Would you pay $34 to drive the Pennsylvania Turnpike? How about $11 for the New Jersey Turnpike? Or $8 for the Garden State Parkway?
Those are the billion-dollar questions for private companies interested in leasing the toll roads.
In figuring out the price tag for a turnpike, nothing is as important to a private bidder as future tolls. If drivers will pay more - and not divert in droves to other roads - companies will offer more for the toll road.
Morgan Stanley & Co., hired by Gov. Rendell to advise his administration on leasing the Pennsylvania Turnpike, is expected to publicly release its recommendations later this month.
"It all depends on the tolls," said one banker who asked not to be identified because his company is involved in the bidding for the Pennsylvania Turnpike. "You want an equitable toll rate, one that isn't so high that people don't want to take the road or so low that you get a lot of congestion."
Rendell wants to lease the turnpike to raise $965 million a year to fix roads and bridges around the state. In New Jersey, Gov. Corzine has expressed interest in leasing that state's toll roads to ease New Jersey's debt burden.
Estimates of the roads' value vary wildly - from $2 billion to $30 billion for the Pennsylvania Turnpike, and from $12 billion to $38 billion for the New Jersey Turnpike and the Garden State Parkway.
If the states followed the example of Indiana, which raised auto tolls by 72 percent before leasing the Indiana Toll Road last year, it would cost about $34 to drive the Pennsylvania Turnpike westbound, instead of the current $19.75. The toll for the New Jersey Turnpike would rise to $11.09 from the current $6.45, and the toll for the Garden State Parkway (northbound) would rise to $7.83 from the current $4.55.
In Indiana, the state was able to get $3.85 billion from Cintra/Maquarie, a Spanish-Australian consortium, for its 157-mile toll road because it agreed to hike car tolls from $4.65 to $8.
"There is a direct correlation of the amount bid to the amount of return," said Matt Pierce, spokesman for Indiana Toll Road Concession Co. "Our bid was based on an $8 toll." Indiana Toll Road drivers are not yet being charged the higher fare, because the state is paying the increase until an electronic collection system is installed by the end of this year.
In addition to any initial toll hike, regular toll increases to keep up with inflation would likely be part of any toll-road lease deal.
The leases for both the Indiana Toll Road and the Chicago Skyway include a toll-escalation clause permitting annual increases tied to the highest of three benchmarks: the consumer price index, or the nominal gross domestic product per capita, or 2 percent a year.
That means a toll increase of at least 2 percent a year would be permitted; since 1940, the nominal GDP per capita has grown by an average of 7 percent a year, and the CPI by about 4 percent a year.
Auto tolls on the Indiana Toll Road would grow to $34.63 by the end of the lease in 2081 with 2 percent annual increases, and to $145.73 with 4 percent annual increases.
On the Pennsylvania Turnpike, if the same 75-year lease term and the same increases were used, car tolls would grow from the current $19.75 to $147.13 (2 percent annual hikes) or to $618.75 (4 percent annual hikes). On the New Jersey Turnpike, with the same formula, tolls would rise from the current $6.45 to $48.05 (2 percent annual increases) or to $202.07 (4 percent annual increases).
For truckers, tolls on the Indiana Toll Road have risen 54.6 percent since last June, and are scheduled to rise by 113 percent by 2009. On the Chicago Skyway, leased by the same consortium as the Indiana road, auto tolls have gone up 25 percent since 2005 and are to go up 175 percent over 12 years, and semitrailer tolls have gone up 33 percent (during "peak" hours of 4 a.m. to 8 p.m.).
In Indiana and Chicago, the primary users of the leased toll roads are not state residents, but through travelers. That insulates local politicians from anger over high tolls, since most of the drivers aren't voters. That is not the case in Pennsylvania and New Jersey, where most of the toll-road users are state residents.
"Turnpike user-voters will accept at least some toll-rate increases before burning politicians in effigy, and that level is probably not too far under the rate of inflation," wrote Steve A. Steckler, chairman of Infrastructure Management Group, of Bethesda, Md., in a recent analysis of turnpike privatization.
Another consideration in determining how much a turnpike is worth - and how much tolls should be increased - is the expected growth in traffic. Traffic consultants are key figures for the bidders for toll roads; their projections help decide how aggressively private companies will bid.
Over the last 10 years, traffic has grown by an average of 2.4 percent a year on the Pennsylvania Turnpike. On the New Jersey Turnpike, traffic has grown by an average of 2.6 percent a year, and on the Garden State Parkway, 1.9 percent.
On the Indiana Toll Road, historic growth is less - about 1.5 percent a year - and that would be enough to recover the $3.85 billion lease price with toll increases of 2 percent a year, analyst Dennis Enright, of NW Financial Group, concluded in a study last November.
As the Rendell administration examines leasing the Pennsylvania Turnpike, toll hikes and traffic projections are among the key factors it must weigh. But Rendell has kept secret the "expressions of interest" in the turnpike from 48 prospective bidders, so it's unclear what toll increases, traffic projections or lease terms his experts are contemplating.
"One of the absolute frustrations we've had in dealing with the governor is his reluctance to disclose anything of any substance about what his proposal is all about," said Timothy Carson, vice chairman of the Pennsylvania Turnpike Commission, which has proposed to "monetize" the turnpike itself. "Anybody replying [to the governor's request for expressions of interest] could make any assumptions they wanted to."
"If Gov. Rendell were to open all the proposals, I think you'd see a pretty wide range, based on different assumptions," said one investment banker. "Lower tolls equate to a lower value."