Auditor General: Turnpike on Brink of Financial Doom

By Stacy Brown | PA Independent

The Pennsylvania Turnpike soon could become a road less traveled. With urgency in his voice, Auditor General Jack Wagner said Jan. 5 that the state’s Turnpike Commission’s mounting debt could force it to raise tolls so much that motorists will find other routes to travel.

"The statistics show clearly that the Pennsylvania Turnpike Commission is drowning in debt due to the burdens placed on it by Act 44," Wagner said. 

Implemented in 2007, Act 44 required the Turnpike Commission to transfer $450 million annually to the state Department of Transportation for a 50-year period. This annual payment would add at least $20 billion in additional debt to the commission, Wagner said. 

If the commission were to default on the obligations, Pennsylvania taxpayers would have to assume the obligations, he said. 

Pennsylvania's Comprehensive Annual Financial Report audit, for the year ending June 30, 2011, shows that the commission must assume additional bond debt to repay the Act 44 debt, Wagner said. 

The commission's long-term $7.3 billion debt, which has increased 181 percent from $2.1 billion in 2007, is just short of the state's more than $9 billion general obligation debt, Wagner said. 

"With Pennsylvania facing nearly a $500 million budget shortfall this year, the commonwealth cannot afford to take on any additional debt," said Wagner, who also called on the General Assembly to make addressing Act 44--and investing in transportation infrastructure--its top priorities. 

However, the General Assembly may not agree with Wagner. 

Eric Bugaile, spokesman for House Transportation Committee Chairman Richard Geist, R-Blair County, said repealing Act 44 is not the answer. 

"There are a lot of good things about Act 44," Bugaile said, adding that Geist was aware of a letter Wagner sent to commission CEO Roger Nutt regarding the issue. 

Telephone messages left for House and Senate Transportation Committee leaders were not returned. 

Jenny Robinson, spokeswoman for Pennsylvania's AAA Mid-Atlantic Division, a motorist advocacy organization, said she wasn't aware of Wagner's position and could not immediately respond. 

Act 44 also gave the Turnpike Commission the authority to increase tolls every year without state government approval. 

The commission increased tolls in 2009 by 25 percent for all customers. In 2010, tolls increased again for all customers by three percent. In 2011, tolls increased 10 percent for cash-paying customers and three percent for electronic E-Z Pass users. 

On Jan. 1, tolls increased another 10 percent for cash-paying customers, with no increase for those using the E-Z Pass system. 

Prior to 2009, officials had increased tolls five times since the turnpike was founded in 1937. 

The commission also announced three percent toll increases to take effect in 2013 and 2014, but did not clarify whether those increases would affect only cash-paying customers or E-Z Pass users as well. 

Still, Nutt disputed Wagner's doomsday message. 

"The commission is not facing any immediate financial crisis as (Wagner) states," Nutt said in a statement. 

"The nation's major rating agencies have not changed their underlying ratings of Pennsylvania Turnpike bonds for more than three years," he said. "During that period, the turnpike has provided more than $3 billion to the commonwealth for statewide investment in transportation systems." 

Nutt said the existence of the commission is not in jeopardy because it has developed a sound, "fiscally responsible approach to meet all of its financial obligations."

Wagner countered that the commission's financial position has deteriorated rapidly in recent years. 

In 1998, the Turnpike Commission was awarded with the highest bond rating of any turnpike agency at that time, AAA, and by 2008, the rating was downgraded to AA because of the uncertainty of the commission's future because of Act 44, Wagner said. 

"It is crystal clear that, with the passage of Act 44, the commission has been placed in a position where its very existence is at risk. No entity can continue to operate with significant increases in long-term debt and the continued serious depletion of assets caused by Act 44," Wagner said. "It's time to rescue the commission by repealing Act 44."