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Markosek says he'll keep turnpike lease bill in committee

By PATRICK CLOONAN, Daily News Staff Writer

08/25/2008

State House Transportation Chairman Joseph Markosek, D-Monroeville, said he has no intention of releasing the proposed lease of the Pennsylvania Turnpike for a vote.

Markosek reiterated his opposition to the proposed $12.8 million deal with Spain's Abertis Infraestructuras and the U.S. firm of Citi Infrastructure Investors.

"It would not be in the best interest of Pennsylvania to give up such a valuable asset for 75 years for an upfront amount of cash that would not last a third of that," Markosek said Saturday.

Markosek was in North Versailles Township for the ribbon-cutting at Logan Middle School. He represents part of North Versailles and Wall, both part of the East Allegheny School District.

He said members of his committee were ready to vote down the proposed lease before the General Assembly went home for the summer, but were asked not to do so by Gov. Ed Rendell.

Since then, the Citi-Abertis consortium, also called Pennsylvania Transportation Partners, extended its lease offer until Sept. 30.

"Momentum clearly favors the lease," Abertis managing director Jordi Graells said last month. "The proposed (Interstate 80) tolling initiative under (state) Act 44 only shifts funds around the commonwealth.

"The lease is the only plan that would infuse the commonwealth's aging transportation infrastructure with desperately needed new investment, rather than new tolls and larger toll increases."

Markosek said he's using his prerogative as chairman to keep that bill in committee, but said he hasn't heard of any support for the lease in his 25th Legislative District.

"I have personally not had any indication of support of that from my constituents or from people in Southwestern Pennsylvania," Markosek said.

Randell has way Our infrastructure will be sold overseas to highest bidder
We will work hard to find out who is for thees idea and will work even harder to leave them know we are not for the idea of selling our infrastructure to leave the cities ride cheap on mass transit when rural America pays for them to do so. Fuel prices at the highest and Mass Transit at the cheapest!
ALL COMPANIES THAT ARE LISTED ARE FROM SPAIN AND AUSTRIA!
The Foreign companies will have control of our vital infrastructure for 75 YEARS

4-16-2008
Pa. governor outlines terms of turnpike privatization bids

Turnpike lease numbers are too good to be true

By Sean Logan

May 28, 2008

The Rendell Administration's proposed deal to lease the Pennsylvania Turnpike to a Spanish firm and invest the proceeds for state transportation funds greatly exaggerates both the true value of the bid and the money the state will earn on that lease payment over the long term.

Gov. Ed Rendell claims that Abertis would pay the state $12.8 billion for a 75-year lease of the Turnpike, which would yield $1.1 billion per year over the first 10 years for highways, bridges and mass transit. The real net value of the bid is actually much less -- about $9.6 billion, with the state more likely to earn only an average of $605 million annually to spend on transportation in the first 10 years. That is nearly $350 million less than it expects to realize under the Act 44 transportation plan passed last year.

The administration's rosy financial scenario fails to account for important relevant factors, and it makes actuarial assumptions for future earnings that are so optimistic as to be fiscally irresponsible. Under the governor's plan, we could run out of money in as little as 16 years.

The first misleading feature of the proposal is the announced bid amount of $12.8 billion. Although that is the gross sum of the Abertis offer, the administration admits that the commonwealth would have to pay off $2.3 billion in existing Turnpike debt that Abertis won't assume. The Turnpike also plans a bond issue in the near future that will add more debt, bringing the total net cost to $2.6 billion. That cuts the net worth to the commonwealth down to $10.2 billion.

Although Abertis commits to making capital improvements on the Turnpike, there are $580 million in projects currently in the Turnpike capital plan, which the lease requires the commonwealth to complete. That further reduces the value of the deal to $9.6 billion.

So the $12.8 billion might be a nice sound bite, but it is fiction.

A larger flaw in the proposal is the earnings potential of the investment. The administration said it intends to turn the bid amount over to the State Employees Retirement System (SERS,) anticipating a 12-percent return on investment over 75 years. That estimate is based on SERS' average return over the past 20 years, a period that saw historically high surges in investment markets unlikely to be seen again for a long time. Although the numbers haven't yet been released, SERS is expected to lose money in this year's first quarter. More than 10 months into their fiscal year, the PSERS' return has been a meager 2.6 percent.

Most investment analysts, including the state retirement systems, use an 8.5 percent estimate to calculate future earnings. At that rate, the proceeds on an investment of $9.6 billion, and factoring in state police costs that the state will have to assume, delivers only $605 million per year for highways, bridges and transit programs over the first 10 years.

Under the Abertis deal, the commonwealth would become liable for state police patrols on the highway, costs currently paid by the Turnpike, estimated to be nearly $33 million next year. That amount will grow with inflation.

Even granting all of the administration's assumptions, if the state earned 8.5 percent on the investment and adhered to governor's announced plan of $1.1 billion per year in transportation spending, it would deplete the initial investment in just 16 years, rather than the 75-year term of the lease.

It is pie in the sky to think that this deal will produce $1.1 billion or more annually for 75 years. These kinds of budgeting practices invite future deficits, something they can do in Washington, but we aren't allowed to do on the state level. We would have to ask taxpayers to fill the gap.

In giving away management of a state asset, the commonwealth would also sacrifice controls that are in the public interest. The proposed lease agreement provides that construction, expansion and operation of the Turnpike would not be subject to local zoning and land use regulations and ordinances.

The current economic climate makes this a terrible time to enter into such a deal, even for those who philosophically favor it. Investment markets have declined sharply in the year since the administration first proposed the lease plan.

Simply put, this is a bad deal for Pennsylvania. Who would benefit?

Abertis and its partners had to raise $6 billion in private equity investments to fund the bid. These investors have been guaranteed a rate of return between 11 and 12 percent. That means more than $700 million per year from Turnpike proceeds will go to investors, rather than to roads, bridges and transit programs.

Sean Logan is a Democratic state senator who represents portions of Allegheny and Westmoreland counties. He is a member of the Senate Appropriations Committee.

Monday, May 19, 2008

Citigroup-Albertis team wins right to lease Pennsylvania Turnpike

Philadelphia Business Journal

A group led by Citigroup and Spanish toll road operator Abertis Infraestructuras SA won the right Monday to lease the Pennsylvania Turnpike, with a bid of about $12.8 billion.

Gov. Ed Rendell has been advocating leasing the turnpike as a means of funding mass transit and much-needed bridge and road repairs in the state.

Rendell has touted the lease as an alternative to Act 44, legislation he signed 10 months ago that includes converting Interstate 80 into a toll road. The federal government has not approved the introduction of such a toll, and the plan has been met with strong opposition.

The lease would run for 75 years.

Rendell said New York-based Citigroup (NYSE:C) and Albertis will meet with legislators, who must approve the deal, to discuss their plans. The bid will officially remain in place until June 20, but Rendell said he has "no doubt" it will be extended as the legislature considers it.

Rendell said the lease would give the state 13 percent more funding than Act 44 and cost Pennsylvanians 30 percent less, because it would not include the I-80 tolling.

The other final bidder was a group led by Goldman Sachs Group and Australian toll-road operator Transurban Group, which bid $12.1 billion, Rendell said.

The third bidder was led by Australia's Macquarie Infrastructure Group and Spain's Cintra Concesiones de Infraestructura de Transporte SA, which offered $8.1 billion. Because that bid was not within 10 percent of the other offers, Macquarie and Cintra did not participate in the final bid, Rendell said.

The governor first proposed leasing the turnpike about a year ago. A study done by Morgan Stanley estimated that a 75-year lease agreement could bring between $12 billion and $18 billion to Pennsylvania.

Rendell said "market conditions" and the fact that tolls are not allowed to rise more than 3 percent a year kept the bids at the low end.

Opponents of the turnpike lease plan often cited the likelihood of a foreign company operating the 500-mile roadway. "There's no more American institution than Citigroup," Rendell said. "And Abertis already operates and manages several [projects] in the U.S."

The Pennsylvania Turnpike Commission could not immediately be reached for comment, but last week spokesman Bill Capone said, "We've known for some time about this process ... and that they would eventually disclose a bid. It will be a matter for the Pennsylvania legislature to take under advisement."