Pennsylvania Turnpike lease called ‘a bad business deal’

user-gravatar

Following lengthy review and analysis predicated on two days of committee hearings and public debate, Pennsylvania House Transportation Chairman Joseph Markosek on Friday, July 4, announced that the bid submitted by the Abertis/Citi consortium for a 75-year lease of the Pennsylvania Turnpike is “simply a bad business deal.” Markosek said he does not plan to call the legislation authorizing the lease/concession up for a vote by his committee.

“After analyzing all the details of the proposed bid, and conferring with my colleagues, it is obvious there is no meaningful support among our committee members, or the General Assembly, to consider this proposal,” said Markosek, D-Allegheny/Westmoreland. “It would be unfair to all parties, including Abertis and Citi, to continue this into the summer. I’d like to thank them for their time and participation in this public process, but let me be clear – the Pennsylvania Turnpike is not available for lease or sale under these terms. There is no realistic scenario under which this deal will happen, and I have informed the governor, my colleagues and the Abertis/Citi team that we need to move on.”

The $12.8 billion binding bid for a 75-year lease of the Pennsylvania Turnpike was announced May 19, and Gov. Edward Rendell’s office said the plan would produce more funding for roads, bridges and public transit systems; the concessionaire also was to implement a capital investment plan in excess of $5.5 billion. The winning bid was made by a team led by Citi Infrastructure Investors and Abertis Infraestructuras, with Criteria CaixaCorp investing alongside the team as a major shareholder of Abertis. “This is a great day for Pennsylvania,” Rendell said at the time, adding that the deal would mean that plans to impose tolls on Interstate 80 would be canceled.

On June 19 and 20, the House Transportation Committee held public hearings to receive testimony from stakeholders and financial experts analyzing the lease bid. Markosek said several key findings emerged:

  • The net economic value of the proposed bid is actually about $8.5 billion, not $12.8 billion;
  • The current funding law (Act 44), with or without the tolling of I-80, provides more funds for transportation than the Abertis/Citi bid;
  • The lease proposal is predicated on an “unrealistically high” 12 percent rate-of-investment return;
  • Based upon historical Consumer Price Index increases, future tolls under the Abertis/Citi proposal could be 159 percent higher than under the Act 44 plan; and
  • Transfer of the turnpike from public to private hands would eliminate important forms of public-sector accountability that currently exist.
  • “Although to some, privatizing the turnpike may seem like ‘free money’, it is clear that it comes with great costs,” Markosek said. “We must challenge ourselves to find alternative ways to make improvements that would avoid the additional costs, risks and impact on governance which underlie this particular proposal.”

    Markosek said he has asked all Transportation Committee members to notify his office as soon as possible with respect to their summer schedules. “With news accounts of increasing gas prices, record demands on public transportation, deteriorating bridges and insufficient monies to fix our transportation systems, we cannot afford to delay discussion of a long-term plan for Pennsylvania,” he said.

    Rendell – who on Friday, July 4, signed legislation authorizing the commonwealth to invest an additional $350 million in Act 44 funding to speed the repair of 411 structurally deficient bridges statewide – said “I look forward to the Legislature revisiting the transportation funding issue in the fall and considering the $12.8 billion bid we have received for the lease of the Pennsylvania Turnpike.”

    Markosek congratulated the governor for his leadership in exploring – and delivering – badly needed revenue for transportation. “The governor and the General Assembly understand the challenge confronting us,” Markosek said. “We’ve made tremendous progress in the past year. With this additional $350 million and the $750 million received from the Pennsylvania Turnpike Commission under Act 44, we will have generated more than $1 billion in new investment for Pennsylvania transportation without increasing taxes.”

    Under Act 44, the Pennsylvania Turnpike Commission will provide PennDOT with an additional $850 million in the 2008-09 fiscal year, with an initial installment of more than $212 million payable by the end of this month.