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Lease the turnpike
It's the best way to finance improvements to Pennsylvania roads, bridges and transit
Friday, July 18, 2008

The state of Pennsylvania has urgent transportation needs. Unfortunately, the Pennsylvania Turnpike Commission and some of its allies are trying to stifle debate on what is the best course to fund improvements to our roads, bridges and mass transit.


Jim Courtovich is a senior adviser to Pennsylvania Transportation Partners, which was formed by Citi Infrastructure Investors and Abertis Infrastructures to operate the Pennsylvania Turnpike if the companies are awarded the operator's lease.

Pennsylvania Transportation Partners' $12.8 billion bid to manage the turnpike is the right step to get there. Not only would Pennsylvania receive upfront money to help meet its transportation needs but an additional $11 billion would be invested in the turnpike itself. There's more -- PTP would pay significant state corporate tax, a tax not paid by the turnpike commission.

We believe Rep. Joe Markosek, D-Monroeville, who chairs the House Transportation Committee, when he says he favors public-private partnerships but wonder why he then questions the motives of private investors in the lease of the turnpike ("Forget the Turnpike Lease," July 16 opinion article). The public would benefit from improved bridges, roads and transit and the investors would benefit from modest returns on their substantial investment.

PTP is planning a statewide education campaign over the next few months so consumers in the commonwealth -- the people who actually drive the roads -- can fully understand the lease proposal and its benefits to them.

The fact no one can dispute is if Mr. Markosek gets his way and the lease is turned down, the $12.8 billion is going to come from Pennsylvania taxpayers and those driving on the turnpike and I-80. There is no other source for the turnpike commission to tap.

In response to the specific assertions made by Mr. Markosek, we offer the following facts:

• The net economic value of the proposed lease is close to $23 billion. This includes the $12.8 billion upfront payment, the largest-ever private investment of its kind, and $11 billion in capital improvements to the turnpike. When Mr. Markosek discounts $2.5 billion of the upfront payment because it will be used to pay off the commonwealth's infrastructure debt, he is suggesting that shifting that debt service burden to Pennsylvania taxpayers is preferable to having it funded by private investors.

• The assertion that funds provided by Act 44, enacted last year as a stopgap measure to meet transportation funding needs, would be greater than those under the proposed lease is false. Act 44 depends on the tolling of I-80, which has not yet met with federal approval, making it far from a sure thing. Under Act 44, the commonwealth would be highly vulnerable to future risks, including those related to financing improvements at a time of economic uncertainty, increasing construction costs and the likelihood of a downturn in revenue as fewer drivers use the turnpike due to rising fuel costs.

• The projected 12 percent return on the $12.8 billion investment is based on a 20-year average. The Legislature would work with the governor to determine the most appropriate mechanism for allocating the money this investment would earn.

• The lease agreement would limit toll increases. The investor group would earn profits by more efficiently managing the road. The turnpike commission, on the other hand, has unlimited authority to increase tolls when it needs to generate cash flow. If there is an increase in finance costs, decrease in traffic or increase in construction costs, the turnpike commission would have to increase tolls to meet the aggressive annual payments promised under Act 44.

• Mr. Markosek questions the accountability of private investors, but PTP would be motivated to improve turnpike customer experience, safety and service. The lease agreement ensures accountability and provides for regular auditing and monitoring, with the $12.8 billion up-front payment at stake.

The headline of a recent Barron's article says it all: "The Keystone State would be better off if it went ahead with a plan to lease the Pennsylvania Turnpike to an investor group."

Pennsylvania's roads and bridges need immediate repair and reconstruction. Mass transit usage is at unprecedented levels, as are diesel prices, creating an incredible burden for operators. Pennsylvanians cannot afford to turn their backs on the critical transportation needs of the commonwealth, nor can they afford to turn away lucrative private investment for political reasons.

The choice is clear: Only the lease agreement would protect taxpayers from paying more and higher tolls and the state from having to increase the gas tax or take on more debt to pay for infrastructure improvements.

First published on July 18, 2008 at 12:00 am