By Eric Boehm | PA Independent
HARRISBURG — The Pennsylvania Turnpike Commission lost at least $109 million in risky interest investment moves, Auditor General Jack Wagner says.
The state’s fiscal watchdog said Tuesday the loss of taxpayer money in risky interest-rate swap arrangements was only one part of a gloomy financial situation uncovered by his audit of the Turnpike Commission, which is more than $8 billion in debt and spends more than 47 cents of every dollar on debt-service payments.
In a response to the audit, the Turnpike Commission said the swaps saved $10 million on the payments.
Wagner disagreed. He said the turnpike lost $29 million on 23 active swap deals between 2007 and 2011, the period examined by the new audit. The turnpike also paid more than $100 million in fees and interest for those swaps.
The swaps are risky investment deals in which two parties essentially bet on the direction interest rates will move. The party that guesses correctly gets paid by the loser.
The Turnpike Commission said Wagner’s report included “incomplete and inaccurate” results when it came to the interest rate swaps.
Craig Shuey, acting CEO of the commission, said the audit generally shows the turnpike is meeting its mission statement.
“Despite the fact that we do not necessarily agree with all of the findings and recommendations, your review of our performance has given us additional areas to consider as part of our long term strategy to position the organization for future challenges,” Shuey wrote in a letter to Wagner last week.
Wagner said the swaps are only one part of the problem. Of greater concern is the turnpike’s debt of more than $8 billion.
That’s a total that has grown from $2.9 billion in 2007, raising red flags for the auditor general.
Wagner pinned the fault on Act 44 of 2007, a state law that requires the turnpike to transfer $450 million annually to the state Department of Transportation.
That revenue is used for road and bridge projects and mass transit.
Wagner called for the repeal of that law, which, he said, risks the financial future of the turnpike and puts all Pennsylvania taxpayers on the hook.
The turnpike has been forced to raise tolls in five consecutive years to meet the demands of Act 44.
The turnpike commission agrees that Act 44 has been the driving force behind those toll hikes, but denies that the spiraling level of debt is a crisis.
Short of a repeal of Act 44, Wagner suggested the turnpike cut back in other areas – such as paying commissioners for mileage instead of giving them cars.
The release of the audit report is likely the last hurrah for Wagner, a Democrat, in his current role. His second term as auditor general will end next week, when Eugene DePasquale, a former Democratic state representative from York County elected to the post in November, replaces him.
Wagner is rumored to be considering a gubernatorial bid in 2014, but he declined Tuesday to talk about his plans.
Contact Boehm at [email protected] and follow @PAIndependent on Twitter.
— Edited by John Trump at [email protected]