Wildlife on the highway to hell: Roadkill in the largest ...
Highway to Hell Fixing Highway Finances in Pennsylvania
description
Transcript of Highway to Hell Fixing Highway Finances in Pennsylvania
![Page 1: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/1.jpg)
Highway to HellFixing Highway Finances in Pennsylvania
Miles Mutilator IngramTorrey Bloodthirsty Babson
Public Expenditure AnalysisMay 2007
![Page 2: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/2.jpg)
Outline• Pennsylvania Highway Background
– Stakeholders– Background– Infrastructure State of Affairs– Financial State of Affairs
• PennDOT/Governor’s Proposal
• Pennsylvania Turnpike Commission’s “Modest Proposal”– Revenue Bond Program– Congestion Fees: Regional Mobility Funds– Tolling of I-80– Other Revenue Sources
• A Closer Look at Some Assumptions– Discounting– Traffic Diversion– Secondary Markets– Passage of Regional Mobility Fund
• Recommendations and Conclusion
![Page 3: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/3.jpg)
![Page 4: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/4.jpg)
Stakeholders• Pennsylvania Department of Transportation (PennDOT)
• Pennsylvania Turnpike Commission (PTC)
• Commonwealth of Pennsylvania
• Citizens of Pennsylvania
![Page 5: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/5.jpg)
BackgroundPennDOT and PTC are separate, independent agencies, both reporting
to and receiving funds from the Secretary of Transportation.
Pennsylvania Department of Transportation• Has jurisdiction over all PA roads other than the turnpike and its spurs
• Is responsible for 40,500 miles of state roads and highways & about 25,000 bridges
• Created from the former Department of Highways by the legislature on May 6, 1970
• Employs 11,000 people
![Page 6: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/6.jpg)
Background
• The PTC was created in 1937, and has jurisdiction over I-76 and its various tolled spurs. It officially entered service on October 1, 1940
• The turnpike was financed by a loan from the New Deal's Reconstruction Finance Corporation for almost $41 million at 3.75 percent. The New Deal’s Works Progress Administration also provided another $29 million in grants
• PTC employs around 2,250 people, or 4 people for every mile of road it oversees, including 480 managers
Pennsylvania Turnpike Commission
![Page 7: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/7.jpg)
• Pennsylvania’s “highway and bridge systems are in crisis…”
• “Pennsylvania has more than twice the percentage of structurallydeficient bridges than the national average, and more than a third of the 21,000 miles of state-owned secondary roads are rated “poor.” Pennsylvania’s state owned bridges are on average 50 years old.”
Infrastructure State of Affairs
Their November, 2006 report found:
In February 28, 2005, Governor Rendell convened the nine-member Transportation Funding Reform Commission to study and make recommendations concerning the financing and operations of transportation systems in Pennsylvania.
![Page 8: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/8.jpg)
Infrastructure State of Affairs
WORST ROADS1. Louisiana
2. Pennsylvania3. California
4. Illinois5. Michigan
WORST ROAD1. I-10 Louisiana
2. I-80 Pennsylvania3. I-40 Arkansas4. I-5 California
5. I-40 Oklahoma
• PA is “the state most frequently at the head of the Worst Roads list in its 16-year history” Overdrive, December 2006
• Overdrive, an online trucking magazine, issued its rankings for our country’s “Worst Roads” in December 2006:
• The American Society of Civil Engineers gives Pennsylvania Roads a grade of “D” in it’s Infrastructure Report Card for the state, entitled “The Keystone is Crumbling”
![Page 9: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/9.jpg)
“the Commission believes an annual increased investment of $1.013 billion is needed with a heavy focus on system preservation and targeted capital investments.”
“Since the last increase in highway and bridge funding in 1997, PennDOT has lost approximately $350 million of its purchasing power due to inflation.”
Financial State of Affairs“The key to a successful infrastructure program is to have funds to support roadway construction, rehabilitation and
emergency situations” ASCE Infrastructure Report Card for Pennsylvania
The Governor’s Transportation Funding Reform Commission report also found:
![Page 10: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/10.jpg)
PennDOT Current Finances
Motor License Fund
Other,
PA General Fund,Federal Funds,
![Page 11: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/11.jpg)
PennDOT 2006 Annual Report
Motor License Fund Revenues
![Page 12: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/12.jpg)
PTC Current Finances
![Page 13: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/13.jpg)
Direct Transport Supply
Direct Transport Demand
Indirect Microeconomic
Indirect Macroeconomic
• Income from transport operations (fares and wages)
• Access to wider distribution markets and niches
• Improved accessibility
• Time and cost savings
• Productivity gains
• Division of labor • Access to a
wider range of suppliers and consumers
• Economies of scale
• Rent income • Lower price of
commodities • Higher supply
of commodities
• Formation of distribution networks
• Attraction and accumulation of economic activities
• Increased competitiveness
• Growth of consumption
• Fulfilling mobility needs
Benefits of Transportation
Source: European Conference of Ministers of Transport
![Page 14: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/14.jpg)
Competing Propositions
Governor’s Plan• Lease or concession of Pennsylvania Turnpike system - $965 million/yr for
road and bridge repair• Excise tax on oil company gross profits - $760 million/yr for transit projects• Total is greater than $1.7 billion
Other Revenue Source Possibilities• New revenue by creating a $1 “congestion fee” in certain urban areas as a
way to raise the necessary funds for infrastructure repair• A highly leveraged debt recapitalization of the Turnpike by the Pennsylvania
Turnpike Commission or another public entity owned by the commonwealth
![Page 15: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/15.jpg)
• Part A: Revenue Bonds
• Part B: “Regional Mobility Fund” Congestion Fee
• Part C: Tolling of I-80
• Part D: Other Revenue Sources
PTC’s “Modest Proposal”
![Page 16: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/16.jpg)
Part A: Special Revenue Bonds• $4 billion bond issuance over 10 yrs• 25 yr Maturity• 5.5% interest rate
![Page 17: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/17.jpg)
Part B: Congestion Fees
Metropolitan AreaNumber of Taxed
ExitsProjected Annual
Revenue
Pittsburgh 8 $50,000,000
Philadelphia 14 $83,500,000
Harrisburg 5 $13,000,000
Scranton/Wilkes-Barre 6 $12,000,000
Total $158,500,000
$1 increase on turnpike exits around Pennsylvania’s major metropolitan areas
![Page 18: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/18.jpg)
Part C: I-80 Tolling Financial Projections
• Initial toll of 8 cents per mile on passenger vehicles and 30 cents for commercial vehicles
• 3% annual increase in tolls
![Page 19: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/19.jpg)
Road Tolling: Fixing Market Failure
Time and Money Costs
Road Trips
Excess Burden
Pcurrent
(includes personaltravel costs of
time and money)
Qcurrent
DMarginal Social Costs
Average Private Costs
![Page 20: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/20.jpg)
Time and MoneyCosts
Road Trips
Ptoll
Qtoll
DMarginal Social Costs
Average Private Costs
Road Tolling: Fixing Market Failure
Toll Toll Revenue
Social Equilibrium
![Page 21: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/21.jpg)
Part D: Other Revenue Sources• PTC projects revenue of over $12.5 billion between 2008 – 2038 from increase in tolls on I-76
• PTC assumes 25% turnpike toll increase 2010, and 3% annual increases thereafter
Project Increases in Turnpike Fees/mile
1.0 2.0 2.2 3.1 4.15.9 7.4 8.5 9.9 11.5
13.315.4
17.920.8
0.0
5.0
10.0
15.0
20.0
25.0
Year
Cen
ts/m
ile
![Page 22: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/22.jpg)
Part D: Increases in Projected Turnpike Fees and I-80 Toll Fees
Turnpike vs. I-80: Fees/mile
0
10
20
30
40
50
60
70
80
2010
2015
2020
2025
2030
2035
2040
Year
Cen
ts/m
ile
I-80 Cost/mile (car)
Turnpike Cost/mile(car)
I-80Cost/mile(commercial)
Turnpike Cost/mile(commercial)
![Page 23: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/23.jpg)
2008 $650.00 ($48.46) $158.00 $205.46 $9652009 $700.00 ($100.64) $161.16 $204.48 $9652010 $636.00 ($148.06) $164.38 $312.67 $9652011 $400.00 ($177.87) $167.67 $100.00 $269.02 ($29.59) $235.78 $9652012 $400.00 ($207.69) $171.02 $100.00 $283.87 ($29.59) $247.39 $9652013 $415.00 ($238.63) $174.44 $100.00 $299.52 ($29.59) $244.26 $9652014 $250.00 ($257.27) $177.93 $100.00 $316.02 ($29.59) $407.91 $9652015 $225.00 ($274.04) $181.49 $100.00 $333.41 ($29.59) $428.74 $9652016 $215.00 ($290.07) $185.12 $100.00 $351.73 ($57.19) $460.41 $9652017 $109.00 ($298.20) $188.82 $100.00 $371.03 ($58.79) $553.13 $9652018 ($298.20) $192.60 $100.00 $391.38 ($60.49) $593.71 $46.00 $9652019 ($298.20) $194.53 $100.00 $407.20 ($61.81) $623.28 $9652020 ($298.20) $196.47 $100.00 $423.65 ($63.18) $606.25 $9652021 ($298.20) $198.44 $100.00 $390.78 ($60.43) $634.42 $9652022 ($298.20) $200.42 $100.00 $406.59 ($61.76) $617.94 $9652023 ($298.20) $202.43 $100.00 $423.05 ($63.13) $600.86 $9652024 ($298.20) $204.45 $100.00 $440.17 ($64.56) $583.14 $9652025 ($298.20) $206.49 $100.00 $457.98 ($66.05) $564.77 $9652026 ($298.20) $208.56 $100.00 $476.52 ($67.60) $545.72 $9652027 ($298.20) $210.65 $100.00 $495.80 ($69.21) $525.96 $9652028 ($298.20) $212.75 $100.00 $515.87 ($70.89) $505.46 $9652029 ($298.20) $214.88 $100.00 $536.75 ($72.63) $484.20 $9652030 ($298.20) $217.03 $100.00 $558.47 ($79.17) $466.87 $9652031 ($298.20) $219.20 $100.00 $581.07 ($76.15) $439.08 $9652032 ($298.20) $221.39 $100.00 $604.59 ($78.12) $415.34 $9652033 ($249.74) $223.60 $100.00 $629.05 ($80.16) $342.24 $9652034 ($197.56) $225.84 $100.00 $654.51 ($82.28) $264.49 $9652035 ($150.14) $228.10 $100.00 $681.00 ($84.50) $190.54 $9652036 ($120.32) $230.38 $100.00 $708.56 ($86.80) $133.18 $9652037 ($90.50) $232.68 $100.00 $737.24 ($89.20) $74.78 $9652038 ($59.56) $235.01 $100.00 $767.07 ($91.69) $14.17 $9652039 ($40.93) $237.36 $100.00 $798.12 ($94.29) $1,0002040 ($24.15) $239.73 $100.00 $830.42 ($97.18) $1,0492041 ($8.13) $242.13 $100.00 $864.02 ($101.11) $1,0972042 $244.55 $100.00 $898.99 ($105.20) $1,1382043 $247.00 $100.00 $935.37 ($109.46) $1,1732044 $249.47 $100.00 $973.23 ($113.89) $1,2092045 $251.96 $100.00 $1,012.61 ($118.50) $1,246
PTC Bond Proceeds
Total Pennsylvania Transportation RevenuesYear
PTC and Other Revenue Sources Contributions
MLF Bond Proceeds
MLF Debt Service
Regional Mobility Funds
I-80 Cost Savings
I-80 Excess Revenues
I-80 Debt Service
PTC’s Projected Cashflows
![Page 24: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/24.jpg)
• Cash flows are NOT discounted
• Traffic diversion due to tolls assumed at 20% for cars and 1% for trucks
• Secondary markets are not considered
• Will the Regional Mobility Fund pass the legislature?
A Closer Look at Some Assumptions
![Page 25: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/25.jpg)
• Currently, future cash flows are not discounted! The sum of non-discounted cash flows to the PTC is $37.8 billion.
• The PTC report assumes an annual interest rate of 5.5% on issued bonds, and an annual inflation rate on costs of capital of 4%
• The following table shows the sum of cash flows at various discount rates:
Discount Rates
Rate PV of Cash Flows
Undiscounted $37,791.86
3.0% $22,105.21
3.5% $20,447.83
4.0% $18,972.80 4.5% $17,656.37
5.0% $16,478.20
5.5% $15,420.85
6.0% $14,469.32
![Page 26: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/26.jpg)
Traffic Diversion RatesPassenger Vehicles:
• Passenger vehicles currently make up 87% of I-80 traffic. The average length of an I-80 trip is about 30 miles, therefore diversion to secondary roadways will be possible for most trips
• Passenger vehicle diversion (20%) will therefore have a significant effect on secondary roadways.
Commercial Trucks:
• I-80 is the one of the primary highways used for commercial trucks traveling west from New York and New Jersey ports, and is currently the only major east-west highway in the region that is not tolled
• Commercial truck diversion (1%) will therefore be significantly lower than passenger vehicle diversion
![Page 27: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/27.jpg)
Diversion Rate Impact on Toll Revenues
Diversion Rate Impact on NPV
$0
$5
$10
$15
$20
$25
$30
$35
20% 25% 30% 35%
Passenger Diversion Rate
Cos
t (bi
llion
)
PTC Undiscounted Sum
PTC Discounted NPV
CBA StudyUndiscounted SumCBA Study DiscountedNPV
![Page 28: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/28.jpg)
Social Costs in Excess of Private Costs – Dollars/Vehicle Mile
• Diversion = 20% car, 1% truck
• I-80 = 9,315,549 vehicle miles/day, 87% is passenger and 13% commercial • 2.36 billion passenger miles and 437 million commercial miles in year 1
Source: Transportation CBA – Roadway Costs, Victoria Transportation Policy Institute
Secondary Markets: Secondary Roadway Costs
![Page 29: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/29.jpg)
Secondary Markets: Secondary Roadway Costs
![Page 30: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/30.jpg)
• Traffic diversion to secondary roadways will result in increased maintenance and construction costs on these roadways
• At a discount rate of 4%, the present value of these costs will be $185 million
• This money represents a transfer of costs from PTC (I-80) to PennDOT (secondary roads), but not an overall increase in spending on road maintenance, therefore there are no price effects.
Secondary Markets: Secondary Roadway Costs
![Page 31: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/31.jpg)
Secondary Markets: Gasoline Prices
The Mackinac Center for Public Policy (Michigan-based public policy research institute) found the long-run price elasticity of demand for gasoline to be .7
A meta-analysis of many studies in the Energy Journal found the elasticity to be .58
![Page 32: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/32.jpg)
Regional Mobility Fund Passage
Present value of cash flows to the PTC with the Regional Mobility Fund:
$18,972 million at 4%
Present value of cash flows to the PTC without the Regional Mobility Fund:
$12,696 million at 4%
A difference of $6.3 billion!!!
![Page 33: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/33.jpg)
What is the PTC analysis MOST SENSITIVE to??
• Discount Rate (very sensitive)
• Passage of the Regional Mobility Fund (very sensitive)
• Gas Prices (toll revenues are very sensitive, overall financing is less sensitive, and effects are hard to project)
• Traffic Diversion (not so sensitive for cars, more so for trucks)
Sensitivity Analysis Conclusions
![Page 34: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/34.jpg)
Recommendations•NPV should be included in all PTC financial projection!!!
•Research the political feasibility of the Regional Mobility Fund, exploring options for incremental phase-in of fees.
•Research I-80 traffic flows:
Where are commercial vehicles coming from? Where are they going?
How much is in-state and out-of-state traffic? Who is using the road and who is paying for the road?
•Research the effects of gas prices on long-term financial outlook.
•Leasing of the Turnpike should be considered, but only with strict road maintenance stipulations.
![Page 35: Highway to Hell Fixing Highway Finances in Pennsylvania](https://reader035.fdocuments.net/reader035/viewer/2022062520/56815cb7550346895dcab2bc/html5/thumbnails/35.jpg)
Conclusions• At this time, PA has neither the money nor
the political will to fix its roads and bridges
• PTC’s report is seriously flawed
• For now, we’re on a Highway to Hell