Investors Drop Pa. Turnpike Bid, Citing Opposition, Market Woes

By Sean McNally, Senior Reporter

This story appears in the Oct. 6 print edition of Transport Topics.

The investment group that sought to lease the Pennsylvania Turnpike has withdrawn its bid, citing political opposition and uncertain financial markets, and leaving the state without a solution to its infrastructure funding problems.

The decision to pull the turnpike bid “was based on the timetable and situation of the legislature in the state of Pennsylvania . . . the financial uncertainties and the opportunities offered by the infrastructure market at present,” Spanish firm Abertis Infraestructuras said in a statement Oct. 1.

The bid by Abertis, working with Citi Infrastructure Partners and Criteria Caixa Corp., expired Sept. 30.

Late last month, legislative leaders said it was unlikely they would take up legislation to authorize the lease before the legislative session ended this year.

“There is no support for taking it up in this fall session,” said Senate Majority Leader Dominic Pileggi, a Delaware County Republican. “And we should not rush into such a major policy decision under some sort of artificial deadline.”

Abertis said that because the state accepted the consortium’s bid for a $12.8 billion, 75-year lease in May, the bid had been extended twice, “to help comply with the legislative process.” Given opposition in the state’s General Assembly, however, the group “believes the situation is not propitious for a third extension.”

Gov. Ed Rendell, a Democrat, has been a proponent of the lease and has indicated he probably will seek a new round of bids for leasing the 537-mile turnpike next year.

“Gov. Rendell remains committed to pursuing legislation to allow a lease of the turnpike,” said Chuck Ardo, a Rendell spokesman.

However, it was unclear whether a new lease deal would be accepted next year.

Adding to the confusion was the Sept. 11 rejection by the Federal Highway Administration of a request by the Pennsylvania Turnpike Commission to toll Interstate 80, a key part of a proposed transportation funding plan the state passed last year. The toll receipts were supposed to be used to pay back bonds taken out to fund infrastructure projects.

Bob Caton, spokesman for House Majority Whip Keith McCall, a Democrat, said any new bid for the turnpike would have to be considerably larger than $12.8 billion to gain sufficient support in the capital, Harrisburg.

“Unless something substantially changes, the result’s probably going to be the same,” Caton said. “The deal would almost have to be too good to be true for us to hand over this taxpayer-owned asset.”

Joe Scarnati, president pro tempore of the state Senate and a Republican, agreed. He said the Abertis group’s bid was “a bad deal for Pennsylvania” and “too low.”

In Washington last month, a group of finance and banking experts said that in the current financial crisis, large deals like the proposed lease were less likely in the future (9-29, p. 12).

“If [a new bid] is below what it is now, I can’t even imagine the legislature voting approval for a lease. They didn’t think $12.8 [billion] was enough — a lot didn’t — so why would $10 [billion] now be satisfactory,” said Jim Runk, president of the Pennsylvania Motor Truck Association.

Runk, one of several trucking executives who said they were pleased that the lease deal fell apart, said the state did need to find a way to fund its roads and bridges.

“Something’s going to have to be done, but I think the members are probably pleased that the turnpike lease didn’t go through and also that the tolling of Interstate 80 was not approved,” Runk  told Transport Topics.

“That still leaves us in a dilemma trying to figure out how to fund a highway system that’s larger than New Jersey, New York and all of New England put together,” he said.

John Lynch, vice president of federation relations for American Trucking Associations, said ATA was “pleased that, in the short term, the legislature has not chosen to bring it up and that Abertis has decided to pull their bid, and we will be watching very closely to see what happens in January and whether the governor makes another effort to go about leasing the turnpike.”

“We still feel the most equitable and efficient way to pay for infrastructure is the fuel tax, however politically unpopular it is,” Lynch said.

Some state officials said they believed Pennsylvania should revisit the idea of tolling I-80 next year.

“My own view is that, in the Obama or McCain administration of ’09, this issue would be revisited. I think a different U.S. Department of Transportation will give this controversy an additional overview,” said House Majority Leader Bill DeWeese (D).

However, Runk said he thought the lease was “probably dead, at least for a while,” but that the issue of road funding was likely to be front and center early next year.

Wire service reports contributed to this story.