Former Manager Sues PA Turnpike Commission for Political Firing

A former manager for the Pennsylvania Turnpike Commission is suing the agency for wrongful firing, claiming he was let go because of his lack of political connectaions, the Post-Gazette reports.

Donald Kovac claims he was fired for refusing to reinstate a toll collector who assaulted a motorist (and was captured doing so on video).  With pressure from the Teamsters, then chairman Mitchell Rubin - since forced to resign due to an ongoing FBI investigation and his wife's conviction - gave the order to fire Kovac.

It gets better.  How do think Kovac was told he was being fired?

On Nov. 20, Mr. Kovac said, he was driving a turnpike-owned car that had been assigned to him when he was pulled over by a state trooper and told he had been fired.

Given the depth of corruption of political patronage at the Turnpike Commission,  I didn't think much would surprise me - but getting pulled over by police to get a pink slip rather than a speeding ticket is bizarre.

Lessons from the Failed PA Turnpike Lease

The Pew Center on the States has a new report out offering lessons to Pennsylvania and other states on the proposed deal to lease the Pennsylvania Turnpike (full report here), noting that private funding for roads remains a likely, and necessary, scenario for future infrastructure needs.

They point out the lack of communication between the executive branch and the legislature, and "rosy scenarios" for investment returns.  Hence, they recommend that state legislatures take the lead in development parameters for a lease deal (which I feel like I said over and over again) and using more realistic financial assumptions.

If only there was an organization who had said these things before the fact.

Musical Chairs at Pennnsylvania Turnpike

Governor Rendell has promptly dumped Mitchell Rubin as chairperson of the Pennsylvania Turnpike Commission and replaced him with Michael Pratt of Pepper Hamilton LLP.  Toll Roads News has more on the firing. 

Meanwhile, the Allegheny Institute notes that Pennsylvania's transportation funding plan continues on the expectation that I-80 will be tolled in a couple of years, despite the federal government's rejection of that plan. 

Pennsylvania Turnpike Chair Target of FBI

KYW Radio reports that Pennsylvania Turnpike Commission Chairman Mitch Rubin is now the target of an FBI Corruption probe.

This should not be a surprise, following the conviction of Rubin's political patron, former Senator Vince Fumo, and his wife, Ruth Arnao, as Rubin sits in the center of the Turnpike Family Tree (available at TurnpikeFacts.com).

Brad Bumsted has more on how Rubin's position may be in jeopardy.  The continued legacy of corruption at the Turnpike Commission - along with increased debt, higher tolls, and declining revenues - raises more questions about what the General Assembly should do about the agency.   We have some recommendations, including ending the practice of no-bid contracts and eliminating the commission altogether. 

Pennsylvania Turnpike Tolls up 25%

Drivers are waking up to higher tolls on the Pennsylvania Turnpike this week - a 25% increase in tolls went into effect Sunday.  Some of the news stories are trying to provide a bit of reaction of drivers; others are editorializing on how truckers and motorist will be harmed by higher tolls.

I am a bit curious to see exactly how drivers will react, and how many were aware of the toll increase.  While we have been writing about the plan to increase tolls since the plan was enacted, the Turnpike Commission has focused attention on the myth that the proposed Turnpike lease, and only the lease, would result in higher tolls.  I suspect many of the facts about Act 44 were drowned out by this barrage of propaganda.

Pennsylvania Senate GOP has Turnpike Lease Study

An analysis of potential Turnpike lease by Moody's, commissioned the the PA Senate Transportation Committee, was released yesterday. Their findings are that a Turnpike lease might be beneficial, that $12.8 billion is a fair price, all things considered, and that price would yield about $590 million annually for the state. From the report summary:

A compelling argument can be made that a turnpike lease could be constructed to benefit both the Commonwealth and a private operator. Notably, by shifting the Commonwealth’s turnpike resources into other assets, the state government's overall fiscal condition would be less sensitive to fluctuations in economic activity. Likewise, a private firm with holdings in other countries and states could invest in the turnpike in order to diversify its assets and shelter them from risk. ...

By factoring in assumptions about future inflation and interest rates, turnpike profits over time can be translated into their current cash value. The present value of a 75-year lease of the turnpike is estimated at $16.55 billion. However, a private firm bidding for the lease would not be willing to offer the full value of the asset. The private operator would also need to be compensated for taking on considerable risk. ...

Under the baseline scenario of a $12.8 billion gross bid invested in a fund structured to match that of the Pennsylvania State Employees’ Retirement System, $590 million per annum in infrastructure spending could be supported over the lifespan of the lease.

The estimate of $590 million annually is pretty much in line with our estimate (and doesn't include taxes paid, savings on payments to the Turnpike Commission, or the cost of state policy) - and significantly higher than the Turnpike Commission's payments under Act 44, absent I-80 tolling.

This study was largely a waste of taxpayer dollars, as it contains little information you couldn't get at TurnpikeFacts.com. And if Senators were waiting for these findings, that is unfortunate, as the Turnpike Commission continues to go deeper into debt.

If the Senate is serious about considering a Turnpike lease in the new session - and we have reasons to be skeptical of that - we have some recommendations of how to proceed.

Turnpike Commission Cutting Work Force

Following traffic and revenue declines, the Pennsylvania Turnpike Commission announced it will be reducing its staff size starting with a "voluntary departure program", with layoffs to be next.

Curiously, one of the Turnpike Commission's lines against a Turnpike lease was that an "evil, for-profit" company would cut workers., while they would protect them.  We have noted the Turnpike Commission's bloated payroll in the past, so cutting staff is certainly part of being more efficient - but I doubt we will see cuts in the number of politically appointed managers (nearly 1 per mile of roadway now), expenses for bond lawyers,  perks for Joe Brimmeier, and the like.

Two more questions:
- Will the 25% increase in Turnpike tolls in January exacerbate ridership declines?
- Sam Smith raises the question of whether the Turnpike Commission be allowed to go deeper into debt at a time when they are unable to meet their current operating costs?  As we have pointed out, the borrowing plan under Act 44 creates a massive amount of new debt, and the Turnpike Commission is continuing to borrow based both on revenue growth and on the presumption of tolling I-80.   

Leasing Toll Roads, Airports, and Parking

There are several stories on privatization in the news lately on a number of fronts. First up is in the real value of toll roads - which should be read by Pennsylvania residents and lawmakers of all mindsets:

• For those who think the Turnpike Commission can simply re-submit their proposal to toll I-80 (basically the same people who thought they would get approval in the first place, even though we told them they wouldn't): The Federal Government is revising the rules so that no state can do a tolling plan like Act 44 without a "fair market valuation" of the road, and would allow for public agencies to compete with private firms in bidding on such deals.
  
• For those who think "re-bidding" the Turnpike lease will fetch a bigger pot: Toll Roads News is reporting that analysts think Abertis overbid on the Turnpike lease - pegging its value at $11 Billion - and that Abertis is better of without the deal.
  
• For skeptics of toll road leases: The Weekly Standard has an article touting the success of the Indiana Toll Road lease.
  

On another front, Chicago - which was the first in the US to lease an existing toll road - has finished the details of a 99-year, $2.5 billion lease of Midway Airport. Reason's Out of Control blog has more on the deal. There is also a story on Toll Roads News, which notes that Citi was one of the big investors. As readers will note, Citi had planned to pour a few billion in to Pennsylvania for the Turnpike, but let that bid expire shortly before the Midway deal went through.

Finally, here is an update on the proposal to lease the Harrisburg Parking Authority's parking garages.

No immediate fiscal crisis?

The Pittsburgh Tribune-Review reports on the drop in transportation funding due to the rejection of the Turnpike Commission's I-80 tolling plan.

Under Act 44, the Turnpike Commission will borrow billions to pay PennDOT hundreds of millions each year. Had the I-80 plan been accepted, the Turnpike Commission would have paid $500 million for highways and bridges and $400 million for mass transit systems after fiscal year 2010. But with the rejection of the I-80 tolling plan, those payment drop to $200 million for highways and $250 million for transit.

Some in Harrisburg think they've got time to deal with this problem.

"There's no immediate urgency," said state Rep. Joe Markosek, a Monroeville Democrat who chairs the House Transportation Committee.

and

"There is no immediate fiscal crisis, so there is no reason to jump into the sale of the turnpike at this time," said Erik Arneson, a spokesman for Senate Majority Leader Dominic Pileggi, R-Delaware County.

However, all of this time is borrowed time and borrowed money by the Turnpike Commission. Can they pay it off with toll increases of 25% in January 2009 and 3% increases thereafter? Time will tell. If they can't, tolls will have to go up even further to generate even less money than the $12.8 billion lease.

Will rejectors regret inaction on turnpike?

Morning Call editorial blasts lawmakers for failing to even consider a lease deal:

Once again, the small-idea, under-achieving Pennsylvania Legislature has let down the people they serve.

The Scranton Times echoes that sentiment:

The $12.8 billion offer now on the table was made in an open bidding process. It was a case of the market stating definitively the value of the turnpike.

And the unfolding global credit crisis could affect the future of the turnpike in another negative way if the Legislature refuses to act on the existing offer.

If the offer expires, the market might well take a lesser view of the turnpike’s value simply because adequate credit might not be available to an entity making a bid in the future. The current offer is guaranteed.

Rep. Frank Andrews Shimkus, a Lackawanna County Democrat who opposes the lease, said recently that there is nothing in the lease deal that the state cannot do by itself.

Ah, but there is — the state cannot operate the turnpike with the same level of efficiency as a private company. The Pennsylvania Turnpike Commission, which should be disbanded regardless of whether a lease is achieved, itself is an expensive redundancy.

Last but not least, the Citizens Voice calls the delay a risky bet.

Some Senate Republicans have said they will not consider the lease plan until the new session of the Legislature convenes in January, and that they might move to rebid the project.

That is a colossal spin of the dice. The global financial crisis probably will tighten credit across the economic spectrum, thus producing lower, rather than higher bids.

If that happens, Pennsylvania will be saddled with a massive backlog of unfunded highway infrastructure projects and no alternative plan to fund them.Some lawmakers have estimated the turnpike’s lease value to be higher than the $12.8 billion bid, but that bid was the result of an open, competitive bidding process in the marketplace — the definitive test of value.

The Legislature should move on the turnpike lease not only to lock in the price and avoid losing the deal to the financial crisis, but to use the resulting infrastructure projects to help stimulate the broader economy.

$12.8B lease opportunity is all but lost

The opportunity to plug a massive transportation funding gap will be lost because of legislative inaction. Although Gov. Rendell plans to try to revive the turnpike lease in 2009, one has to wonder if both the capital and transportation companies will be there to deal with Pennsylvania policymakers again. (We sure would understand why they would take their business elsewhere.)

Here are stories in the Pittsburgh Tribune-Review and Harrisburg Patriot-News on this lost opportunity.

Turnpike Lease Bid expiring - what now?

With the Turnpike lease bid expiring - and indications are there will be no extension of the $12.8 billion bid - both Governor Rendell and some lawmakers have indicated the intent on rebidding a lease deal in early 2009.  To go forward, legislators should:

1. Legislators must take the initiative:
   a.   For such a bid to be taken seriously, legislative action will have to precede the bid process; it cannot be driven solely by the Governor.  Legislators should lay out precisely what the terms will be on aspects of toll limits, retaining current employees, maintenance requirements, bid process, and other aspects.
   b.   Constitutional limitations on the lease money—limiting it solely to transportation infrastructure—should be passed in advance of a lease deal.
2. Repeal Act 44 and stop the Turnpike Commission’s’ borrowing.  As we have mentioned, the Turnpike Commission will continue to borrow to pay their Act 44 requirements.  This new debt obligation will likely force them to raise tolls at a rate faster than the 3% annually they are promising (which follow a 25% increase in January).
3. Require competitive bidding on all bond work and pass Turnpike Commission reforms and/or fold the Commission into PennDOT.  Reforms dealing with hiring practices for Turnpike Commission jobs to eliminate patronage and nepotism, along with requiring competitive bidding on all bond contracts should be passed immediately.  Eliminating the Turnpike Commission and moving Turnpike operations under the fold of PennDOT would be a positive step.
4. Embrace Public-Private Partnerships on new transportation projects.  Bills such as HB 555 (Rep. Geist) and SB 1158 (Sen. Madigan) would allow PennDOT and local governments to engage with the private sector on new projects (new roads, bridges, express lanes, etc.).  These projects will bring the efficiency of the private sector and help fund our transportation infrastructure.  The Turnpike Commission already has the authority to engage is these arrangements, and is taking bids to complete the Mon-Fayette expressway.

Legislators should do their jobs

The Altoona Mirror takes legislative leaders to task for failing to do their jobs:

Senate Republican leaders - President Pro Tem Joe Scarnati and Majority Leader Dominic Pileggi - are among the latest to come down with the ailment of do-nothing-itis.

The Senate's top two said Friday that a proposal to lease the turnpike to a private consortium will not be approved this year. Pileggi was quoted as saying there wasn't support for taking up the matter, ''And we should not rush into such a major policy decision under some sort of artificial deadline.''

Rush? A firm offer of $12.8 billion to lease the turnpike for 75 years has been on the table since May 19 with virtually nothing happening in the Legislature. A dead snail probably could have made more progress than the well-compensated officials who are supposed to be taking care of the people's business.

And in case there's any confusion on the part of legislators: Worrying about how to pay for transportation needs is the people's business.

Things aren't much better in the House. Transportation Committee Chairman Joe Markosek and Majority White Keith McCall have whistled the lease plan dead, and Majority Leader Bill DeWeese suggests waiting until next year and trying again to get permission to toll I-80.

Talk about "leadership inaction."

Since these legislators think waiting on a potential lease deal is no big deal, it's a shame we can't wait to issue their next paychecks until next year. Perhaps then they might consider the matter a little more pressing.

While people may disagree about whether leasing the turnpike is a good idea, it's an idea that deserves thorough debate and a vote - especially when there is an offer on the table and the current transportation funding plan has been nixed by the feds.

Transportation funding options

The Derrick in Clarion provides a good synopsis of Matt Brouillette's presentation on Pennsylvania's transportation funding situation.

What isn't covered in the article was the discussion about the other options on the table for lawmakers to fill the $1B funding gap: 1) Reprioritize current spending; 2) Increase gas taxes by 15 cents or more per gallon (a penny raises ~ $63-65M); and/or 3) Increase vehicle fees -- all of which are unlikely to be done in Harrisburg any time soon.

"Leasing Turnpike Jeopardizes Safety"

... so said a commentary distributed by the Susquehanna Valley Center (see below). Either they didn't bother to read the lease agreement or they are intentionally trying to mislead the public with unfounded fears. We wonder which one, particularly since the head of the SVC is a professor at public university who we would hope is teaching students about accuracy and intellectual integrity.

Here's the relevant section from the lease agreement...

Section 3.18 Police, Fire, Emergency and Public Safety Access Rights. Notwithstanding any other provision of this Agreement, at all times during the Term and without notice or compensation to the Concessionaire, any police, fire and emergency services and any other security or emergency personnel, including the armed forces, and any Governmental Authority with jurisdiction over the Turnpike, shall have access to the Turnpike as necessary for emergency management and homeland security purposes, including the prevention of, practice drills for, or response to, a public safety emergency. The Concessionaire shall cooperate with police, fire and emergency services and any other security or emergency personnel, including the armed forces, in respect of such emergency management and homeland security purposes. Further, in connection with the declaration of a state of emergency by the Governor pursuant to the Emergency Management Services Code (35 Pa. C.S.A. § 7101 et seq.), the Commonwealth may designate the Turnpike a toll-free public highway to facilitate evacuations or for any other emergency purpose. The length and scope of any such emergency declaration shall be governed by 35 Pa. C.S.A. § 7301(c); provided that the Commonwealth, notwithstanding anything contained herein or in 35 Pa. C.S.A. § 7301(c), shall use its reasonable efforts to minimize (i) the duration and scope of any such declaration and (ii) the adverse impact that any such declaration may have on the Turnpike Operations.

---

From: susvalley [mailto:susvalley@susvalleypolicy.org]
Sent: Mon 9/22/2008 3:12 PM
To: Matthew Brouillette
Subject: Leasing Turnpike Jeopardizes Safety

SUSQUEHANNA VALLEY CENTER POLICY BRIEF
www.susvalleypolicy.org
www.voiceofpa.net

LEASING TURNPIKE JEOPARDIZES SAFETY

By Carolyn Welsh

When disaster strikes, emergency responders often need to quickly travel great distances to assist the injured, contain the damage and investigate the cause. In many counties throughout Pennsylvania, emergency responders rely on the Pennsylvania Turnpike to connect them with people in need. That is why emergency service providers across the Commonwealth are opposed to any proposal to lease, sell or privatize the Pennsylvania Turnpike to a private contractor.

The turnpike is a Pennsylvania asset that we just cannot lose. The office of sheriff is a full partner in law enforcement in Pennsylvania, responding to all types of emergency situations, including accidents, natural disasters and criminal activities. Our deputies receive extensive law enforcement and first responder training. Sheriffs' offices often rely on the Pennsylvania Turnpike to respond to emergencies, as well as transport prisoners and serve warrants. Each year, 150 million vehicles use the Pennsylvania Turnpike. Emergency service providers respond to life-and-death calls along the 514 miles of the Pennsylvania Turnpike. In return, the turnpike compensates the emergency service providers through agreements between the organizations. Many of these associations rely on this revenue to fully serve the public safety needs of their communities.

State lawmakers need to consider these critical points as they review any proposal to privatize this Pennsylvania asset. First, there is no guarantee that a private operator will honor the commitments with emergency service providers. A private operator would have an incentive to drop the service commitments in an effort to create as much profit as possible for shareholders. As a public safety official, I am concerned about how we effectively respond to emergencies or disasters. In the event of a natural disaster, environmental accident or a terrorist attack, it may be necessary to move large numbers of people from one region of the state to another. The turnpike, as a limited-access highway, can become a one-way evacuation route by closing the ramps and forcing traffic to go east or west, north or south. The rest stops can be turned into emergency areas where food, water and medicines are dispensed.

Again, the turnpike is a Pennsylvania asset we cannot lose. The turnpike is also taking advantage of new technology to make the highway safer. The turnpike is using a cutting-edge video and data system to provide instant information to emergency responders, as well as signboard and radio alerts to drivers. The more information first responders have when they arrive on an emergency scene, the better they can help the injured and protect themselves in dangerous situations.

The turnpike's investment in technology shows its commitment to the public. There is no guarantee that a private company, which must first consider the profits for its shareholders, would make this type of investment in safety technology.

As a publicly owned and publicly managed asset, the Pennsylvania Turnpike has proven its commitment to public safety by investing in technology and reaching agreements with emergency service providers across the state. Emergency responders have no expectation that a private, overseas-based operator would share the same commitment.

We need to keep the Pennsylvania Turnpike a public asset dedicated to public safety. Let's not risk our ability to save and protect lives by handing over this major transportation asset to a private company.

(Chester County Sheriff Carolyn Welsh is the first vice president of the Pennsylvania Sheriffs' Association. She was recently awarded the 2008 Crime Prevention Award presented by the Pennsylvania Commission on Crime and Delinquency.)

Indiana Toll Road private operator eliminates tolls to help in flood

Despite not being required to by the lease agreement, the private operator of the Indiana Toll Road -- an "evil foreign" consortium of Spanish and Australian companies -- suspended the collection of tolls to help with traffic being diverted off of flooded state-operated highways.

Read more at TollRoadsNews.

Gas tax increase coming instead of Turnpike lease?

Pittsburgh Tribune-Review says Rendell is looking at a gas tax increase in light of the refusal of legislative leaders to consider the lease.

"To make up the shortfall, we're looking at a gas tax increase," said
Rendell spokesman Chuck Ardo. "Where else are we going to find the money for the
shortfall in transportation funding?"

While we know there are lots of places to make up some of the shortfall -- such as repealing prevailing wage and using competitive contracting in mass transit -- the gap between needs and potential cost savings is too great. Of course, if the General Assembly and Governor were willing to cut spending elsewhere -- which we've also recommended time and time again -- then we could reprioritize state spending. And what do you think the chances are of all those things happening?

Well, we obviously think higher gas taxes, more bonded debt, and the preservation of the Turnpike Commission are most likely to be the outcome if the lease doesn't go through. And it is why we believe the lease makes the most economic and public policy sense.

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).

Supporters Argue for Turnpike Lease

ABC 27 News story on the Turnpike Lease, featuring the motley crew of supporters: Matt Brouillette, Gov. Ed Rendell,  Howard Yerusalim (former PennDOT Secretary under Bob Casey) and Rep.Dan Moul.



Here is the second video, featuring the opposition.

Scarnati's "Save the Turnpike Commission" Plan

In an obvious attempt to divert attention from his vote and support of tolling Interstate-80, Senate President Pro Tempore Joe Scarnati writes today in a Courier Express commentary that

"I, like many of you who opposed the tolling of I-80, was pleased with the decision and felt it was the appropriate decision for the citizens of the Commonwealth. It really speaks volumes to the success that can be experienced when state and local leaders work together for what is in the best interest of our communities."

But his flip-flop on supporting the Save-the-Turnpike-Commission Act 44 -- and then taking credit for getting the I-80 toll plan rejected -- fails to offer any real solutions to our transportation funding crisis. Indeed, Scarnati's plan is just rhetoric that merely serves the Senate's primary interest of saving their patronage playground at the Turnpike Commission.

Like a few folks in the House, he suggests that the General Assembly and Gov. Rendell "rein in spending, make infrastructure a priority and find much of the revenues for our road and bridge problem in the current state budget."

We agree that there is plenty of wasteful spending that could be cut -- we've identified billions. But what cuts does Joe propose? Which revenues is he going to shift? None. As the leader of the Senate at the bargaining table with Rendell for the last two years, he's had the opportunity to cut spending and shift spending priorities -- and he hasn't.

The fact is that the Turnpike lease makes good economic and public policy sense, and is the only viable means to help pay for our paving without tax increases or more bonded debt. But we should also be cutting wasteful spending AND re-prioritizing the spending in Harrisburg.