I-80 Tolling vs. Turnpike Lease

Tolling I-80 and increasing tolls on the Turnpike (Act 44 of 2007) provides less than half the funding needed for roads, highways, and bridges, according to the Pennsylvania Transportation Funding and Reform Commission report.

• $450 million for roads, highways, and bridges in FY 2007-08.
• $300 million for mass transit in FY 2007-08.

Act 44 provides an average of only $946 million over the next 10 years and does not reach $1.7 billion until 2036. Furthermore, Act 44 funding increases are also unlikely to keep pace with inflation and are dependent on federal approval for tolling I-80, which has not been granted by the Federal Highway Administration.

Act 44 will generate only $450 million annually if the Federal Highway Administration does not approve the tolling of I-80.

• $200 million for roads, highways, and bridges—only one-fifth the identified need of $965 million.
• $250 million for mass transit—less than one-third the identified need of $760 million.

If the Turnpike Commission fails to generate the expected toll revenues from the Turnpike and I-80, taxpayers will be forced to make up the difference. The Turnpike Commission began borrowing before all revenue streams were assured, placing the taxpayers at great risk. Indeed, a gas tax increase may be necessary to pay back Turnpike bonds that are leveraged against the Motor License Fund, particularly if the federal government denies permission to toll I-80.

Under a Turnpike lease, the state will receive an upfront cash payment. This places the shareholders of the investment companies—not the taxpayers—at financial risk.

Under Act 44 of 2007, there are no limits on the Turnpike Commission’s ability to raise tolls either on the Turnpike or on I-80 (if it receives federal approval to convert the highway into a toll road). The Turnpike Commission has stated their intention to increase tolls by 25% in 2009 and 3% each year thereafter, and implement similar tolls on I-80; however, nothing prevents the Commission from dramatically increasing toll rates on either the Turnpike or I-80.

Under a long-term lease, toll rate increases will be limited, unlike in Act 44—the final lease agreement will place a strict cap on toll rate increases of 25% in 2009 and 2.5% or the Consumer Price Index (whichever is higher) each year thereafter. It is also important to note that the toll rate increase allowance in the contract will be a maximum, not a minimum, and a toll operator would likely keep tolls under the cap to maximize traffic on the Turnpike.

While toll increases would result in more motorists choosing to use free roads, which may increase the cost of maintaining these roads, there would be greater diversion under Act 44 than a Turnpike lease. First, a Turnpike lease would keep Turnpike tolls at or below what is expected under Act 44. But far more traffic diversion will occur under the tolling of I-80, which is currently free.

The effect of Act 44 on residents and businesses in the I-80 corridor was never assessed prior to the passage of the legislation. A 2005 study by the Pennsylvania Department of Transportation (PennDOT) recommended against tolling I-80, in part because of the expected diversion to other roads.

Toll rate increases on the Turnpike will have some impact on traffic on other routes like U.S. 30—regardless of who operates the Turnpike. A toll road company depending on toll revenues will have no incentive to drive traffic away. On the contrary, since they earn their income from traffic ON the Turnpike, they will have every incentive to minimize diversion.

Under Act 44, approximately 47% of the estimated I-80 toll revenue would be used for payments to PennDOT, while only 36% would be used on I-80 improvements and maintenance (another 17% is considered “surplus revenue”).

Claims that no I-80 tolls would be used for mass transit is misleading, as Act 44 provides between $300 and $500 million annually for mass transit if I-80 tolling is approved, but only $250 million annually for mass transit if I-80 tolling is rejected. In essence, the tolls on I-80 constitute not only a “user fee”—i.e. payment for use of the road—but also a tax, as I-80 motorists will pay more for mass transit grants and funding for other roads and bridges than they will for improvements on I-80 itself.