For a couple of years I posted frequently about municipal (Chapter 9) bankruptcy. From Stockton, California to Detroit with three published articles in between, I covered a wide range of topics. But one that may not have received enough attention is that the definition of "municipality" in the Bankruptcy Code encompasses more than the typical city. It includes all sorts of state-created legal entities including toll authorities.
Toll roads in the United States have filed for bankruptcy. Why would a tollway loose money? Simple, someone steals a boatload of it. And who could steal that much money from a tollway? Why state government, of course.
How for the love Howard Johnson's can a state steal money from a tollway? For the answer go here to read the decision of of the United States District Court for the Middle District of Pennsylvania in Owner Operator Indep. Drivers Assoc. v. Penna. Turnpike Comm. (April 2019). The truckers' association filed suit to stop Pennsylvania from appropriating money from the Turnpike Commission to pay for road repairs other than on the Turnpike itself. It should be obvious why the state would like to do this: it gets users of the Turnpike to pay for repairs rather than local taxpayers. A win-win, right? Not if you're a user, of course, which is why they sued.
To cut to the chase, the District Court held against the truckers; what the Pennsylvania did was not unconstitutional. For the record, I agree.
What interests me are the long-term consequences for the Turnpike. Every dollar co-opted by the state is one less dollar spent on the Turnpike. And the power of the Turnpike to raise tolls is limited by the market. Hence, over time, especially as the state's avarice increases, it will take an ever-greater percentage of the Turnpike's take and eventually kill the goose that laid the golden egg.
But then ... it's time for Chapter 9! Except that Pennsylvania doesn't permit it municipalities to file Chapter 9. So for the Turnpike Commission it will be a trip to receivership. Which doesn't have quite the same ring but who cares; there will be plenty of legal fees to go around.
(For more than you want to know about Chapter 9 bankruptcy you can read my three published articles: Municipal Bankruptcy: When Doing Less Is Doing Best (download here or here); Who Pays The Price: The Necessity for Taxpayer Participation in Chapter 9 (download here or here), and Who Bears the Burden: The Place for Municipal Residents in Chapter 9 (download here or here).)
Toll roads in the United States have filed for bankruptcy. Why would a tollway loose money? Simple, someone steals a boatload of it. And who could steal that much money from a tollway? Why state government, of course.
How for the love Howard Johnson's can a state steal money from a tollway? For the answer go here to read the decision of of the United States District Court for the Middle District of Pennsylvania in Owner Operator Indep. Drivers Assoc. v. Penna. Turnpike Comm. (April 2019). The truckers' association filed suit to stop Pennsylvania from appropriating money from the Turnpike Commission to pay for road repairs other than on the Turnpike itself. It should be obvious why the state would like to do this: it gets users of the Turnpike to pay for repairs rather than local taxpayers. A win-win, right? Not if you're a user, of course, which is why they sued.
To cut to the chase, the District Court held against the truckers; what the Pennsylvania did was not unconstitutional. For the record, I agree.
What interests me are the long-term consequences for the Turnpike. Every dollar co-opted by the state is one less dollar spent on the Turnpike. And the power of the Turnpike to raise tolls is limited by the market. Hence, over time, especially as the state's avarice increases, it will take an ever-greater percentage of the Turnpike's take and eventually kill the goose that laid the golden egg.
But then ... it's time for Chapter 9! Except that Pennsylvania doesn't permit it municipalities to file Chapter 9. So for the Turnpike Commission it will be a trip to receivership. Which doesn't have quite the same ring but who cares; there will be plenty of legal fees to go around.
(For more than you want to know about Chapter 9 bankruptcy you can read my three published articles: Municipal Bankruptcy: When Doing Less Is Doing Best (download here or here); Who Pays The Price: The Necessity for Taxpayer Participation in Chapter 9 (download here or here), and Who Bears the Burden: The Place for Municipal Residents in Chapter 9 (download here or here).)
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