Spanish group bids $12.8 billion for turnpike lease

Would run highway for 75 years; Rendell calls it a 'good deal'


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HARRISBURG -- After months of talks, Gov. Ed Rendell has recommended a deal with a Spanish highway consortium that is willing to pay Pennsylvania $12.8 billion to lease, operate and maintain the Pennsylvania Turnpike for 75 years.

If the money from Barcelona-based Abertis Infraestructuras is invested properly, Mr. Rendell said yesterday, the one-time, upfront payment could result in Pennsylvania getting $1.1 billion a year. The money would be used to fix 9,000 miles of deteriorated highways and 5,000 structurally deficient bridges and to financially bolster dozens of mass transit agencies around the state, including the Port Authority of Allegheny County.

The negotiations with Abertis weren't easy, but now comes the hard part. By fall, Mr. Rendell must persuade a majority of the 203 state House members and the 50 state senators to approve the turnpike lease deal, the biggest of its kind so far in America.

"This [turnpike lease] is a good deal for the people of Pennsylvania," he said. "We urgently need new funding for road and bridge repair, and a turnpike lease will help us meet that need. And with this lease, we can cancel the plan to impose tolls on Interstate 80."

Not everybody thinks a turnpike lease is so great. The Teamsters union, representing about 1,800 workers on the Pennsylvania Turnpike Commission's 2,300-member work force, is worried about Abertis' willingness to keep existing toll takers and road maintenance workers.

Mr. Rendell said all union contracts will stay in force until they expire in 2011, and then they'll have to be renegotiated between Abertis and the union. What happens to the 500 management workers at the turnpike commission isn't as clear.

Over the years since the first Irwin-to-Carlisle section of the turnpike opened in 1940, the turnpike commission has cultivated a close relationship with state legislators, providing jobs for relatives and friends. The commission is expected to urge legislators to reject the lease with Abertis.

State Rep. Joe Markosek, D-Monroeville, chairman of the House Transportation Committee, is usually a Rendell ally, but not on turnpike leasing.

Mr. Markosek said the money needed to fix roads, bridges and mass transit should come from Act 44, a transportation improvement measure approved by the Legislature in July and signed by Mr. Rendell.

It counts on money from two sources: a 25 percent increase in turnpike tolls that will take effect in January, along with revenue from first-time tolls to be placed on Interstate 80. Federal approval is needed for the I-80 tolls and it could be months before a ruling is handed down.

Mr. Rendell said he likes the turnpike leasing deal better than Act 44. He said Act 44 will produce $946 million a year, about $150 million less than the $1.1 billion that Pennsylvania could get from a turnpike lease.

The Spanish firm, which has financial interests in 60 businesses in 17 countries on four continents, is working with two partners, Citi Infrastructure Investors, a division of the New York City-based Citi financial conglomerate, and Criteria CaixaCorp, a major shareholder in Abertis.

At yesterday's announcement were Jordi Graells, Abertis' managing director of toll roads in North America, and Michael Froman, managing director of Citi Infrastructure Investors. Working with the team is John Durbin, former executive director of the Pennsylvania Turnpike Commission.

The current turnpike executive director, Joseph Brimmeier, also has been a Rendell ally in the past, but they differ on the lease issue.

Mr. Brimmeier favored Act 44, since it leaves the five-member turnpike commission and its 2,300 workers intact. Act 44 has already produced $750 million in borrowed money for road, bridge and mass transit projects, he said.

If lawmakers approve the lease with Abertis, the turnpike commission wouldn't have much left to do. Abertis would take over the 300-mile east-west mainline, plus the 120-mile Northeast Extension, plus two shorter toll roads in Western Pennsylvania.

The turnpike commission might still oversee completion of the partly built Mon-Fayette Expressway in southwestern Pennsylvania, but it wouldn't need too large a work force for that.

Abertis was one of three consortiums that bid on leasing the turnpike for 75 years. The others were Transurban of Australia, working with Goldman Sachs of New York, which bid $12.1 billion, and Macquarie of Australia, working with Cintra of Spain, which bid $8.1 billion.

Mr. Rendell said that he'd like the Legislature to vote on the turnpike lease by June 20. But given the complexity of the deal, he said that's unlikely. So he's hoping for the lease to be voted on in late September, soon after the Legislature returns from its summer recess.

He said Abertis has agreed to the higher tolls that the turnpike commission has already scheduled -- a 25 percent increase in January and, each year afterward, a toll increase of either 2.5 percent or the rate of inflation reflected in the Consumer Price Index (typically about 3 percent), whichever is larger.

The proposed lease with Abertis already is causing strange political alliances. While Democrat Markosek opposes the lease, House Republican leader Sam Smith of Punxsutawney generally supports the concept, said aide Steve Miskin. Mr. Smith didn't like Act 44 because he doesn't want to toll I-80, which goes through his district.

But Mr. Smith and other GOP legislators need a lot more information about the proposed lease before they'll be ready to vote for it this fall, Mr. Miskin said.

U.S. Rep. John Peterson, R-Venango, an opponent of Act 44 because of the I-80 tolls, praised the proposed lease yesterday.

"It will give the state millions more money [for roads and bridges] and won't have the horrible, onerous tolls on I-80 that would put up a 'closed for business' sign on Pennsylvania's economic future," he said.

Mr. Peterson urged the Legislature "to act as quickly as they can on this lease."

Other praise came from Matthew Brouillette, head of a conservative think tank called the Commonwealth Foundation who favors having more things done by private enterprise and less by state government. That usually puts him at odds with an activist governor like Mr. Rendell, but not this time.

Mr. Brouillette said he thinks the turnpike lease "is a better deal for Pennsylvania than Act 44," which is heavily dependent on borrowing money that must be repaid for years to come.

The proposed turnpike lease is 7 inches thick, but a copy is available online at www.dot.state.pa.us/paturnpikelease.


Bureau Chief Tom Barnes can be reached at tbarnes@post-gazette.com or 1-717-787-4254. First Published May 20, 2008 4:00 AM


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