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Friday, August 15, 2008

I-80 plan relies on traffic growth, while drivers are driving less

Congressman Peterson, the lead critic of tolling I-80, makes an astute observation: the Turnpike Commission's financial model relies on I-80 traffic growing 2.5% annually. Yet a recent report and news stories highlight the fact that drivers are driving lass due to higher gas prices.  And that is without new tolls on I-80..

This 2.5% growth model was also used by the academics hired by House Democrats to do their own study (their model only expected 1% traffic growth if the Turnpike was leased to a private operator, with no justification for the different traffic models).

In addition to the questionable model of traffic growth, the heavy borrowing based on future revenue, mandatory payments to PennDOT, and no caps on tolls (on either I-80 or the Tunpike), increase the likelihood that tolls will increase even higher than the Turnpike Commission has promised. 

6 comments:

Anonymous said...

Won't the logic here, in regards to toll increases, apply to leasing the turnpike as well? Moreover, why would investors want to invest in the PA turnpike if, as you put it, drivers are driving less (am I missing something here)? Unfortunately, tolling I-80 or leasing the turnpike will create toll increases. We need to wash both ideas and be more creative.

Nathan Benefield said...

No - under a lease, Turnpike Tolls are capped.

I couldn't say what the bidders' model - which allowed them to bid $12.8 billion - projects traffic growth to be, and whether it is accurate or not.

But as far as taxpayers are concerned, it is irrelevant - again, tolls are capped, and if traffic grows more slowly than they (the bidders) expect, it means less profit (or even losses) for them. A lease shifts the risk away from taxpayers and onto the private operators.

Commonwealth Foundation said...

Of course the logic applies. The difference (a big difference) is who is at risk when gas prices increase or traveling miles decrease -- under a lease agreement, it is the private company; under Act 44 it is the toll paying and taxpaying public. The private company has to eat its losses. The Turnpike Commission HAS TO raise tolls or the General Assembly/Governor HAVE TO raise taxes. The lease agreement prevents the private company from being able to increase tolls because of declining Turnpike use. Not so under Act 44.

As for the investors, they've already put up the $12.8 billion. Why? Not really concerned, but they obviously believe the investment is worth it.

Would love to hear your "more creative" ideas. We think the lease is as creative as you can get in terms of paying for our transportation infrastructure with the lowest costs to taxpayers and the least disruption to the economy.

Anonymous said...

well, i would hope the bidders model is accurate (but, according to your referenced model [regards to drivers driving less] it is not), since they are willing to invest $12.8B (a very low bid). so, i would assume act 44 follows the same model as the bidders. come on selling american infrastructure is not ""more creative"" it is funny.

Commonwealth Foundation said...

How do you conclude that $12.8 B is a "very low bid"? Its not because you "think" its worth more. The marketplace determined the price and the state got the highest bid. However, what lowered the price was the restrictions placed on the bidder. If the private operator would have had the same "restrictions" (or lack thereof) as the PTC, the bid would have definitley been higher.

As for "selling american [sic] infrastructure", we're not for that either, but we know that's just one of the many misleading talking points used to protect the Turnpike Commission's honeypot of our money.

Increase Web Site Traffic said...

That scenario would generate about $180 million per year, enough to pay for a substantial expansion of I-80 to accommodate the anticipated traffic growth.
In the next 30 years it is said that maintaining the high way in a good condition will cost about $6.4 billion.

-Janine