PA Act 44 of 2007

[briantroutman]

Here's my understanding of the Act 44 saga. Please chime in if I've omitted anything.

• In 2006, facing highway funding shortfalls, then-Governor Rendell proposed leasing the Pennsylvania Turnpike to a private operator, a move which would essentially dismantle the Pennsylvania Turnpike Commission.
• Fearing for their jobs, PTC officials respond with a counter-offer: Transfer I-80 from PennDOT to PTC control and, by allowing the PTC to collect tolls, alleviate some of the burden on state highway funds. (And consequently, not only preserving the PTC bureaucracy but growing it to previously unknown levels.)
• In 2007, the state legislature responds to the PTC's offer with Act 44, a bill which specified payment amounts ($750 million/year) the PTC would obligated to make to the state in exchange for the right to collect tolls on I-80.
• Act 44 also included a provision for a reduced payment schedule ($450 million/year) in the event that I-80 tolling was not approved by the FHWA.
• In 2010, the FHWA rejected the PTC's tolling plan for the third and final time, ending any hope for toll collection on I-80.

Why would the PTC agree to pay even a single dollar in the event that tolling was not approved–what's in it for them? And further, how is such an agreement even legal? In my modest education on contract law, I was taught that a contract must include consideration (something of value) for both parties in order to be legal and enforceable. Perhaps the legal machinations of governmental entities aren't subjected to this test.

To draw an analogy, this would seem to be the same as making a deal with a guy selling a car who says "If the state sends me a title, I'll let you have my car for $20,000. And if they don't send me a title, I'll keep the car, but you'll give me $10,000 anyway."

Was now-disgraced former CEO Joe Brimmeier so desperate to preserve his own job that he was willing to put the PTC in serious financial jeopardy to do so?

[ekt8750]

That actually happens a lot in the corporate world when mergers and acquisitions fall through cause they didn't get regulatory approval. There's usually an article in the contract that stipulates a breakup fee (usually cash but assets are sometimes involved) paid by the purchasing company to the target to compensate them for the time resources used during the negotiations and regulatory approval.

[briantroutman]

But breakup fees are usually there to cover what could be considered the costs of the failed deal. In this case, that would include money spent on engineering studies, the expense required to locate another tolling partner, etc. Yet as far as I know, the PTC incurred those costs ($23 million for engineering studies) on their side–I'm not aware that PennDOT had any other "opportunity cost"  resulting from the deal falling through. And further, the breakup fee would be along the lines of the costs incurred, not an ongoing obligation of $450 million per year, year after year–nearly half of the total deal had it been successful.

[Gnutella]

To be honest, I'm glad the deal to privatize the Pennsylvania Turnpike fell through. There's just something about civic infrastructure in the hands of global corporations that doesn't sit well with me. Not everything needs to be privatized.

[jeffandnicole]

Why would the PTC agree to pay even a single dollar in the event that tolling was not approved–-what's in it for them? And further, how is such an agreement even legal? In my modest education on contract law, I was taught that a contract must include consideration (something of value) for both parties in order to be legal and enforceable. Perhaps the legal machinations of governmental entities aren't subjected to this test.

The PTC is basically an entity created by the state.  The State can give...the State can take away.  And if it's like other states, the State has ultimate control over the Turnpike.  After the Turnpike holds their normal meetings, the Governor can veto any or all portions of the minutes of the meeting, basically voiding any decision that was made.

So, all those deals that were made...if the Turnpike objected and failed to pass the measures, the Governor would've just vetoed their actions.  And since some of the various officials serve at the pleasure of the Governor, the Governor could have just as quickly thanked them for their service and inserted someone else in their place that was a little more willing to go with the Governor's plan.

Now, that's not saying those patronage jobs are all going to be Yes men just doing what the Governor says, but they probably have limited leeway on what they can fight for. 

[ARMOURERERIC]

You are aware that the act has since been superceded by act 89(?) passed in November 2013 and part of that new law is paying back the PTC for all it's past contributions.

The real sick thing about the original law you mentioned is that in reality $250 of the funds taken from the PTC was used to shore up underfunded mass transit pension plans in Pitts and Philly, not for roads.

[PHLBOS]

You are aware that the act has since been superceded by act 89(?) passed in November 2013 and part of that new law is paying back the PTC for all it's past contributions.

The real sick thing about the original law you mentioned is that in reality $250 of the funds taken from the PTC was used to shore up underfunded mass transit pension plans in Pitts and Philly, not for roads.

IIRC, the only change to Act 44 related to Act 89 was the duration of the annual Turnpike toll increases; not the abolition of such.

The tolls went up at the beginning of this year and will increase next January as scheduled.

[cpzilliacus]

You are aware that the act has since been superceded by act 89(?) passed in November 2013 and part of that new law is paying back the PTC for all it's past contributions.

The real sick thing about the original law you mentioned is that in reality $250 of the funds taken from the PTC was used to shore up underfunded mass transit pension plans in Pitts and Philly, not for roads.

My understanding is different.  Act 89 did modify Act 44, but the flow of toll money from the PTC to PennDOT continues at $450 million (in money that the PTC has borrowed) annually, mostly to subsidize public transportation agencies around the state, and supposedly in 2023, the payment to PennDOT declines to $50 million annually. 

Under Act 44. a substantial part of the payments from PTC to PennDOT went to PennDOT-maintained highways and bridges. 

Under Act 89, all of it goes to non-highway spending, especially public tranportation.  Details on the PTC's Web site here.

As best as I can tell, PennDOT (or SEPTA or the Port Authority of Allegheny County) will never be paying the PTC back for any of the billions that the Turnpike Commission has forked over since 2007.

[briantroutman]

The PTC is basically an entity created by the state.  The State can give...the State can take away...

I'd say yes and no– The PTC operates under a charter granted by the state legislature in 1937, but it isn't a state agency in the way that PennDOT is. The governor is allowed to appoint commissioners to four year terms, and those appointees must be confirmed by the state senate. But beyond that somewhat indirect influence, I don't know that either the governor or the legislature can force much upon the commission beyond recalling commissioners under the terms of the charter (which might be require grounds, such as misconduct, incompetence, etc.) or by passage of another act dissolving the PTC's charter.

In the larger picture, though, I get your point: One way or another, the governor and legislature would eventually wipe out any dissenting commissioners and replace them with puppets.

But what astonishes me is how the commissioners didn't seem to put up any sort of resistance whatsoever. To the contrary, they seemed rather eager for Act 44's passage and later to whitewash the gravity of the situation–at least that's how it appears in all of the news coverage I've read.

[cpzilliacus]

But what astonishes me is how the commissioners didn't seem to put up any sort of resistance whatsoever. To the contrary, they seemed rather eager for Act 44's passage and later to whitewash the gravity of the situation–at least that's how it appears in all of the news coverage I've read.

Even more perplexing to me is that Wall Street keeps purchasing PTC bonds to provide the cash for this - and the proceeds of those bonds are going right out the door to PennDOT and then to an assortment of Pennsylvania transit agencies. Of course, the original plan was that PTC would collect tolls from I-80 users, and those toll dollars would end up subsidizing transit and other Pennsylvania projects having little or nothing to do with the Turnpike or I-80.

The Pennsylvania State Auditor has been very critical of the practice of issuing PTC bonds to fund transit subsidies, but the trustee for the PTC bondholders has apparently not been heard from.

[cpzilliacus]

Was now-disgraced former CEO Joe Brimmeier so desperate to preserve his own job that he was willing to put the PTC in serious financial jeopardy to do so?

Wasn't just Brimmeier who was at fault.  Ex-Pennsylvania State Senator Vince Fumo (D-1) was one of the masterminds of Act 44.  Some years it passed, Fumo was indicted on corruption charges (some of which involved the Turnpike) and he was convicted, and served time in federal prison.