I-80 toll plan fiasco undercuts support for Pennsylvania Turnpike Commission

Initially there seemed to be a lot going for the idea of tolling PA/I-80 but over-reaching by the Turnpike Commission now threatens its very existence. Key lawmakers in Pennsylvania are now moving to repeal Act 44 which underpins the Turnpike Commission's plans and are looking craft a compromise with the Rendell administration plan to get bids for a longterm lease/concession.

The Pittsburgh Tribune yesterday broke the big news that the state Senate president and Republican leader Joseph Scarnati was moving against Act 44. Scarnati was previously an outspoken opponent of a lease/concession and a key broker for the Turnpike Commission's plan. Now in an almost 180 degree turn he says he is leading an effort to find an alternative to the tolling of I-80.

He told the paper he is "looking at privatization with a few twists."

The twists seem to involve limits on foreign ownership of the concession lease, the concession's specification of controls, plus "reforms" in operation.  

He calls his approach a "hybrid plan."

Gordner wants three concessions

In another move a colleague of Scarnati's Sen John Gordner (Repub Columbia) says he will introduce legislation to privatize the Turnpike via a longterm lease. He favors splitting the Turnpike into three parts to make it into three concessions:

- Mainline East from Harrisburg to the Delaware River

- Mainline West from Harrisburgh to the Ohio line

- Northeast Extension

Apparently there would be a prohibition against any concessionaire having an interest in more than one of the three concessions. This might discourage some bidders and lower the total value for the state.

Cintra/Macquarie who have separate concessions on the contiguous Chicago Skyway in Illinois and the Indiana Toll Road say they get economies from being able to program investments across both concessions and move senior staff between the two.

Both Scarnati and Gordner say they're against a concession going to a "foreign" company though it is difficult to see how they would get decent bids with such a prohibition. Or even any bids at all.

Even the biggest name Wall Street firms like Merrill Lynch, Citigroup, Blackstone etc are going to the Middle East and Asia for huge dollops of capital on account of subprime losses, and becoming increasingly 'foreign.'

At the same time toll operators with 'foreign' origins like Macquarie, Cintra and Transurban are increasingly American in their operations and ownership profile.

Scarnati is quoted: "I have major problems sending boatloads of money to a foreign country."

Last summer's Act 44 contains no provision limiting the sale of Turnpike Commission bonds to US nationals. The Pennsylvania Turnpike Commission and other state agencies sell their bonds on international markets, and to that extent send "boatloads" of interest and repayment money overseas anyway. There isn't much strictly national financing in this age, anymore than there are any pure national manufactured products.

Gov Rendell has not yet released the concession agreement he is proposing. To the extent it is seen to retain control of the Turnpike for the state and provides for some profit sharing with the state, the "foreign ownership" issue may subside in importance in the minds of legislators.

A bigger issue is likely to be jobs.

A Harrisburg insider tells us that while the Turnpike Commission itself will be abolished and several top Turnpike executives will get no tenure, there will be concession provisions providing for the bulk of Turnpike Commission employees to be kept on by the concessionaire or by the state for at least several years.

TOLLROADSnews 2008-01-16