CAWP Legislative News 5-10
Feds Reject Application to Toll I-80, Governor calls for Special Session on Transportation Funding
In reaction to the United States Department of Transportation’s rejection of the application to toll I-80, Governor Edward Rendell announced at an April 6th press conference that he is planning to call a special session of the General Assembly to address the issue of transportation funding. He said he will set the date for the start of the special session in consultation with legislative leaders “but it will be fairly soon.” He added, “We simply cannot wait to replace these funds.”
Governor Rendell said, “We will look at every option on the table.” Some of the options cited by the Governor include an oil company gross receipts tax, public private partnerships, a possible partial lease of the Pennsylvania Turnpike, fees and taxing options, and using the state’s capital budget authority. Governor Rendell said, “I come in with no preconceived notions; no one solution, and I will be flexible.” He went on to say, “This is such a dire problem of such significant consequences for jobs, for economic development, for commerce and for the quality of life in Pennsylvania that I urged all the legislative leaders to not look at this in a partisan way and to approach this in a nonpartisan fashion.” According to Governor Rendell, he also told the legislative leaders, “Let’s try to hammer out the best solution for the people of Pennsylvania. This Commonwealth cannot afford for us to do nothing.”
Governor Rendell responded to the following questions from the news media:
Does this take us back to your original plan to lease the Turnpike and given the current economy, is that a viable option?
We’ll see. I think the oil company gross profits tax is a great idea. I think we should take a look at that. I think the citizens would heartily support it particularly with protections against any taxes being passed on at the pump. That would certainly be an option. To look at the possibility of a public private partnership or a limited public private partnership or a new type of public private partnership is something we should consider. The bottom line is the legislature and the Administration has to look at everything. Remember the Transportation Funding Reform Commission came up with very strong recommendation. Act 44 was a partial remedy. It did not go nearly as far as the recommendation. We are looking at every option. Nothing is on the table per se and nothing is off the table.
Is there a deadline for finding a solution?
We need to resolve this before the end of the fiscal year.
What was the reaction when you spoke to the legislative leaders?
They know the magnitude of this problem. Senator Pileggi lives in Delaware County, which has more transit than any county except Allegheny and Philadelphia so he knows the magnitude of this. They all do. The small transit authorities don’t get a lot of money in terms of raw dollars but the dollars they got out of Act 44 are desperately important for them. This is not a Philadelphia/Allegheny issue anymore. Remember: the biggest shortfall here is highways, bridges and roads.
What about the timing of raising taxes in an election year?
I have been going around talking about the budget. When I talk to people about a Marcellus Shale severance tax; when I talk about Pennsylvania being the only state that doesn’t tax cigars and smokeless tobacco; when I talk about ending a 1% discount on sales tax for the Wal-Marts and the Home Depots; when I talk about the “Delaware loophole”, you would be amazed. People aren’t dumb. They think they are good ideas. They want big gas to pay its fair share; they want big tobacco to pay its fair share; they want big retail to pay their fair share; and they want corporations to pay their fair share. People understand that if they want safe bridges, good roads and potholes eliminated, you cannot wait for the pothole fairy to do it, you have to pay for it.
Is it fair for turnpike drivers who have been paying higher tolls these past couple of years to see those revenues spread across the state?
They were always spread across the state. There is nothing new in Act 44.
Will the special session be geared towards raising the $472 million lost from the rejection of the application?
At the very least. We have to replace what we have lost. I think with the escalating cost we need to look at doing a little bit more. Clearly, if we match the money from Act 44 it would be a successful conclusion of the session.
What was the feedback from federal officials?
They based it on their legal interpretation. I sat in Secretary LaHood’s office for two and a half hours and listened to their lawyers and our lawyers. No doubt in my mind they were wrong. One of their contentions is that you can’t use money from tolling highway A for other roads and bridges. The enabling legislation explicitly says you can.
If you are right about the legal theory, two straight Federal Highway Administrations run by two of the most different ideological bosses you can imagine both came to the same conclusion.
That is incorrect. In fact, on these issues the Bush Administration was much more favorable.
Assuming you have a friend in the White House, why do you think this happened?
I don’t have a clue. I could conjecture but it would be based on nothing more than conjecture so I am not going to do that.
You have been talking about the cuts to mass transit yet PennDOT and the Turnpike Commission has emphasized no money for the tolling would be used for mass transit.
Clearly, under the law you could not use money from the I-80 tolls for mass transit. The I-80 tolls would be spent to meet other highway needs. If you recall, we have the power to flex money around so PennDOT would have been able to be flex some of that money to mass transit.
What will be the impact on this year’s highway and bridge projects?
We will designate existing PennDOT dollars to finish projects we started. It will mean new projects, mass transit, additional bridges and additional roads won’t be repaired.
Is there any point in reapplying?
No.
Will the tolling of I-95 be considered?
When the federal highway funding is reauthorized, they will lift the ban on tolling interstates. That is what makes this decision ludicrous.
When will you make a decision on the date of the special session?
Relatively soon.
Did you talk with Secretary LaHood today?
I talked with his office.
Why a special session?
There is a need to concentrate on this issue. We need to do something and there is no time to waste.
What is the size of the backlog?
PennDOT Secretary Allen Biehler responded: As the Governor told you, we will be unable to pave 300 miles of highways and roads. Our backlog on bridges has gone from 6,000 to 5,600. We are ahead of the Governor’s goal. However, 300 bridges become structurally deficient each year. The backlog is daunting.
Can the Marcellus Shale severance tax or the tax on cigars and smokeless tobacco be used?
No.
Was it is foolish to rely on federal approval for the funding?
It was not my plan.
Why not reapply?
Because the department’s legal interpretation shuts the door on the issue.
How would the gross profits tax work?
The oil companies would not pay the corporate net income tax but would pay at a higher rate a tax on their gross profits earned in Pennsylvania.
Will there be a need to repeal Act 44?
Yes, parts of it will need to be repealed.
Is there a market to lease or partially lease the Turnpike?
The market is starting to come back. I have had a lot of hedge funds in New York tell me money is available for public private partnership projects.
What would a partial lease look like?
We would have to figure that out. I would talk to Wall Street to gauge their interest in Pennsylvania.
Do you anticipate rebidding the Turnpike lease?
Again, I am going to sit down and talk with the legislative leaders. Interestingly, after the legislature killed my proposal, there are a number of bills in the legislature to create a legal process for public private partnerships.
Do you wish that you increased the gas tax in 2006?
No. Had we indexed the federal gas tax for inflation in 1989 it would be 44 cents more and that would have solved a lot of the transportation problems.
Is your opposition because you don’t think you can pass it?
I will gauge the temperature of the legislative leaders. I am open to everything.
Have you considered cutting spending?
You can’t cut to increase capital dollars. When a legislator recommends cutting spending, you should ask where it should be cut. 80% of the budget is mandated. I can’t control the increases in the number of prisoners in Corrections or increases in the number of people in Medicaid.
Did the federal government express concerns with other parts of the application?
Yes but they based the rejection on their legal analysis and made it clear we cannot revisit the issue.
Can you get this and the budget passed on time?
Only one team wins the World Series but every year the fans of the 30-plus major league baseball teams, as the season starts, hopes their team can win it all. Hope springs eternal.