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(August 2007) House Bill 1590, which was signed into law on July 18, both increases and restructures transportation financing in Pennsylvania. On average, highways, bridges, and mass transit systems across the state will receive an additional $946.3 million each year over the next ten years, representing the largest single transportation investment in the state’s history.

Funding Transportation: A Public-Public Partnership

Generally, the new transportation program is not funded through tax increases or new taxes. There is no new tax on oil company profits. And there is no increase in the gas tax or oil company franchise tax, both of which are paid at the pump by consumers. Nor is the new program funded through a much-debated Public-Private Partnership such as the long-term lease of the PA Turnpike to a private company.

Instead, state leaders negotiated a Public-Public Partnership with the PA Turnpike Commission (PTC). The arrangement allows the PTC to institute tolls along I-80, increase tolls on the Turnpike, and borrow against anticipated future revenues to make legislated annual payments to the Commonwealth. Upon federal approval, the PTC will establish up to 10 toll booths across I-80 beginning in 2010-11. Tolls on the Pennsylvania Turnpike will increase in 2009, sooner than previously scheduled. Bonds issued by PTC will be paid by tolls and guaranteed with future revenue of the Motor License Fund.

A Plan to Increase Funding for Public Transit

Of the $946.3 million, $414.4 million – roughly 44 percent – is dedicated to the Pennsylvania’s 43 urban and rural mass transit systems, closing existing operating shortfalls and providing additional funding for future capital improvement projects. Transit systems will receive an additional $300 million in fiscal year 2007-08.

New Funding for Transit – Projected Over 10 Fiscal Years

In addition to new revenues from Turnpike proceeds, HB 1590 also restructures state transit funding. In a revenue-neutral swap, 4.4 percent of Sales and Use Tax revenues is dedicated to a new Public Transportation Trust Fund, which is estimated to generate $392.8 million in fiscal year 2007-08. In turn, $392.8 million from the current Public Transportation Assistance Fund (PTAF) will be returned to the General Fund. The bill also adjusts state and local funding formulas to more accurately reflect operating and capital needs and allows for performance criteria in transit funding, including elements such as rider capacity.

Through the new transportation plan, state leaders provide transit systems with a much-needed degree of fiscal stability. By dedicating a portion of sales tax revenues, rather than a discretionary allotment through PTAF, the state has secured a revenue source that is indexed to economic growth. By mandating annual increases to Turnpike proceeds, the state has provided the assurance of revenue growth even in periods of economic downturn.

The transportation funding solution particularly benefits the Southeastern Pennsylvania Transportation Authority (SEPTA), which is responsible for moving over two-thirds of transit riders statewide. Despite hiking fares by an average of 11 percent in July, SEPTA still faced a $94 million operating deficit for its new fiscal year. The new legislation closes this deficit, providing SEPTA with an additional $156 million in operating funds and another $58 million for the agency’s pressing capital improvement needs.

Though a part of the original House Bill, the final version of HB 1590 does not include statewide local taxing authority, a provision that would have allowed counties and municipalities to employ a variety of tax options to meet local funding requirements. Only Allegheny County was granted this authority. Also removed from the final Bill were alterations to the SEPTA Board of Directors, designed to more accurately reflect system ridership and local funding levels.

A Plan for Increasing Funding for Roads and Bridges

Of the $946.3 million, $531.8 million – roughly 56 percent - is dedicated to the Pennsylvania’s roads and bridges. These funds will supplement the Motor License Fund support for transportation programs. A portion of the PTC funds will be dedicated to state roads and bridges – while a portion will go toward construction and maintenance on local roads and bridges. In 2007-2008, it is expected that $415 million will be used on state-owned roads, while $30 million will be used on local roads and bridges, and $5 million will be dedicated to county bridge maintenance.

New Funding for Roads and Bridges – Projected Over 10 Fiscal Years

Detour Ahead? Federal Approval of I-80 Tolls

The transportation plan hinges on the ability of the PTC to toll I-80, and that still requires federal approval. Since the passage of the transportation bill, two Congressmen from northwestern Pennsylvania have opposed the plan, due to the impact of tolling I-80 on their constituents in northwestern PA. How the state resolves this potential problem is unclear.