Skip to comments.Spanish firm offers $12.8 billion to lease Pa. Turnpike
Posted on 05/21/2008 7:51:41 AM PDT by BGHater
A Spanish toll-road operator won the bidding war to operate the Pennsylvania Turnpike, offering $12.8 billion for a 75-year lease, Gov. Rendell said today.
The proposal by Abertis Infraestructuras, of Barcelona, must be approved by the Pennsylvania legislature, and legislative leaders in Harrisburg have said the plan faces tough sledding with lawmakers.
In making the largest bid ever for the private operation of a U.S. toll road, Abertis partnered with a subsidiary of U.S. investment bank Citigroup, and Spanish investment firm Criteria CaixaCorp.
Abertis operates toll roads in Spain, France, Italy, the United Kingdom, Argentina and Puerto Rico. The company also operates airports, telecommunications systems and parking garages.
Under Rendell's plan, the Abertis/Citi consortium would lease the turnpike for 75 years with the right to raise tolls 25 percent next year and 2.5 percent or the rate of inflation every year after that.
Rendell called the lease plan "a very good deal for Pennsylvania drivers and taxpayers," and he said it would mean about $1.1 billion per year for road, bridge and transit projects in the state, on average, over the next 10 years.
Under the terms of the lease, the private operator would be required to maintain and improve the turnpike and honor existing labor contracts until they expire. At that point, employee unions would need to negotiate new contracts with the Abertis/Citi consortium.
If approved, the turnpike lease would mean the end of embattled efforts to toll I-80 as a way to raise transportation funds. And it would mean the effective end to the 70-year-old Turnpike Commission, the politically powerful agency that operates the toll road.
The Rendell administration would invest the multibillion-dollar lease payment and use the proceeds to pay for highway, bridge and public transit projects. But the total would be reduced by about $2.3 billion dollars necessary to assume existing debts and other obligations, leaving about $10.5 billion to be invested, according to the administration's calculations.
Rendell said the lease money would be invested with the Pennsylvania State Employees' Retirement System, and he said the administration expected to earn 12 percent a year on its money. He said that was the average return for SERS over the past 20 years.
Rendell has said he wants the 359-mile east-west turnpike and the 110-mile Northeast Extension to be in the hands of a private operator by mid-September, but legislators said that is very optimistic.
If approved, the lease would be the largest-ever of a U.S. toll road. The Indiana Toll Road was leased in 2006 for 75 years for $3.8 billion, and the Chicago Skyway in 2005 for 99 years for $1.83 billion.
Pennsylvania Turnpike Commission chief executive officer Joseph Brimmeier said today his agency opposes leasing the turnpike, prefering to stick with Act 44, the new law that would raise transportation funding by tolling I-80 and increasing turnpike tolls.
"With Act 44, the Turnpike will supply PennDOT almost $84 billion over 50 years without raising taxes or out-sourcing a critical asset," Brimmeier said in a statement. "That's why we remain committed to implementing Act 44 and seeing it through to completion."
Rendell, though, argued a lease would raise about $150 million more per year than Act 44.
"If you don't have to toll a road, that's a very good idea," Rendell said. "It seems like a slam dunk to me."
Act 44 relies for much of its funding on the tolling of I-80, which requires federal approval. That approval remains uncertain, as the Federal Highway Administration returned the state's first application for permission to toll I-80, and the state has not yet resubmitted its application.
Rendell said today he will urge the Turnpike Commission "in the strongest terms possible" to resubmit the I-80 application this week. And he said he will ask U.S. Transportation Secretary Mary Peters for a quick response, so state lawmakers can weigh that information in their deliberations on the lease proposal.
But Turnpike spokesman William Capone said the application "is clearly not ready to go this week...no way it's close to being ready to be resubmitted."
Abertis and its predecesor companies has been operating toll roads in Europe for 40 years. Its network covers 68 percent of Spain's toll routes and toll roads in northern and western France. It also has a stake in toll road operations in Italy, Portugal, the United Kingdom, Chile, Colombia and Argentina.
In addition, it operates telecommunications facilities, parking garages, and airports, including the Orlando (Fla.) airport, the Burbank (Calif.) airport, and one concourse of the Atlanta airport.
Abertis reported a first-quarter profit of 134 million euros ($208 million), up 9.4 percent from the same period a year earlier.
Citi Infrastructure Investors is a divsion of Citigroup, a financial services company whose brands include Citibank, Primerica, Smith Barney, Banamex and Nikko.
Under the lease plan, Abertis and Citi would equally share management responsibilities of the toll road, while Abertis would own 50 percent of the company, Citi 41 percent and Criteria 9 percent.
Rendell said the two losing bidders for the turnpike lease were teams consisting of Goldman, Sachs & Co. and Transurban Group of Australia; and of the Macquarie Infrastructure Group of Australia and Cintra of Spain.
Lease your infrastructure to foreign interests. The next thing we know is that our ports might be turned over to our arab friends.
There needs to be a balance but we do not need to let foreign interests own infrastructure or defense based companies.
Of course we can trusty the government to do only the right things with the taxpayers’ money. Once that is squandered away, then what will sell or lease to get the next big welfare payday?
Rendell is a jackass, as such would make the perfect VP for Obama or Clinton.
What’s next? Are we going to lease out all our 7-11’s to India or Pakistan???
This is what happens when other countries collect too many dollars, because we are always in debt.
They buy us out.
Does Congress care? (silly question!)
However, the good news is that in case of war, they can’t pick up the Turnpike and take it with them.
Not much financial info.
I love the logic. Lease your state assets for 75 years, have your citizens pay through the nose with increased tolls - but get the money NOW to pay for your Fast Eddie socialist programs to keep buying votes!
God only knows what those infernal Spaniards plan to do with the road once they hold the lease. They might even stop people from using it.
The lease is either too long or too cheap. Of course, there won’t be any traffic on the road since there won’t be any traffic at all anywhere so the management of this management company is already suspect.
Killing the Turnpike Commission AND the raid on I-80 might just be worth it.
They'll stop our military from using it. And they'll add IEDs. It's true! I read it on FR.
We have a Spanish group running the “interstate” system here in Chile. The roads are GREAT but DAMN are they expensive. Watch what you wish for!
Franco saved the nation from communism by killing off the traitorous Spaniards and running the commissars and the Abraham Lincoln Brigade out of the country. How ironic that they're back and making investments like this one in another nation's infrastructure.
American politicians are killing our country.
I wonder if Germany is interested in selling the autobahn? I wonder where we would get the money? The Germans wouldn't want to be paid in the toilet paper we call money?
Just think if America bought the autobahn a speed limit would be established cutting down the number of tragic high-speed deaths and injuries.
You mean America's Royal Class? I doubt it. Until Madame Dufarge breaks out her knitting needles, of course.
I don’t know where to look, but I’d imagine that U.S. direct investment overseas totals $300 billion a year, or thereabouts. A U.S. firm owning the autobahn is a funny notion. Our trial lawyers would have a feast.
Just when you though Fast Eddie couldn’t do something any dumber.....
And HE is on the Dem’s VP short list? I heard Beckel say that Rendell would be his first pick for VP.
Going home to dig the shelter another 10 feet deep.....
Funny, considering the trade surplus ($44.7 billion in 2007) they run with us.