Penn Pike meeting on toll concessions for $5.2 billion Mon Fayette/Southern Beltway projects

August 15, 2008
By Peter Samuel

The Pennsylvania Turnpike Commission (PTC) has scheduled a meeting Sept 17 in Harrisburg for companies interested in what they call a public private partnership (P3) for the remaining three sections of the Mon Fayette Expressway and Southern Beltway near Pittsburgh. We think it's a toll concession they have in mind. (see Terminology at bottom)

Turnpike CEO Joe Brimmeier is quoted as saying that the PTC remains fully committed to completing the projects: "In order to do that, we need to look at all options, including alternatives like P3s. Timely completion of these projects is important to the region's economy, and we believe private involvement could accelerate construction, particularly since there's very limited funding available for new transportation projects at the state and federal levels."

The three roadway projects are from west to east:

- Southern Beltway US22 to I-79 crimson on map 21.4km (13.3 miles) estd cost $659m

- Southern Beltway I-79 to PA43 (MFE) tan on map 20.1km (12.5 miles) estd cost $735m

- Mon Fayette Expressway (MFE) US51 splitting to I-376 near Pittsburgh and near Monroeville, yellow on map, 39km (24 miles), estd cost $3.8 billion

This is a total of 80km (49.8 miles) of 2+2 lane expressway estimated by the PTC to cost close to $5.2b. Concept acceptance, route selection and environmental permitting are obtained for MFE/51-376 and are expected to be obtained for both the Southern Beltway projects by early next year.

Very different kinds of roads

The Southern Beltway is an outer suburban and rural road skirting the southern fringes of the Pittsburgh metro area but providing new east-west connectivity and access to Pittsburgh Internat Airport and I-79 for the southern suburbs and the Monongahela Valley.

The Mon Fayette Expressway from PA51 with arms heading off east and west to I-376 (known locally as the Parkway East) is a far different road. It is a tightly wound, highly structured urban highway, the product of a long set of compromises to accommodate the communities through which it passes. It has lot of walling and some lidded sections to reduce traffic impacts. It has major bridges and riverside works.

It is expensive although some say the PTC's $3.8b estimate is too high.

MFE/51-376 serves both north-south and east-west traffic and would be a major addition to mobility in the region.

It obviously helps link the southern Monongahela (Mon) Valley corridor to Pittsburgh and points east of Pittsburgh. But independent of that the two upper arms of the Y form a potential alternate to I-376 as an east-west route.

I-376 is difficult to widen beyond the existing 2+2 lanes in its western portion nearer downtown Pittsburgh and the universities and hospitals area. MFE's northern portion could provide for spillover traffic to the difficult-to-widen I-376 in the last 8km (5miles) into the downtown.

The PTC had traffic and revenue studies done several years ago and they showed the highway having quite low levels of traffic, they said - around 30k veh/day. The studies were never published.

The Turnpike Commission decided in 2005/2006 that MFE/51-376 wasn't viable for them with toll financing and that the Commission couldn't hope to get sufficient grant money or other funding to fill the gap. So it announced it was deferring any move into detailed design and construction. The projects were on hold.

Joe Kirk

With the Turnpike Commission giving up on completion of the project local officials in the Mon Valley began calling for exploring private sector financing with toll concessions. A longtime backer of the roads, Joe Kirk of the Mon Valley Progress Council, not only called for toll concessions and encouraged several important elected officials to support them, but also solicited expressions of interest in concessions from companies that do P3s.

see http://www.monvalleyprogress.org

The Turnpike Commission decided to get with this push for concessions setting itself up to grant them - officially in March this year. This was presented as a response to a request by state house transport committee chair Rep Joe Markosek who is also the local member in the state house for much of the Pittsburgh region.

The incomplete Southern Beltway got thrown in too.

CEO Joe Brimmeier says the PTC has the legal power to enter into public private partnerships (P3s) and toll concessions and that 1985 legislation requires it to promote the completion of the MFE/SB highway projects.

see PTC statement on "testing private sector interest" 2008-03-04

http://www.tollroadsnews.com/sites/default/files/PTC080304

Nothing much seems to have happened in the four months since then. The PTC has been preoccupied with I-80 and the Governor's threat to dispossess the Commission with a longterm lease of the Mainline and Northeast Extension which would leave it with tiny tollroads around Pittsburgh. Now however the Commission seems confident it has won the fight with the Governor and defeated the lease proposal, has a good prospect for tolling I-80, and is moving on to the new Pittsburgh area tollroads.

Trying to reconcile the Commission opposition to a concession/longterm lease on the established tollroads with support for greenfields concessions Brimmeier says: "We've long recognized the need for private-sector involvement in transportation funding, We believe the best use for a P3 is as initially intended: To help build new facilities, so-called 'greenfield' projects. However, we still assert that P3s relating to 'brownfield,' projects - or existing infrastructure - offer less opportunity for the private sector to add value."

Shrill comment from Cintra/Citi

A statement by Jim Courtovich a spokesman for Pennsylvania Transportation Partners the Cintra/Citi group today said:

"We appreciate that the Turnpike Commission finally agrees with us that a public private partnership is the best way to manage major Pennsylvania infrastructure efforts, including the Mon-Fayette Expressway. We ask it to take the next step and stop its lobbying against the proposed public-private partnership for the Turnpike.

"The actions against a public-private partnership for the Pennsylvania Turnpike are only of self-interest to the PTC's power base, which has been built over decades and has led to staggering mismanagement and inefficiencies. It's time to end the era of misuse of toll money and bring in a real change at the Turnpike with ethical, honest and transparent management practices. Its time for the Turnpike Commission to stop misleading people and offering empty promises just to save their senior positions. It's time to turn the Turnpike back over to the people of the Commonwealth."

Our estimate: faint hope.

On the MFE/SB concessions the Turnpike Commission's state-within-a-state type powers and its successful overt defiance of the Governor may make some potential toll concessionaires shy away from participating in the Commission's own concessioning process. But who knows?

For those who want to attend what is billed as an informational meeting they are encouraged to pre-register by Sept 12 via the Turnpike website at http://www.paturnpike.com selecting the "P3 Project" item on the left of the main page. For other information on the Mon-Fayette and Southern Beltway projects, see

http://www.paturnpike.com/MonFaySB/


The meeting is Wed Sept 17 at the Holiday Inn Harrisburg East, 4757 Lindle Road,
Harrisburg from 1pm to 4pm. Get off the Turnpike at Harrisburg East IC 247.

TERMINOLOGY: The MFE/SB proposal is described in the official statement as "a possible Public-Private Partnership, or 'P3' to finance, design, construct, operate and/or maintain three remaining sections of the Mon-Fayette Expressway and Southern Beltway toll highways near Pittsburgh."

Note there is no explicit mention of the private partner doing toll collection or having rights to the tolls in a toll concession.

P3s are sometimes held to cover project development, design, build and operations projects and initial financing in which there are contractual payments to the private partner rather than toll revenues as compensation.

We asked two Pennsylvania Turnpike officers if this was envisaged as a toll concession with the private entity entitled to the toll revenues, or if it could be a P3 without toll concession rights as compensation.

One responded: "the concession will include the tolling function."

The second: "we specified that these would be tolled expressways and included the option to operate, so I believe it is clear."

Perhaps this is being picky, but it is possible to have a private entity do toll collection outside of a concession. Neither Florida Turnpike Enterprise nor the Turnpike Division of Texas DOT employs directly a single toll collector. Faneuil Inc collects all the tolls on the Florida Turnpike and Washington Group Inc Texas DOT's tolls.

The distinction is that in the case of contracting out toll collection the toll monies are the property of the public toll authority.

There are P3s which are comprehensive contracting out but in which the tolls remain the property of the public toll authority. In these non-concession P3s the public entity takes the business risk and reward.

In a toll concession by contrast the investor-owned entity or concessionaire is entitled to the tolls and takes the business risks and rewards.

Though they use the vaguer term 'P3' for their MFE/SB proposal we think the PTC mean that it is to be a toll concession.

At least the PTC don't use the Texans verbal monstrosity of 'comprehensive development agreement'. Texan CDAs are notable for their lack of comprehensiveness while usually being much more than just development.

TOLLROADSnews 2008-08-15

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