The Pennsylvania Turnpike Commission is on "potentially unstable financial ground" that could imperil the state's entire transportation system if the General Assembly doesn't act soon, according to state Auditor General Eugene DePasquale.
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The audit, he said, also notes that failing to meet the commission's unrealistic traffic and revenue projections could contribute to a financial and statewide transportation crisis in the next seven years.
"The turnpike is relying on unrealistic revenue growth projections that should be setting off alarms now and in the near future," DePasquale said. "On a positive note, our audit found that the commission is following its procurement rules when it comes to awarding contracts and that the turnpike commission is managing its current financial situation."
The audit found that the turnpike commission, which oversees a 553-mile system, is carrying a heavy debt load and is using highly optimistic consultant projections to predict how much money will be coming in each year through 2044.
Act 44, a law passed in 2007 under then-Gov. Ed Rendell, made the commission responsible for $450 million of annual payments for non-toll road transportation projects such as highway repair and mass transit. The law hinged on Federal Highway Administration approval of tolls for east-west Interstate 80, but Washington rejected Pennsylvania's application, leaving the state on the took.
The state's 2013 transportation bill, called Act 89, reduced the payment to $50 million annually after 2022.
DePasquale urged the General Assembly to consider lowering or eliminating that debt, and also called for reciprocal agreements with other states to beef up sanctions, including license suspensions or revocations, against toll violators.
"The big takeaway from the report was that projections about toll traffic being a little too rosy," said Alan Schankel, a managing director with Janney Capital Markets in Philadelphia.
"Certainly they've been able to raise rates without too much blowback but whether they'll continue to do or not remains to be seen," Schankel said.
"We believe that at some point, the average turnpike traveler will be deterred by the increased cost and seek alternatives," the report said.
That's easier said than done, according to Schankel, given Pennsylvania's size and geographic quirks including its mountainous regions. "It's difficult, especially where you have tunnels," he said. "Sometimes it's hard to go from here through there without going through the tunnels. I-80 is a parallel road but you don't have the easy connections to the New Jersey Turnpike, the Ohio Turnpike, and to Philadelphia and Pittsburgh."
According to Turnpike Commission Chairman Sean Logan, the audit is one of several internal examinations — both statutory and voluntary — performed on the commission's finances and operations.
"I deeply appreciate the auditor general's thorough review along with the recommendations he made," Logan said in a statement. "We agree with Auditor DePasquale that our mounting debt, due largely to payments to [Pennsylvania Department of Transportation] as mandated by state law, is a growing concern, and we are taking steps to address that challenge.
"We look forward to working with the auditor as well as the legislature to secure passage of meaningful tolling enforcement legislation that will allow all tolling agencies in the state to make sure motorists pay their fair share."
In seven years, when Act 89 reduces the Turnpike Commission's required payments, PennDOT will be $400 million a year short on the amount it uses to support PennDOT programs. Cuts to public transit agencies in cities and smaller communities across the state, said DePasquale, would pressure regional public transit agencies to impose deep service cuts, steep fare hikes or both.
The gap will appear even sooner if the audit's recommendation to relieve the turnpike of its Act 44 and Act 89 obligations are followed.
Many public transit agencies receive about half their operating funds from the state, he said, including Port Authority of Allegheny County; Capital Area Transit, which serves residents in Cumberland and Dauphin counties; Erie Metropolitan Transit Authority; and Altoona Metro Transit.
