Ohio legislators have proposed raising the speed limits on some of Ohio’s highways. It appears the change could impact revenue forecasts for the Ohio Turnpike and may also impact the sale of turnpike bonds proposed by the Governor.
A recent $3.4 Million dollar study of the Ohio Turnpike by the firm KPMG used a forecasting model to predict future revenue for the turnpike. One of the key components of the model was estimated diversion rates i.e. how many drivers would choose alternative, non-turnpike routes based on other model inputs like toll increases.
According to the study, one of the assumptions used when developing and running the model was “Posted Speed Limit”. The study assumed the Ohio Turnpike would maintain 70 mph limit while other roads would maintain their 65 mph limit for urban freeways, 65 mph or 55 mph for urban freeways, etc.
This as an important factor since time, as well as cost, are considered by drivers who may choose to use or not use the Ohio Turnpike. And drivers who do choose an alternative route are not paying tolls and therefore not generating revenue for the turnpike.
Kasich’s transportation budget bill, HB51, is currently sitting in the Senate Transportation Committee and it include increases in speed limits on Ohio’s freeways, including an increase to 70 MPH for interstate routes – bringing them to the same level as the Ohio Turnpike. One route that would be affected is I-76 in the eastern part of the state.
According to the KMPG study, I-76 is one of the “common parallel routes used by trucks to avoid the Turnpike tolls.” Speed limit increases on this route could impact the predicted diversion rates used to forecast turnpike revenue.
If KMPG’s revenue estimates are being used to price the turnpike bonds, and some of the key components of their forecasting model may be changing based on proposed speed limit legislation, then Turnpike Commission officials could have a serious problem when they try to take these bonds to the market.
I just hope we don’t have to pay KPMG another $3.4 million dollars to run the numbers again!
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