Study Supports Turnpike Lease

Commonwealth Foundation responds to PSU/Wayne State study

HARRISBURG, PA — Today, in response to a study of traffic diversion due to toll increases on the Ohio Turnpike by authors from Penn State University and Wayne State, the Commonwealth Foundation identified fatal flaws in the report’s conclusions and reiterated the need to repeal Act 44 and lease the Pennsylvania Turnpike.

“Unfortunately, the PSU/Wayne State report does little to enlighten policymakers about the pluses and minuses of infrastructure privatization,” said Matthew J. Brouillette, president of the Commonwealth Foundation, Pennsylvania’s free-market think tank. “However, the report unintentionally supports the repeal of Act 44 and the leasing of the turnpike to a private operator.”

The study, “Empirical Evidence of Toll Road Traffic Diversion and Implications for Highway Infrastructure Privatization,” claims that toll road privatization will cause several negative impacts due to diversion of traffic to other roads.

“The problem with the report is that the authors didn’t actually study ‘toll road privatization’,” said Brouillette. “They only studied the effects of higher tolls during reconstruction of the Ohio Turnpike, not the implications of private toll road management. This distinction is critically important for lawmakers to understand as they consider leasing the Pennsylvania Turnpike.”

Brouillette noted additional problems with the report that fail to enlighten the turnpike lease discussion, including:

• The study only uses data from the Ohio Turnpike, a government owned and operated road. The authors did not consider data from any leased or privately managed toll road in the United States or abroad.
• The study uses anomalous data from the Ohio Turnpike. The analysis of traffic diversions to other roads is based on the effect of higher tolls (as well as severely restricted speed limits) that occurred during renovation of the Ohio Turnpike.
• The study makes unfounded and unfavorable assumptions. The authors assumed that tolls on roads operated by private companies have been (and will be) higher than tolls on government owned and operated roads.
• The study assumed equality between the private sector and the government sector. The authors assumed that a private operator of toll roads does not bring any efficiency gains or improvements—which would have been found if they studied privately managed toll roads.

“In reality, the authors only studied what occurred when the Ohio Turnpike Commission increased tolls and reduced speed limits,” said Brouillette. “But in assessing the effect of higher tolls the Ohio Turnpike, the PSU/Wayne State study actually supports the leasing of the Pennsylvania Turnpike because it would result in less traffic diversion than will occur under Act 44’s higher turnpike tolls and new tolls on I-80.”

Consider the following:

• Act 44 of 2007 increases Pennsylvania Turnpike tolls by 25% in 2009 and 3% annually thereafter; and tolls the currently free I-80 at approximately the same rate per mile traveled (pending federal approval).
• These higher tolls on the Turnpike and new tolls on I-80 will result in diversion of traffic to smaller, free roads.
• A lease agreement on the Pennsylvania Turnpike could actually result in lower turnpike toll increases and no tolls on I-80 at all.
• Thus, a lease of the Pennsylvania would likely result in less diversion of traffic to other roads than will occur under Act 44.

“This study reinforces the fears many residents and businesses in the I-80 corridor have of seeing a freeway become a tollway,” said Brouillette. “Rather than continue with plans to toll I-80, lawmakers should fully consider a lease of the Pennsylvania Turnpike with contract limits on future toll increases.”

Morgan Stanley’s preliminary analysis suggest that a turnpike lease could generate $1.6 billion annually—nearly the amount identified as needed to close the long-term transportation funding gap, and twice the amount delivered by Act 44—without billions of dollars in bonded debt or new tolls on I-80.

“It is crucial that lawmakers get involved in discussing a potential lease, rather than rushing legislation through without serious consideration—as was done with Act 44,” added Brouillette. “A lease of the Pennsylvania Turnpike can be structured poorly or properly. But by working with the Governor and stakeholders now, lawmakers can devise parameters for a potential lease which will protect taxpayers and motorists while bringing in enough capital to meet our transportation needs.”

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The Commonwealth Foundation (www.CommonwealthFoundation.org) is an independent, non-profit public policy research and educational institute based in Harrisburg, PA.

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