Infrastructure Funds Drive PA Turnpike Public-Private Partnership Proposal
According to the American Society of Civil Engineers (ASCE), the United States will need to invest roughly $1.6 trillion over the next several years in order to bring current infrastructure conditions to acceptable levels — and as roads continue to crumble, declines in local tax revenue to pay for repairs (as gas prices have skyrocketed and kept drivers off the roads) are pinching regional budgets. The ASCE report card for Pennsylvania, as well as documentation from the state's Department of Transportation, indicate that it will cost $11 billion just to repair the state's bridges, which speaks nothing of the potholes, insufficient shoulder room, and ongoing construction of other roads.
Next month, the Pennsylvania legislature will vote on a deal — the largest public-private partnership ever proposed in the US — struck between Governor Edward Rendell and a group of private investors to lease America's oldest major toll road, the 537 mile long Pennsylvania Turnpike. As much as states need money to fix their roads and bridges, Wall Street firms are eager to supply it, according to a Wall Street Journal article. With the industry's core businesses in distress from the credit crisis, so-called infrastructure funds — which have already raised more than $160 billion, according to Morgan Stanley — have emerged as one of the most promising growth areas in years.
If the Pennsylvania Turnpike deal is approved, Abertis, the Spanish company hoping to lease the road, will operate the highway, bear the expense of improvements (including plans to wire fiber optics and install security monitors), and collect tolls. Abertis, also responsible for operating motorways in the UK, South Africa and Chile, points out other ventures in the US as proof that public-private partnerships can relieve infrastructure problems; notably, the company assumed operations of the Orlando International Airport in Florida in 1996, paying $20 million for a 30-year lease and assumed $30 million in debt. Last year Orlando extended the airport lease for another 30 years as Abertis has already invested $70 million on upgrades, from parking spots to expanding the terminal gates.
The Pennsylvania deal's detractors, from the Turnpike Commission itself to labor unions, question whether the state is selling too cheaply. They also worry that jobs will be lost — under the proposal, union contracts are guaranteed only until 2011 — and that tolls will rise. The new operators can raise tolls 25% in 2009, then keep them in line with inflation every year.
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