Finance Institutional Investment
May 19, 2008
By: Dees Stribling, Contributing Correspondent
A partnership of Citigroup Inc. and Abertis InfraeStructuras, a Spanish company that specializes in operating toll roads and other infrastructure, has won the right to bid for a long-term lease of the Pennsylvania Turnpike.
All together, the partners will offer the state $12.8 billion to lease the 514-mile road system, which is currently operated by the Pennsylvania Turnpike Commission, for 75 years.
Gov. Edward Rendell of Pennsylvania oversaw the selection of the Abertis-Citigroup partnership over two other partnerships. The governor announced the selection this morning at a conference in Harrisburg. "This is a good deal for the Commonwealth of Pennsylvania, which needs more money to build and repair roads and bridges," he asserted, further stressing that as a lease, the state would maintain some control over future toll increases.
Under the current state highway funding measure, known as Act 44 and passed last summer, tolls will go up on the turnpike 25 percent next year, and an estimated 3 percent per year thereafter. Rendell said that if the Pennsylvania legislature accepts the bid to lease the turnpike, the rate of increase would be written into the deal, rather than be an estimate that could change. "In this lease document, the terms are guaranteed," he said. "Tolls can rise no faster than the rate of inflation, or 2.5 percent a year, whichever is greater."
He added that the lease agreement would require Abertis-Citigroup to take on the turnpike's unionized workforce, but not its current management, at the same salary and benefit level as the current contract, which has four years left to run.
"If the legislature would allow us to accept this bid, funds will be in hand, without the risk of having the I-80 tollway turned down by the federal government," Rendell also said, referring to the request by the state--enshrined in Act 44--to put tolls on the stretch of I-80 that runs through the state more-or-less paralleling the turnpike, though further north. The federal government needs to approve any such I-80 tolls. "Even if the I-80 tolls are approved, this lease will provide about 13 percent more funding that Act 44," the governor said.
The bid proposal must be approved by the legislature, where it faces some opposition. The deal is similar in some ways, though considerably larger, to the $1.8 billion privatization of the Chicago Skyway in 2005, in which the city of Chicago leased a section of road to a private partnership for 99 years.
By: Dees Stribling, Contributing Correspondent
A partnership of Citigroup Inc. and Abertis InfraeStructuras, a Spanish company that specializes in operating toll roads and other infrastructure, has won the right to bid for a long-term lease of the Pennsylvania Turnpike.
All together, the partners will offer the state $12.8 billion to lease the 514-mile road system, which is currently operated by the Pennsylvania Turnpike Commission, for 75 years.
Gov. Edward Rendell of Pennsylvania oversaw the selection of the Abertis-Citigroup partnership over two other partnerships. The governor announced the selection this morning at a conference in Harrisburg. "This is a good deal for the Commonwealth of Pennsylvania, which needs more money to build and repair roads and bridges," he asserted, further stressing that as a lease, the state would maintain some control over future toll increases.
Under the current state highway funding measure, known as Act 44 and passed last summer, tolls will go up on the turnpike 25 percent next year, and an estimated 3 percent per year thereafter. Rendell said that if the Pennsylvania legislature accepts the bid to lease the turnpike, the rate of increase would be written into the deal, rather than be an estimate that could change. "In this lease document, the terms are guaranteed," he said. "Tolls can rise no faster than the rate of inflation, or 2.5 percent a year, whichever is greater."
He added that the lease agreement would require Abertis-Citigroup to take on the turnpike's unionized workforce, but not its current management, at the same salary and benefit level as the current contract, which has four years left to run.
"If the legislature would allow us to accept this bid, funds will be in hand, without the risk of having the I-80 tollway turned down by the federal government," Rendell also said, referring to the request by the state--enshrined in Act 44--to put tolls on the stretch of I-80 that runs through the state more-or-less paralleling the turnpike, though further north. The federal government needs to approve any such I-80 tolls. "Even if the I-80 tolls are approved, this lease will provide about 13 percent more funding that Act 44," the governor said.
The bid proposal must be approved by the legislature, where it faces some opposition. The deal is similar in some ways, though considerably larger, to the $1.8 billion privatization of the Chicago Skyway in 2005, in which the city of Chicago leased a section of road to a private partnership for 99 years.
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