Senate Republican Leader Chooses Turnpike Commission Over Taxpayers
Senate Republican Majority Leader Dominic Pileggi told the AP that he won't allow a debate or vote to occur on the Senate floor regarding the leasing of the Pennsylvania Turnpike.
While we knew the political challenges of stripping the Senate of its use of the Turnpike Commission as a patronage playground for placing political friends and family, we always thought that the choice between massive tax increases and bonded debt on the people of Pennsylvania would eventually be trumped by the financial benefits of earning interest on a multi-billion dollar lease payment.
But it is understandable why Pileggi and others like Rep. Markosek won't even bring the issue up for debate -- the benefits of the Turnpike lease will reveal the fraud they are perpetrating on the people of Pennsylvania by defending the Turnpike Commission and Act 44.
If this issue is as dead as these elected officials say it is, why not have a real debate and vote (and not the fast one Joe Markosek tried to pull in June).
34 comments:
Selling the taxpayers infrastructure is insane, unwarranted, and in our current economic state, silly. This foundation fails to realize that the invested lump sum (that is all we get) will run dry way before 75 years. Remember, it is not a sale just a 75 year lease, how silly. Does it worry you that two appointees and the governor would have control of the money, in addition? This foundation talks about Rendell’s spending, yet they support giving him over $8B to invest? Hmm, something is weird here…
This is the BEST time to take this offer of $12.8B. It was a seller's market then, and a buyer's market now. Guaranteed that amount would plummet if it were re-bid. In fact, that's why Abertis/Citi are saying they are taking their money off the table if this isn't done soon.
Control of the funds is a critical issue. But is something that could be dealt with in the process of moving legislation through the committees and to the floor. But since Pileggi and others refuse to even consider the proposal, how do you make improvements to the lease agreement? You can't. Furthermore, I somehow doubt that would get you off your Turnpike Commission talking points.
A turnpike lease delivers $37 billion more over 75 years - here is the breakdown. This doesn't include the amount spent on improvement on the Turnpike itself (~$11 billion).
Sorry, but you can't post false information in your comments to a blog that has put the facts out there repeatedly and expect no response.
The "facts" this site offers are one-sided. It is obvious that a conclusion was reached before the data was collected, not the proper way to conduct business. It is easier that way, don't you think?...
Do point out which facts are inaccurate and which facts you think are missing.
Here is a fact for you and your one sided anti-turnpike website.....Its is UN-AMERICAN to sell your infrastructure to foreigners!!!
Besides i would love to see the "Facts" of how much money that 8 or 9 bilion will make now in this market environment. Rumors are floating Citibank will be the next to roll over after the massive failure of our government to stop the Wall Street meltdown.
Thanks for making our point.
And, now would be the BEST time for PA to take the $12.8 Billion lease payment. We get the money to pay for our infrastructure on Day 1, and whatever happens to the investors is not the problem of the PA taxpayer.
The "Facts" on this website are very one sided. There is no mention of the very real costs associated with the lease proposal and no one seems to have considered the need to create a Constitutional lockbox to control the proceeds PRIOR to leasing the pike.
Statutory restrictions on the use of the money are as good as the next session of the GA and we cannot amend the Constitution while the enabling legislation runs through the committee process.
The real cost here is not the lost earnings on the 12.8, but the near certainty the GA will squander the 12.8. All the financial analysis I've seen ASSUMES the Governor and the GA will manage this money responsibly. Given recent history, that is naive in the extreme.
Which "Facts do you dispute if they are not Facts (without the quotes)? Sure they are "one-sided" because that's what Facts are, they are definitive and provable rather than just opinion.
There has been a discussion about protecting these monies, but we all know there are no guarantees in anything done in the political arena. You should also know that we've been encouraging lawmakers to be sure to include a Constitutional protection of the money -- but that won't happen if there's no opportunity to even move forward with the bill.
And the fear of the GA squandering money is a perpetual problem that will never go away as long as there is tax money to be spent by politicians. Whether it is through a lease payment or the bonded debt that will continue to be issued by the PTC, there's going to be money to be squandered. What's your solution to that? The belief that they won't get the money one way or another is truly naive.
Did anyone think maybe that the federal goverment wishes not to deal with the Rendell administration?Wait until the presidential election is over and we have a new transportation secretary in Washington and see how the PTC tolling apllication is viewed.Sorry Anti-turnpike supporters-the LEASE IS DEAD!
You're wrong about us being "anti-turnpike". In fact, we are so pro-turnpike that we want to maximize its value rather than squander it away with the political hacks currently running/ruining it. And this isn't a criticism of the employees but of the management!
You say "political hacks",Are you aware of the fact that the PTC's commissioners are appointed through the governor?Anything with the commonwealths stamp on it is ran by "political hacks" and therfore wastefull spending a "squandering" exist.The fACT is this- the PTC since its inception has made money in spite of its self and "political hacks".Act 44 could have been repealed the vote was there, but why didn't they?Because there is no other means to generate the revenue to meet the transportation deficit.Do you think the answer is a higher gas tax?I think not,especially now with the economy's state and people traveling less.You speak of "squander"-what is stopping the governor from the temptation of spending all the revenue generated from a lease deal if it was to go through.Please read the fine print from the pages of the "lease deal" with Albertis and see who is responsible for the deficits if the revenue is not generated as projected from their company.The answer- The Commonwealth of PA!
"Political hacks" = Joe Brimmeier. What experience in the transportation/toll road industry did he bring to the CEO position? NONE. The only road experience he had was driving Ed Rendell around for campaign fundraisers.
"Squander" = 4 employees per mile on the PTC while PennDot has only one employee per three miles.
"Made mone" = hardly. Not a penny of the hundreds of millions "made" by the PTC has been given to the Commonwealth. In fact, the PTC has been SUBSIDIZED by the taxpayers to the tune of $90 million per year. Now, with Act 44, the PTC is borrowing money to pay to PennDOT, all in a self preservation effort that will cost tollpayers millions more per year in higher and unlimited toll increases.
"Fine print" = Bold print is that the TAXPAYERS are on the hook for the PTC's bonded debt.
"Gas tax" = Not supported here. But staying with Act 44 and passing up the lease will leave that as the only other option to pay for our roads, highways, and bridges.
i thought the gas tax that is currently in place was to be used for roadwys and bridges? What happened to that money? the turnpike does not have their hands on that, the state does....or should i say Penn-Dot. why should the turnpike be sacrificed for the states inability to manage money? The turnpike at least is self sufficient and does not require a tax to pay for its own road. the state does so in taxes.....i think you are barking up the wrong tree. Four employees per mile......but they get the job done. look at the valentines day storm in which the whole state came to a stand still......except the turnpike.
Gas tax is paying for our roads highways and bridges, but it is a declining revenue (higher fuel efficient cars). PTC does have its hand in that, albeit a small portion.
The PTC's "self-sufficiency" is at the expense of toll payers. The PTC was the third least efficient toll road authorities among some 30-odd toll roads analyzed by the Reason Foundation.
BTW, it wasn't the whole state that was shut down at Valentines. And all privately operated toll roads were clear too across the northeast. So don't keep patting yourselves on the back for PennDOT's incompetence.
I know you don't agree with this but from what I've read on your website, you are very anti-turnpike. If the gas tax IS paying for our roads, highways and bridges, then why does PENNDOT need additional money from the turnpike? Why aren't the mass transit systems like SEPTA self-sufficient? Why isn't the Commonwealth Foundation questioning wasteful spending of taxpayer's money when it comes to SEPTA? Why do I have to pay a higher toll on the turnpike to support mass transit when I haven't been on a SEPTA bus since I was in high school? The fact is the Commonwealth Foundation is dead wrong by advocating a lease of the turnpike, especially to a company that's located in Spain. The Commonwealth Foundation should be SUPPORTING agencies like the turnpike NOT advocating their demise.
Please do make the distiction that we are anti-Turnpike-Commission, not anti-turnpike. In fact, we see the future of funding our roads to be more direct user fees, like tolls. So please differentiate between our dislike of the bloated, patronage-ladden, nepotistic, crony-driven Commission executives and not the road or the employees.
As for SEPTA and other transit issues, see our Policy Brief from 2007, Mass Transit Reform: Lessons for Pennsylvania, at http://commonwealthfoundation.org/policy-briefs/mass-transit-reform-lessons-pennsylvania
I want to know who is funding all the Anti-Turnpike billboards that are placed throughout the state that are linked to this website? This website is sooo Anti-turnpike it is sickening. Im sure this website is getting some pretty nice "kickbacks" for their Turnpike smear campaign. I know they arent doing this out of the "Goodness" of their own hearts!
I would also like to see how "wisely" the gas tax is being spent. Im sure it is not all going to where it is supposed to be going. You mine as well blame the Turnpike for mismanaging that too. I find it appauling that you state that other roads were open during the valentines day storm, when the state looked like "Bafoons" for leaving thousands of motorist stranded. If I do recall Pennsylvania made headline news on ABC....Nice!78 and 81 were shut down, and the Turnpike actually bailed out parts of 80 with road maintenance. What private toll roads are there in the Northeast Pennsylvania, besides the Turnpike?
Has the Commonwealth Foundation itemized political contributions by PTC or its allies to legislators, many of whom seem opposed to even debating the issue.
Has Commonwealth Foundation detailed lobbying expenditures of PTC?
As to GA and Governor misspending taxpayer money, the Commonwealth Foundation has been relentless, almost daily posts, of the fiscal irresponsibility of the legislature.
The one valid and cogent argument AGAINST leasing is that GA and Gov will misspend the proceeds; that is, also, a valid and cogent argument against the GA and Gov. taxing and spending most of the money allocated. The recent irresponsibility of voting on a budget knowing with reasonable certainty that there would be a revenue shortfall is a good example of that. On the other hand, to give the GA and Gov. their due, the PTC makes them look like prudent stewards of tax money.
Another Question. one poster said Turnpike is subsidized. Is that accurate? I find it hard to believe Turnpike loses money.
The fact that unions and PTC both oppose the lease is an argument for it.
Here's a post and chart on the PTC's subsidy from the Taxpayers: http://cfpolicyblog.blogspot.com/2008/05/turnpike-lease-to-save-taxpayers-87.html
On political contributions and total lobbying expenditures, no we haven't compiled those.
On the private roads in the Northeast that were operable in the Valentines storm (previous couple of posts, that should have said Midwest (the Indiana Toll Road that was hit by the same storm as that hit PA).
"Fact" that I strongly dispute: "We can pay interest or collect it."
That is nonsense.
Either we pay interest in a transparent manner via bonded debt, or we pay in via revenue forgone. There ain't no such thing as a free lunch. Your very own "Paying for our Paving" acknowledges the lease leverages our equity. And so it does, via a loan. I know of no other way to leverage equity. The loan is not free. AI is not going to give us 12.8 Billion dollars today without cost.
You've done a lot of financial analysis, all of which rests on the assumption the GA and the Governor will not squander the money. Have you made the general public aware of the lack of restriction on the lease proceeds or have you allowed them to believe there are adequate restrictions on the use of the proceeds?
You've elucidated the expense associated with bonded debt, etc. Have you elucidated the expenses associated with the lease? Why not?
If we have a ready means by which to restrict the use of the proceeds, ie a Constitutional Amendment, why have you not made that an absolute condition precedent to signing enabling legislation or this lease?
First, you need to be reminded that the PTC has NEVER made money for any government entity but itself. Indeed, it has been subsidized by the General Fund and through Motor License Fund (MLF) monies. Prior to the idea of leasing the Turnpike, the PTC had no intention of giving any of its revenue to the state (even with its plans to increase tolls by 25% in 2010 and 3% annually). Therefore, the argument of "forgone revenue" is moot. There was/is NO revenue that would be forgone. The only way the Commonwealth gains any value (leverages its equity in the Turnpike) is through a lease of the asset to an outside (non-Commonwealth entity). The so-called "public-public partnership" of the PTC fails to do this because it is not bringing in any outside capital -- its just the same old same old bonded debt.
This is not a loan either. It is an upfront payment in exchange for operating and maintaining the toll road for 75 years with strict limitations. A loan requires repayment, of which there is no repayment, and as explained above, there is no forgone revenue. So the argument that this a loan is simply false.
As for restrictions on the proceeds, we've been strong advocates for constitutional limitations. We are certainly encouraging that to be part of the process...if the issue ever gets a fair hearing in the General Assembly. Its pretty hard to set up constititional restrictions for something that doesn't exist. Further, there already is a constitutionally restricted fund that these monies could be deposited into ... the MLF.
As for lease expenses, what expenses have we not discussed? Of course there are transaction fees and expenses related to enacting such an agreement, but that's the nature of such transactions.
We obviously fear (and frequently expose) how our tax money is squandered in Harrisburg. That threat is always and will forever be present. The challengs is that we remain vigilant in holding our elected officials accountable. If there were another way, believe me, we'd be advocating for it.
Forgone revenue is only moot if you assume that we, our children, and our grandchildren are incapable of holding elected representatives accountable. I reject the premise.
Jack Markowitz cogently observed (http://www.pittsburghlive.com/x/pittsburghtrib/s_563020.html): "...Ohio's excellent highway was built and is operated by a public turnpike commission, too. Just an obviously better one."
There is no reason we can't do this.
Every thinking Pennsylvanian should see the revenue forgone as a tax on our collective inability or unwillingness to hold our elected representatives accountable, our inability to insist on performance.
With respect to the lease/loan debate: The label placed on the agreement is not determinative of the accounting treatment of the transaction. Economic substance determines the accounting treatment to be afforded the transation. The lease concession requires Pennsylvanians to repay the concession fee if we impair the lessee's interest during the lease term or if we manage to trigger a "compensation event." Whether you call this lump sum a loan or prepaid rent is irrelevant. We have an off-balance sheet, debt ceiling evading liability until the expiration of the lease term. Has this been explained to the people of PA?
In my view this is a loan because the up front payment was calculated by discounting the projected future cash flow. We are effectively accelerating the collection of future net income into the current period. We are effectively borrowing this money from ourselves, our children and grandchildren.
Morgan Stanley reported the projected future cash flow was discounted at a rate of 7%. Whether you call the up front payment loan proceeds or pre-paid rent, the discount is equivalent to INTEREST PAID. There ain't no such thing as a free lunch.
We can finance the reconstruction of our highways using transparent, bonded debt or we can use an opaque, impenetrable device to hide the true cost from the electorate.
I'd prefer to use a transparent method; the method that is subject to the constraints of rating agencies and the debt ceiling and is readily understood by virtually every member of the electorate.
Regardless of whether you believe this is a loan or prepaid rent, why have you not insisted on establishing a Constitutional Lockbox BEFORE granting authority to "lease" this asset?
You are so conflicted. On the one hand you don't trust government to do the right thing but on the other hand you do. Which is it?
You're right that we (PA) can and should have better government. But is running a toll road a necessary government function? And isn't it always better to utilize the private sector in delivering a public good at a cheaper price and higher quality to taxpayers?
Obviously we won't agree on your defining a lease payment as a loan. So no need to keep beating that issue.
Bonded debt is no more transparent than a lease payment. Granted, the lease payment is predicated on future cash flows...that's how the private sector valued its worth. However, the bonded debt projected by the PTC to do it your way will leave upwards of $37 billion on the table. Even if you cut that in half, the taxpayers are still losing big time value through the bonded debt route.
As for calling for a constitutional lockbox, which we have, there's no way to have one in place BEFORE accepting the offer (it will take years for the amendment process). However, given your desire for government to remain as the direct operator of the Turnpike, it doesn't seem to matter to you whether or not there's a "lockbox" at the end of day.
I don't trust the government. PERIOD.
Placing 12.8 BILLION unrestricted dollars into their hands is the epitome of irresponsibility.
Put a lockbox in place BEORE leasing the pike, I'll ignore the rest of the defects.
As it stands, the cost of dismantling the PTC using this method is just too high.
I don't trust the government. PERIOD.
Placing 12.8 BILLION unrestricted dollars into their hands is the epitome of irresponsibility.
Put a lockbox in place BEORE leasing the pike, I'll ignore the rest of the defects.
As it stands, the cost of dismantling the PTC using this method is just too high.
Everyone knows including the Commonwealth Foundation, that the lease payment will NEVER be protected by a state constitutional amendment. Your anti-turnpike commission vs. for the turnpike lease is splitting hairs. What will happen to the turnpike employees under a lease? Sure the leasing company will have to abide by the current CBAs. But what happens when they expire in just a few short years? Hard working men and women who have families to support will be out of a job. Or will get to keep their jobs with a great reduction in pay and benefits. It seems to me the Commonwealth Foundation doesn't care one bit about what happens to them. As long as SEPTA and the other mass transit agencies across the are funded, at the expense of the turnpike commission is just fine with the Commonwealth Foundation.
If you're depending on being a toll-taker forever, you better start looking around to see the writing on the wall. Toll roads around the world are going electronic, even the PTC (which may not tell you up front) knows this is ultimately where they are going.
As for mass transit, try reading our materials to see where we stand before showing your ignorance.
See where you stand on mass transit. Let me ask you this, do you have an entire website dedicated to the pit falls and waste of taxpayer money concerning public transit, complete with videos and TV commercials in the same manner you have with your anti-turnpike commission site? If so please direct me to the website(s).
I get it, The Commonwealth Foundation is anti-worker and very anti-turnpike commission. That is very clear from your website. Would you rather turnpike employees went on welfare after privatization rather than contribute to society by working and paying taxes?
As soon is there is a serious proposal to use public private partnerships on mass transit, we'll be the first to be educating people about the benefits. Until then, we'll put our energies toward the PTC.
Ok....lets take the Turnpike Commission out of the equation....which is what you call your beef. How could you let the Turnpike in which the state you live in fall in the hands of another country? How can you possibly live with yourself by promoting a lease to a foreign country, in which the Country you live in has given you the opportunity of freedom of speech and press? Do you realize that there are kids being killed in IRAQ to defend our country, while you sit behind a computer and promote the selling of our states asset to another country. I dont get it. I think you should be forced to go to IRAQ and maybe you will have a better understanding on what it is to be proud of your country and defend it.....not sell it. There is too much of our country going down the drain, and you want to add to it.
Post a Comment