Pennsylvania governor takes hits in privatization debate

| 5/24/2007

State lawmakers in Pennsylvania are questioning whether the governor’s hiring of financial consultants to advise the state on public-private partnerships was legal, especially since the Legislature has not yet enacted legislation to enable such partnerships.

Democratic Gov. Ed Rendell hired the financial firm Morgan Stanley to determine the value of a possible lease of the 514-mile Pennsylvania Turnpike. Rendell’s supporters say the report was needed to authenticate the need for privatization legislation, according to The Associated Press.

Morgan Stanley reported to the governor earlier this week that the Pennsylvania Turnpike could fetch the state between $12 billion and $18 billion in a long-term lease to private investors. If the state invested that money, it could generate up to $1.6 billion per year for transportation projects, the firm speculated in its report.

Some federal lawmakers say they could block such a lease.

In the U.S. House, the chairman of the Transportation and Infrastructure Committee and the chairman of the T&I highways subcommittee – Reps. James Oberstar, D-MN, and Peter DeFazio, D-OR – stated May 17 that the feds have the power to undo public-private partnerships that don’t serve the public’s best interest in preserving the interstate system.

The Morgan Stanley report contained two other suggestions on how to bail out Pennsylvania’s transportation budget:

  • organizing a public corporation to leverage tax-exempt debt; and
  • imposing a toll on Interstate 80 while increasing turnpike tolls by $1 on city interchanges.

Gov. Rendell has asked the legislature to act quickly to pass legislation to enable public-private partnerships. Several lawmakers are quoted in the news saying they want to approach the subject carefully.

Last year in Indiana, Gov. Mitch Daniels and a majority of state legislators there pulled out all the stops to lease the Indiana Toll Road to private investors from Spain and Australia for $3.85 billion.

About half of the states in the union have enabling legislation on the books for privatization or are considering public-private partnerships for infrastructure, according to the U.S. Department of Transportation.

– By David Tanner, staff writer