Turnpike debt load at $7 billion
The Pennsylvania Turnpike might be on the road to the poorhouse.
Required by a 2007 state law to provide billions of dollars for statewide road and bridge repairs and transit operations, the turnpike is spending more each year than it makes, despite toll increases that have doubled the cost to travel the turnpike over the past 10 years.
To meet the financial demands of the law, Act 44, turnpike officials have borrowed aggressively, leaving the agency deeper in debt each year.
The Turnpike Commission is more than $7 billion in debt, up from $2 billion in 2002 and $4 billion in 2009. The burden continues to grow, with the turnpike required to make payments until 2057.
“There can be no assurance that the commission will be able to continue to issue debt on terms that are acceptable, or at all, to finance these obligations,” the commission’s auditors reported in the agency’s current annual financial report.
Highway and bridge projects around Pennsylvania have grown dependent on the money from turnpike toll-payers.
If the turnpike stopped making its $450 million-a-year payment to PennDOT, the already strapped state transportation budget would lose about 12 percent of its financing.
If the turnpike defaulted on the payments on its Act 44 debt — which it says it will not do — state law would require taxpayers to pick up the tab through the gasoline tax.
The turnpike’s liabilities exceed its assets by more than $1.3 billion, a sharp turnabout since 2009, when assets exceeded liabilities by more than $150 million.
Tolls have risen sharply: In January, the cash toll for driving a car from Ohio to New Jersey will rise to $39.10 and the E-ZPass toll will go to $30.77. In 2003, the cost was $14.70.
In 2014, tolls will increase by an additional 3 percent. They will continue to rise every year after that.
“We need to get the turnpike out of this tailspin or it will be in serious financial trouble soon,” state Auditor General Jack Wagner said. “The situation is unsustainable. … Anyone with common sense can see that.”
Turnpike officials say they can manage the finances by continuing to borrow money, raising tolls every year and cutting costs, including soon replacing human toll collectors with all-electronic tolling.
Chief executive Roger Nutt said the turnpike cannot continue its raising fares and borrowing for the long term.
“But there is clearly not an immediate crisis,” he said. “Right now, we are managing it. We don’t have any choice.”
The root of the turnpike’s financial woes is Act 44, the 2007 state law, which required the turnpike to contribute $900 million a year for statewide roads, bridges and transit.
To come up with the money, state lawmakers authorized the Turnpike Commission to convert Interstate 80, which parallels the turnpike across northern Pennsylvania, to a toll road. But the federal Department of Transportation in 2010 denied the state’s application to require tolls on I-80.
So the turnpike’s obligation to fund other roads and transit dropped in half in 2011, to $450 million a year, under terms of Act 44.
But even that amount might be too much for the Turnpike Commission to afford, after paying operating costs the turnpike and the principal and interest on its growing debt.
The turnpike brings in about $800 million a year in tolls and other operating revenue.
It spends slightly more than $300 million to run the turnpike. It pays about $300 million on its debt. And it pays the state $450 million as its Act 44 obligation.
“This leveraging of the turnpike revenue stream for non-turnpike investments will exert significant pressure on the turnpike’s customer base and raise important affordability issues,” Moody’s Investors Service said this year in a report titled “Milking the Cash Cow.”
Moody’s, like other ratings agencies, continues to rate the turnpike’s financial health fairly high: Aa3 on its debt for turnpike operations, and three notches lower, A3, on the debt for Act 44 payments.