$2.1 million for lease advice goes to firm tied to Rendell
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Gov. Ed Rendell's effort to raise transportation funds by leasing the Pennsylvania Turnpike already has cost state taxpayers more than $4.6 million for legal and financial advice.
Of that, $2.1 million has been paid to Ballard Spahr Andrews & Ingersoll LLP, a Philadelphia law firm with political ties to the governor, while other consultants and subcontractors working on details of his proposed privatization deal have received $1.2 million.
Another $1.3 million has been billed but not yet paid, including $135,359 for unspecified expenses owed to New York-based Morgan Stanley, the financial firm advising the governor on a "fee success basis," meaning it'll be paid for professional services only if the multibillion-dollar deal materializes.
Mr. Rendell's press secretary, Chuck Ardo, and his deputy chief of staff, Roy Kienitz, supplied the information in response to a request made during a recent meeting with the Post-Gazette editorial board.
State Sen. Jeffrey Piccola, R-Dauphin County, had asked Mr. Rendell as far back as March to disclose details and costs related to hiring law firms and engineering consultants to work on plans to lease the turnpike. At the time, Piccola, chairman of the Senate State Government Committee, said he may hold hearings because of the "huge amounts of money involved."
"As with most business ventures, some money must be invested up front," Mr. Ardo said. "When Pennsylvania is able to fix more roads and bridges and offer greater support for mass transit as a result of the lease transaction then the investment will be seen as prudent."
Bids for a turnpike lease are due tomorrow, but the results are not to be released until next week. It is believed that two or possibly three international investment firms are preparing proposals.
Tim Carson, a Republican appointee and vice chairman of the Pennsylvania Turnpike Commission, said Mr. Rendell "clearly got the best talent ... high-priced talent ... for a very complex matter," and he questioned the wisdom of pursing a lease in the first place.
"As a public finance lawyer for 30 years, I don't understand his preoccupation with this," Mr. Carson said. "His proposal is bad public policy and bad public finance. I wouldn't have spent a dime on it."
Mr. Ardo said the governor's general counsel, not Mr. Rendell, made the decision to contract Ballard Spahr.
He said, "Ballard is a large firm whose namesake is a nationally recognized expert in the field of tax exemption of tax exempt financing and with numerous lawyers familiar with many aspects of private-public partnership."
Last summer, Mr. Rendell signed Act 44 creating a partnership between the Turnpike Commission and PennDOT to generate money for roads, bridges and transit by raising turnpike tolls and tolling Interstate 80, which requires federal approval.
But in recent months, Mr. Rendell has revived his previous interest in leasing the turnpike to private investors, a move that, if successful, could keep I-80 toll-free and unravel Act 44, which has already provided $750 million for PennDOT's use.
Freshman state Rep. Brad Roae, R-Crawford County, opposes tolling I-80 but questions Mr. Rendell's choice of Ballard Spahr and other recipients of no-bid contracts.
Countered Mr. Ardo: "Putting professional services up for bid does not take into consideration important factors that require judgment. You wouldn't choose a doctor on the basis of price, but rather on the basis of expertise and experience. We choose professional service providers using the same criteria."
The law firm paid Mr. Rendell $250,000 a year following his eight-year term as the mayor of Philadelphia, and, Mr. Roae said, the law firm has since made 33 campaign donations to him totaling $454,463. In addition, Ballard Spahr employs several of Mr. Rendell's political allies and former aides.
"My point is that this looks like something funny is going on, even though nobody may have done anything wrong," Mr. Roae said. "All contracts over $25,000 should be put out to bid just to avoid the appearance of impropriety. This [choice of Ballard Spahr] tells taxpayers that nobody else had a chance" for the business.
Ballard Spahr has billed the state at rates up to $637.50 an hour for its work on the turnpike leasing issue.
Here's a list of the firms and people that the state has hired to develop and promote a turnpike lease and the amounts they have been paid:
• Ballard Spahr Andrews & Ingersoll LLP, $2,124,814.
• URS, an engineering consulting firm, $479,480.
• Al Jansen, retired chief engineer for the Pennsylvania Turnpike, $30,122.
• Mayer Brown, an international law firm, $577,077.
• PMC/Bellevue, investment advisors, $79,725.
• Duane Morris, a Philadelphia law firm, $70,030.
• Morgan Stanley, paid expenses of $135,359, with another $22,000 expected.
First Published May 15, 2008 12:00 am