Turnpike tolls go up 6%; smaller increases expected in future
Pennsylvania Turnpike users can expect 6% toll increases in 2020 and 2021 but then — if the state Legislature follows through with plans to change how the state funds public transit — the rate of annual increases gradually will go down to 3% in 2028.
Nikolaus Grieshaber, the turnpike’s chief financial officer, outlined the agency’s financial future recently in an interview with the Pittsburgh Post-Gazette about the 6% toll hike that begins Jan. 5. The increase marks the 12th year in a row that rates have gone up and will increase the fee for a car traveling the length of the state to $61.80 from the current $58.30 for cash customers, and to $44.20 from $41.70 for E-ZPass users who several times had smaller increases to boost the use of the prepaid cards.
Mr. Grieshaber said the agency needs the rate hikes the next two years to cover the cost of debt service, which is about $750 million a year. That’s more than half of the turnpike’s annual revenue of about $1.4 billion.
“More than half of our revenue is going into debt service,” he said. “We have a lot of debt to pay down.
A major reason for the growing debt has been the turnpike’s obligation to pay $450 million a year to the state Department of Transportation to help pay for public transit. It borrows most of that money every year because it doesn’t have the cash on hand to pay it.
That began in 2007 when the
Legislature passed a bill pushed by former Gov. Ed Rendell requiring the turnpike to pay $900 million a year to PennDOT, money that was supposed to come from collecting tolls on Interstate 80. Federal officials nixed the tolls, but instead of eliminating the turnpike payments they were cut to $450 million annually through 2022, even though the agency no longer had a source for the funds..
The amount is scheduled to be reduced to $50 million in 2023, but that is contingent on the Legislature finding another source for the funds. The turnpike has been pushing unsuccessfully for several years to eliminate that payment before 2022, but legislative Republicans and Democrats say they expect to pass laws in 2020 changing the funding formula after 2022.
If those payments aren’t substantially reduced, it would be “catastrophic” for the turnpike,
Mr. Grieshaber said. The agency would have to continue toll increases of at least 6%, he said, but he agreed with the concern expressed repeatedly by state Auditor General Eugene DePasquale that motorists will begin to avoid the toll road if rate hikes continue.
“There’s been a lot of talk [about changing the funding formula],” turnpike spokesman Carl DeFebo said. “We’re more hopeful than we’ve been before that it will happen.”
If that does happen, the amount of the turnpike’s annual toll hikes would begin to come down, Mr. Grieshaber said, beginning in 2023. The schedule calls for the rate of increase to fall to 3% in 2028.
“The rate of increase will start to decline,” he said. “There will still be annual increases, but they won’t be as high.”
After that, the increase may stay at 3% for many years to account for inflation, Mr. Grieshaber said.
Mr. Grieshaber noted that eliminating the annual payments for transit wouldn’t substantially reduce the agency’s debt payments
immediately because most of the previously issued bonds have a 30year payout.
“Some people think eliminating the borrowing eliminates the debt, but it doesn’t work that way,” he said. “It takes many years for that to happen.”
The agency also will cut costs by millions when it goes to a completely cashless toll system in fall 2021, instead using overhead gantries to record payments for motorists using prepaid E-ZPass accounts or photographing license plates and mailing bills to those without a transponder. That will eliminate the jobs of 600 toll attendants and office workers who count cash tolls.
Over the next six years, the agency will spend $129 million to install the gantries along the main line of the turnpike. It will use the existing toll booths to record payments electronically until all of the gantries are in place.
But Mr. Grieshaber and Mr. DeFabo said a high percentage of the payroll savings will be used to reconfigure exits that no longer will have toll booths, add lesscomplicated exits in new areas because toll booths won’t be needed and continue to upgrade and expand the highway, parts of which are original construction from almost 75 years ago.
“Obviously, we have to maintain our asset,” Mr. Grieshaber said. “We can do things we would like to do that we couldn’t before.”
“More than half of our revenue is going into debt service. We have a lot of debt to pay down.” — Nikolaus Grieshaber, the turnpike’s chief financial officer