In other words, Rendell’s lease solution is not a panacea.

Taking its toll

Dannin said highway privatization in other states has hardly been problem-free. In the case of an existing highway like I-80, installing tolls isn’t a simple solution.

"Tolls do not magically appear," she wrote in a December 2007 opinion piece for the Philadelphia Inquirer. "Before the first toll can be collected, collection infrastructure must be installed, and this will be expensive." Extra lanes, collection kiosks and more require an intensive outlay of capital before the first toll is collected.

The Pennsylvania Turnpike Commission has already considered these costs, according to materials supplied by the commission at a recent public hearing in Bellefonte.

"It’ll be complicated, and there’ll be an expense, but it’s certainly not as bad as people think it might be," said Pietrucha, who attended the hearing. He explained that the commission will build "barrier tolls" that run across the width of the highway, keeping engineering and construction costs to a minimum.

As for the impact on local commuters, the commission said it is researching ways to keep that to a minimum as well.

"Since tolls on I-80 will be collected at no more than 10 toll plazas, some free local movement will be possible between fare-collection points," explained Pennsylvania Turnpike CEO Joe Brimmeier in an October 2007 statement to the public. "Plus, the commission is considering more ways to reduce costs for frequent I-80 users, like commuters and others."

But trucks and others that now pass through Pennsylvania for free will start paying for the damage they do to the roads here. According to Pietrucha, one semi–tractor trailer is equivalent to 2,000 cars in the damage it does to the pavement.

The Teamsters’ Rowe agreed that it’s time they pay.

"I see trucks that get on I-80, and they don’t drop a penny in Pa.," he said. "At least if they pay tolls they may do some other spending while they’re here. Right now they get a free ride."

Additionally, the state will be able to take advantage of floating bonds to pay for the up-front costs, a low-cost financing option not available to private investors.

Is there any other way to pay?

But tolling and leasing weren’t the first options on the table. In November 2006, the Pennsylvania Transportation Funding and Reform Commission issued recommendations that seemed too tough to swallow.

They included:

• Raising an estimated $750 million through an 11.5-cent increase in the gas tax.

• Raising an estimated $150 million through an increase in vehicle and driver licensing fees.

• Providing an extra $65 million to local governments through an additional 1-cent increase in the gas tax.

These are options politicians loathe: raising taxes. That solution appears to have long gone down the highway to nowhere.

Yet that’s what leasing the toll roads would allow politicians to do without ever taking the blame, according to the authors of the Public Interest Research Group report, who heard it straight from the horse’s mouth.

"Potential investors claim that by outsourcing toll collection to a private company, drivers’ anger over the toll hikes will not be directed at the politicians who authorized the toll hikes," the report stated. "Moody’s bond-rating agency, after conceding that governments can generate these same up-front payments by borrowing against future toll collections without privatization, offers the counterpoint that, ‘If they pursue the option (without privatizing), governmental authorities must take responsibility for their own toll-raising decisions, rather than distancing themselves from these decisions through a long-term concession to a private entity.’"

But Pietrucha said not only is raising the fuel tax not politically expedient; it isn’t a long-term solution.

"They’re starting to shy away from the idea of using liquid fuel taxes, because they’re a flat tax not based on the price of the gasoline," he explained. "Right now, 50 cents out of every gallon is for taxes, about 31 for Pennsylvania and 19 for the federal government. So let’s throw another 11 cents on that. Say gas goes to $5 a gallon, and nobody’s buying gas. It doesn’t matter that you’re making another 11 cents, because nobody’s buying."

He said the leasing idea is still too new to judge, but a user-fee-based system is tried and true.

"Nobody’s going to be happy no matter how you try to tease out this money from the users, but historically that’s the thing that’s been the U.S. dictum: You use it, you pay for it, no problem," he said.

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