A $12.8 billion binding bid for a 75-year lease of the Pennsylvania Turnpike was announced Monday, May 19, one that the governor’s office says will produce more funding for roads, bridges and public transit systems. The concessionaire also will implement a capital investment plan in excess of $5.5 billion. The State Legislature still must sign off on the plan.
The winning bid was made by a team led by Citi Infrastructure Investors and Abertis Infraestructuras, with Criteria CaixaCorp investing alongside this team as a major shareholder of Abertis. “This is a great day for Pennsylvania,” Gov. Edward Rendell said. “We urgently need new funding for road and bridge repair, and a turnpike lease will help us meet that need. Under the terms and conditions we set, the turnpike will be upgraded, and tolls will be no higher than the Turnpike Commission will charge. Where Pennsylvanians will see a major difference is on our other roads.”
Road repair all over the state will accelerate, and plans to impose tolls on Interstate 80 will be canceled, Rendell said. “Leasing the turnpike will deliver more per year than the I-80 tolling plan,” he said. “Pennsylvanians will get more and pay less, and that’s a good deal as far as I am concerned. I hope the Legislature will give this proposal the serious consideration it deserves so all Pennsylvanians can begin benefiting from the additional funding.”
According to Rendell, the $12.8 billion lease payment would be dedicated to road and bridge repair and support 73 public transit agencies across the state; by investing the money for the long term, the lease plan would generate annual payouts for transportation over the 75-year life of the lease. These payments would average 13 percent higher than the maximum available under the I-80 tolling plan, assuming investment returns equal to the average earnings of the Pennsylvania State Employee Retirement System over the past 20 years, according to Rendell.
Citi Infrastructure Investors is a division of Citi, a global financial services company; it invests in mature, core infrastructure assets, largely in North America and Europe. Abertis is one of the world’s largest private toll road operators; it directly manages more than 2,000 miles of toll roads and, indirectly, another 3,000 miles in 10 countries on four continents. Abertis already operates and manages several large infrastructure facilities in the United States, including Orlando Sanford Airport, Concourse E of Atlanta International Airport, and Burbank Airport, as well as the Teodoro Moscoso Toll Bridge in San Juan, Puerto Rico.
“The commonwealth will retain ownership of the turnpike, while the concessionaire will be held to the highest operating standards,” Rendell said. “They also plan to put more than $5.5 billion of their own money into repairing and upgrading the road, and will have to meet strict quality standards imposed by the commonwealth.”
Initial bids were received from three bidding teams on May 9. Because the top two bids received that day were within 10 percent of one another, those two teams were given an additional week to prepare best-and-final offers. A second place bid of $12.1 billion was submitted on May 16 by a group led by Goldman Sachs. A Macquarie-led consortium made a third bid but did not advance to the final round on May 16 because its bid was not within 10 percent of the highest initial bid.
Final acceptance of the winning bid will require enactment of legislation by the Pennsylvania General Assembly and will require modification of Act 44 – the most recent legislative action on transportation funding in July 2007. Act 44 directs the Pennsylvania Turnpike Commission to apply to the U.S. Department of Transportation for permission to impose tolls on I-80.
If approval is granted, the Turnpike Commission would make annual payments to PennDOT averaging $944 million per year for the first 10 years, and larger amounts thereafter. If permission to toll I-80 is not granted, payments to PennDOT would fall to $450 million per year with no escalation.
Jim Runk, president of Pennsylvania Motor Truck Association, said his group “is concerned with the current state of Pennsylvania’s aging infrastructure, but the governor’s solution to effectively sell our turnpike for 75 years does not meet the needs of the transportation community at large. We continue to advocate for viable, long-term alternatives that will put the public’s best interest ahead of the for-profit drive of a private entity. We remain committed to pursuing an equitable solution and to discussing any and all options for solving this statewide problem.
“We Pennsylvanians are anxious to repair our transportation infrastructure, but with the federal government planning to evaluate it on a national level in 2009, we should be leery of speeding forward with a plan that does not take federal solutions into account,” Runk said. “If we bypass a thoughtful and transparent debate on how to best manage these necessary improvements, we risk punting the ramifications of a near-sighted solution to our children. We urge legislators to consider whether this proposed solution will truly improve travel for Pennsylvania motorists along our main artery.”