Reston Spring

Reston Spring
Reston Spring

Friday, February 24, 2012

Pennsylvania auditor-general again says Turnpike's $450m/year Fumo payouts unsustainable - "will lead to crisis like Harrisburg or Greece",, February 24, 2012

In our late January examination of WSA's traffic and revenue forecasts, we noted that we could find only two recent cases where toll roads had been saddled with massive additions of debt--and in both cases the toll roads were in deep financial trouble.  The Pennsylvania Turnpike was one of the two cases wherein the state legislature demanded in Act 44 that the PennPike pay for the maintenance of other major state highways and public transit in PA's major cities, and piled on $5.8 billion in new debt. 

In January, the state auditor wrote to PennPike noting they were nearly bankrupt.  The exchange between the auditor and PennPike continues as described in this TOLLROADSnews article,
Jack Wagner, state auditor-general has written a second time to the Pennsylvania Turnpike's CEO Roger Nutt saying that the huge annual payouts to the state DOT legislated in mid-2007 as Act 44 are leading to the growth of Turnpike debt that is "a near impossible obligation." He notes the Turnpike's debt has doubled in the past four years and is set to increase four-fold over the next six years.

Wagner had written January 5 that the Turnpike was "drowning in debt" and faced financial disaster unless relieved of the huge annual "Fumo payouts" to the state.

Nutt responded to Wagner that the Turnpike was "not facing any immediate financial crisis," and that rating agencies had not downrated Turnpike debt. He claimed the Turnpike had a "sound, fiscally responsible approach to meet all of its financial obligations" over the next three years. Annual increases in tolls would support this borrowing plan.

Nutt's letter did concede that the Act 44 Fumo payouts to the state could have "a negative effect… sometime in the future."

The Turnpike CEO wrote: "We certainly understand that, in the long-term, the funding stream (toll increases) necessary to do so may not easily be sustained, and so subsequent amendments to the funding requirements may need to be considered… We look forward to any opportunity to work with the governor and state legislature to ensure the long-term financial stability of the Turnpike Commission while understanding that, at the same time, there must also be adequate funding to ensure the safe operation of the state’s entire transportation network."
 Click here to read the full story of this ongoing financial dispute.  

By financing Silver Line construction by piling three-quarters of the $3 billion in new debt on the back of Dulles Toll Road users, we believe believe MWAA, the local counties, and Virginia will face the same massive risk.  Our analysis indicates the current financial plan will simply not work work--and we and others have shown that earlier traffic and revenue forecasts have massively overstated expected toll revenues.  Neither MWAA, its contractors, nor any of the other funding partners has shown that the projected revenue streams will be achieved (or, in fact, that the projected streams are sufficient), no matter how high the tolls are on DTR users. 

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