Says costs were required by feds requests
Between the passage of Act 44 in 2007 and the final death of the plan to toll Interstate 80 at the hands of federal Transportation Secretary Ray LaHood on April 6, 2010, the Pennsylvania Turnpike Commission spent more than $24 million to prepare the road for tolling.
In the end, it was a simple issue – the fact that the state wanted to divert revenue from I-80 to the Motor Vehicle Fund via rental payments from the Turnpike Commission to PennDOT – that doomed the project, but only after two years of expensive and extensive engineering and planning work had been completed.
Turnpike Commission spokesperson Carl Defebo said the spending was mandated by the federal government as part of gaining a phase one “provisional” acceptance in a federal pilot program allowing states to place tolls on previously free interstate highways.
According to a list of expenses obtained from the Turnpike Commission, the vast majority of the I-80 project’s price tag was paid to McCormick Taylor, a Harrisburg-based engineering and planning firm which has worked with the Turnpike on numerous projects.
Barry J. Schoch, vice president of McCormick Taylor and the I-80 project manager said the federal government’s request for more information on the tolling plan required “substantial engineering work,” and questioned why the Federal Highway Administration (FHWA) had not stopped the process earlier, if the concept of rental payments was the real problem all along.
“If it was purely that, why would we have been asked to do a detailed engineering condition assessment and capital plan development, if the issue was the legality of the rent?” said Mr. Schoch. “They never said it wasn’t acceptable.”
How was the money spent?
McCormick Taylor completed more than $22 million worth of engineering and planning work on I-80 for the Turnpike Commission, including engineering work, traffic studies, and environmental impact assessments. Other firms were contracted for aerial mapping of I-80, and for specific studies on toll booth locations.
After the Turnpike and PennDOT submitted their initial request to the FHWA in October 2007, the federal agency responded with requests for more information on “the planned reconstruction and rehabilitation project” meant to be funded with toll money, along with a “definitive analysis of the current and future needs and the proposed improvements” of I-80, and a project schedule and toll implementation plan.
Mr. Schoch said it was after that response from the FHWA when most of the expensive enginnering work began. At the same time, McCormick Taylor also began work on a number of environmental impact studies, including identification and classification of wetlands and animal species along the I-80 corridor, which had not been requested by the FHWA and would not have been necessary until the second phase of the application.
Importantly, the FHWA also asked PennDOT to “reconcile” statements made in the application to clarify “toll revenue will only be used for I-80,” the issue which would eventually be cited as the reason for denying Pennsylvania the right to toll the highway.
Toll Booth Planning
Mr. Schoch said roughly ten percent of the total engineering and planning expenses went towards the actual design and development of the tolling system to be used on I-80. The plan was to use “Open Road Tolling,” which would require no toll booths or cash lanes. Cars would travel under electronic sensors which would trigger a camera to photograph the license plate and drivers would be billed for their toll.
Although that type of system is not widely used at present, Mr. Defebo said the model represents the future of highway tolls. Similar systems are in place along I-370 in Colorado and on the southern portion of the Florida Turnpike, he said.
Wilber-Smith Associates, a transportation engineering firm headquartered in South Carolina, completed additional work on the planned locations for toll gantries, for which the Turnpike Commission paid them more than $1.4 million.
The planning involved the placement of toll gantries and studies of diversion routes traffic could potentially take to avoid any of the proposed nine tolling locations. Trucks driving local roads to avoid toll locations were a particular concern of residents during the process, and careful planning was done to make sure tolling locations had inconvenient diversion routes, said Mr. Schoch.
“Fair Market Value”
After addressing the initial response of the FHWA point-by-point with results of traffic studies, engineering analysis, economic impact statements, and plans for future upgrades and maintenance of I-80, the application was resubmitted in July 2008. On the issue of using toll revenues for rent payments to PennDOT, the response was considerably less detailed.
“The payments to PennDOT derived from I-80 revenues constitute rent under the lease and represent a valid operating expense,” read a part of the response.
When the FHWA replied on September 11, 2008, they focused their attention on the “fair market value” of the proposed lease payments to PennDOT, concerned the state was taking more from I-80 than they would have been able to get from a market-value lease.
“The payments required under the I-80 lease appear to have been predetermined by the Pennsylvania General Assembly based on considerations largely unrelated to the true costs of a leasehold interest in I-80,” said the FHWA, adding that there was no way to know if the costs were legitimate or valid because “the lease was not negotiated pursuant to an arms-length transaction, nor was the price determined through a competition.”
Although the FHWA had not mandated competitive lease agreements in the pilot program’s rules, it subsequently added such requirements.
“In particular, the concern with [Interstate 80] was…that the concept of Act 44 was that they were taking the money off of [Interstate 80] for other purposes, and they wanted to make sure that wasn’t excessive,” said Mr. Schoch.
To satisfy the FHWA request, McCormick Taylor contracted an independent financial firm, Provident Resources Group, to conduct an assessment of lease payments, showing the lease was within market value.
Final Denial
While the FHWA accepted the report issued by Provident, their final response to the Turnpike Commission and PennDOT denied the tolling program because the very concept of rental payments to PennDOT violated the terms of the pilot program.
“Specifically, the lease payment would have the effect of diverting toll revenues collected from the operation of I-80 to projects on other facilities, which is contrary to the permitted uses of toll revenue,” said Mr. LaHood in his letter to Gov. Ed Rendell on April 6.
Mr. Schoch acknowledged the FHWA administration had pointed out their concerns with the rent payments throughout the process, but said he believed the turnpike had adequately addressed the issue.
“If it was that black and white, the first application would have been denied by simply saying the rent payments are not legal,” said Mr. Schoch. “Why would we be required to do a fair market assessment of the rent if it was not legal to start with? What’s the relevance of what the fair market value is if it’s all illegal?”
The U.S. Department of Transportation did not reply to requests for interviews.
All Is Not Lost
Despite more than $24 million in expenses incurred by the failed tolling plan, PennDOT and Turnpike Commission officials maintain the project has some take-away value to the commonwealth. Mr. Schoch said his company is in the process of “packaging the various engineering studies” so they can be transferred to PennDOT for use in future maintenance and upgrade projects. He said some of the projects are already up to 30 percent complete.
And after completing more than two years of extensive engineering analysis along the 330-miles of I-80, Mr. Schoch has a pretty good idea where PennDOT needs to concentrate their efforts.
“One of the biggest problems on I-80 is the age of the pavement” which is beyond its expected life, said Mr. Schoch, “and the other priority is updating the interchanges in the eastern end, in the Pocono region” where many interchanges are close together and have very short acceleration lanes.
He also pointed to the 13 major bridges on the highway, which are all reaching the end of their lifespan and could cost between $60 million and $100 million each to repair.
