Just how good a deal is privatizing the PA Turnpike?

crossposted from unbossed

Not just pretty good! Absolutely great! God's gift! According to Citi / Abertis Infraestructuras - the two companies who have formed a partnership to lease the PA Turnpike. And I am assuming that, given all the press releases and the hyper-aggressive marketing by these two, the benefit goes to Citi / Abertis.

It is just amazing what these guys are doing to sell the public on this lease!

* Of course, they have a website (yawn), which you can find here.

Looks reasonably nice, but what is sort of weird is that not all the click on me parts work. Not a good thing to do when you are trying to persuade the people of Pennsylvania to turn over a major artery for 75 years to their care: "If this rich fancy group can't make a simple website work . . . "  You get the picture.

And when you click on the parts that do work, they basically take you to the same page of "facts". More like scare tactics.

* They are sending out what seems like daily press releases that both tout the key advantages they see in the lease and keep double dog daring the chair of the Pennsylvania Turnpike Commission to come out and debate them in public. Whoa!!

Here is today's press release, for example.

PA TRANSPORTATION PARTNERS REISSUES INVITE TO TURNPIKE COMMISSION TO PARTICIPATE IN PUBLIC FORUMS

Initial Legislative Hearings First Step in Long Process to Ensure People of the Commonwealth See the Real Facts

HARRISBURG (June 27, 2008) – In the wake of the first legislative hearings on the proposed lease of the Pennsylvania Turnpike, Pennsylvania Transportation Partners is reissuing its invitation to Turnpike Commission CEO Joe Brimmeier to participate in a statewide series of public forums to discuss the merits of the Turnpike lease proposal versus Act 44. Brimmeier already has declined an earlier invitation to take part in such a debate.

"If the last two days of public hearings in the state House prove anything, it’s that many lawmakers are still seeking the facts of the lease proposal and how it would compare to Act 44," said PTP adviser Jim Courtovich. "People want an open and transparent debate that delivers solid facts and figures to make an informed decision.

"A series of statewide public forums between PTP and the Turnpike Commission is just what we need to more fully explain these critical transportation infrastructure issues. Let’s take this discussion out of the state capitol and into the living rooms of the people who stand to benefit the most by the opportunity to receive an upfront $12.8 billion investment to fix Pennsylvania’s crumbling roads and bridges as well as an additional $11 billion in the turnpike. We call on CEO Brimmeier and the Turnpike Commission to stop refusing to have open and face-to-face discussions on the merits of each proposal. Let’s get this debate out in the open – not left to high-priced Harrisburg lobbyists."  

In the meantime, PTP is planning a county-by-county campaign that will include email communications and direct mail so that Pennsylvanians will better understand the facts of the lease.

"We welcome the public to get involved in this issue," added Courtovich. "Once they do, they will see that the choice is very clear: accept the more than $20 billion in private investment or shift the burden of fixing Pennsylvania’s crumbling infrastructure to the taxpayers.  Only the lease agreement protects taxpayers from more toll roads, raising the gas tax or taking on more debt to pay for infrastructure improvements on the turnpike and around the Commonwealth."

Ok, maybe it was interesting to see this challenge once or twice, but when the beat keeps goin' on, it makes you wonder.

Responding to Legislative Defeats?

On June 18, the PA House voted the Turnpike deal down overwhelmingly - 185-12

HARRISBURG — The offer from a Spanish firm to lease the Pennsylvania Turnpike — and likely prevent Interstate 80 from becoming a tolled road — is now "dead" after the House soundly rejected a measure to direct Gov. Ed Rendell to enter into a $12.8 billion, 75-year lease of the Pennsylvania Turnpike.

"It is now a dead issue," said House Transportation Committee Chairman Joseph Markosek, Monroeville, this morning. "There may be lawyers who may say we could do it, but in the realm of public opinion, it is a dead issue."

The vote to defeat the measure was 185-12. Local Reps. Mike Hanna, D-Lock Haven, and Kerry Benninghoff, R-Bellefonte were among the 12 who voted in favor of the measure.

And then, on June 26, the Senate passed another piece of restrictive legislation unanimously.

June 27 (Bloomberg) -- Pennsylvania's Senate unanimously approved restricting the state's ability to lease to private operators its only toll road, the Pennsylvania Turnpike.

The Senate, on a 49-0 vote yesterday, sent the bill to the House. The measure stipulates that the Legislature must approve the lease of the Turnpike to private companies. The bill eases requirements for partnerships to build or expand other transportation facilities.

``This legislation is the product of four years of work and provides an important tool in meeting our mobility needs,'' Senate Transportation Committee chairman Roger Madigan said in a statement.  

Responding to a Very Negative Report?

I think that one thing that is driving them is the Legislative hearings going on in Harrisburg this week. A report by finance professors from Penn State costed out the contract and concluded the bid was way too low.

"Our recommendation is reject the bid. It's too low," said Gary J. Gray, visiting professor of finance at Pennsylvania State University. "Why sell your prized asset in a buyer's market?"

He added that predictions that the state could reap 12 percent returns by investing the upfront payment were overly optimistic.

link

Now, when I see that assessment, it starts to make sense why the Citi / Abertis are taking such a pugilistic, aggressive stand. Makes me think the people of the Keystone State better be looking beyond the claims that that is the best deal they can get and the scare tactics about taxes and do some serious thinking.

The PA Turnpike Commission Response

The PA Turnpike Commission has not been aggressive in the way Citi / Abertis is. But they have responded. Here is what is currently on the PTC website:

Abertis Bid for Leasing of the Pennsylvania Turnpike Points of Concern

The PA Turnpike Commission expects an open and vigorous debate on the merits of Act 44 versus a proposed lease of the PA Turnpike to a consortium led by Abertis. Our preliminary review of the proposed legislation and the concession agreement raises several critical concerns that will be vetted thoroughly by the relevant legislative committees.

Among the issues of importance to motorists, taxpayers and policymakers are:

   *    Tolls. An analysis of historical toll rates demonstrates that current tolls would be 2.5 times higher if the turnpike had been operated for the past 67 years under the terms of the concession agreement with Abertis allowing tolls increases at the rate of 2.5% or the Consumer Price Index, whichever is greater. Toll hikes in future years will likely increase at higher rates under a lease agreement with Abertis than under the financial projections that provide the financial underpinnings of Act 44.

   *    Capital Funding. There is no long-term plan for rebuilding I-80 and this vital interstate – if not tolled appropriately – will see a dramatic increase in traffic volume and will further deteriorate. The Turnpike itself will suffer from a vastly reduced capital plan – investment is cut by $1.6 billion under the concession plan in the first ten years alone. The concession agreement /legislation does not establish any permanent funding stream for mass transit – a critical component of Act 44.

   *    Bid Amount. A financial analysis demonstrates that Act 44 generates more revenue for PA roads, bridges and mass transit agencies than a lease does because the true bid – the net - is $7.9 billion. The administration’s projected rate of return of 12 percent exceeds any responsible projections and is contradicted by the use by State Employees Retirement System (SERS) of 8.5% as a reasonable investment assumption in calculating their funding requirements to meet pension benefit obligations. At 8.5%, the Abertis bid proceeds would be depleted in just 17 years.

   *     New Investment Board. The enabling legislation establishes a Public-Private Transportation Fund controlled by a three-member board comprised of the Governor, the Budget Secretary and the PennDOT Secretary. Contrary to public statements by administration officials, there are no provisions providing for these amounts to be deposited with SERS. Instead, the new board would control the fund without any legislative oversight, with all expenditures subject to the Governor’s approval.

   *     Abertis Benefits. The concession agreement provides Abertis with a 75-year tax exemption from most state and local taxes; does not provide for current Turnpike Commission retirees benefits; and exempts the Abertis deal from the Right-to-Know Law, local zoning regulations and much of the Procurement Code.

The PTC has also set up its own website - link here to respond.

I have to say that if the decision were made on the basis of websites, the PTC would win this fight. Not only do the links work, but there is a lot of useful information there. This page, for example, with its clickable comparisons.

And a particularly nice touch is the Ask the Commission page, which not only provides answers to questions, it then provides additional details explaining the basis for the answer.

For example, up now is:

Dear Commissioner,

Is it true that the bid to lease the Turnpike to a Spanish led team is more than $12.8 billion? How does that compare to the funding the Turnpike is already generating for transportation under Act 44?

Unknown PA Resident
(submitted via website)

Dear PA Resident,

The Rendell Administration did accept a bid to lease the Turnpike for 75 years at a gross bid of $12.8 billion.  This amount does not include necessary deductions to account for the required pay-off of outstanding Turnpike bond debt, the funding of State Police costs and PTC capital projects which the Commonwealth is required to pay.  These deductions reduce the bid to $7.9 billion.

Over the next 12 years, Act 44 will provide an average of $1 billion per year for transportation. In total, it amounts to $83.3 billion over 50 years. For more details about the PennDOT payment schedule click here...

Carl DeFebo
Pennsylvania Turnpike Commission
Public Information Manager

Check it out. Don't just take my word for it. Who do you think would win based on just the websites.