Dire warnings about the future of the Pennsylvania Turnpike Commission based on a $450 million-per-year infrastructure payment requirement are overstated, according to a research report.
The essential purpose of the toll road system and the commission’s willingness to increase toll rates as needed “translate into a strong issuer and well-secured bonds,” Janney Capital Markets of Philadelphia wrote. “The payment amount has been well factored into rating agency and other analyses.”
Last Thursday, Pennsylvania auditor general Jack Wagner warned that taxpayers could be on the hook for billions of dollars of additional debt if the legislature does not soon amend or appeal Act 44, which requires the PTC to provide $450 million a year in infrastructure funding, financed from toll revenues, for 50 years to the state’s Department of Transportation.
Initial payments, to be used to fund non-Turnpike transportation projects, were to be $900 million per year based on the expected conversion of Interstate 80 to a toll road, but the Federal Highway Administration’s rejection in April 2010 of tolling for I-80 prompted a reduction of the payment to $450 million.
“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 in a letter. “With Pennsylvania facing nearly a half-billion-dollar budget shortfall this year, the commonwealth cannot afford to take on any additional debt.”
Wagner said the agency’s long-term debt has soared by about 181%, to $7.3 billion from $2.6 billion, when lawmakers passed Act 44 in 2007. Since 2009, he said, the commission’s total net assets plummeted 997%, from a $156 million surplus to a $1.4 billion shortfall.
The auditor compared the commission’s plight to capital city Harrisburg, which is under state receivership, and bankrupt Jefferson County, Ala., prompting an angry response from the agency’s chief executive.
“Wagner’s assertion that the commission is in a financial crisis today is simply not true,” Roger Nutt said in a statement. “The PTC remains committed to meeting all its financial obligations — including obligations to bondholders — by sound management of our debt load and by reinvesting in our toll road system.”
The Pennsylvania Turnpike system is comprised of four Interstate highways,covering more than 500 miles and links the Ohio Turnpike to the west with the New Jersey Turnpike to the east.
Moody’s Investors Service placed a negative outlook on its rating for various bonds issued by the PTC. Toll revenue senior and subordinated bonds account for about 80% of the commission’s debt. Moody’s rates the senior bonds Aa3 and the subordinated bonds A3. Standard & Poor’s and Fitch Ratings assign them A-plus and A-minus, respectively.
The Turnpike increased tolls by 10% for cash transactions on Jan. 1. “We believe that PTC has adequate resources and revenue to continue supporting the bonds,” wrote Janney’s Alan Schankel.
“The good thing was the auditor general did not find any corruption or misappropriation of money,” Schankel said in an interview.
