Pennsylvania Turnpike Lease Could Jumpstart PPPs, Opportunities in Infrastructure Finance Growing
The federal government rejected a call to impose tolls on Interstate 80 in Pennsylvania, according to the AP. The decision will force the Pennsylvania Turnpike Commission to continue making payments to the state for transportation needs. It also means the asset is more likely to fall into private hands. A consortium led by Spanish infrastructure company Abertis, which has offered $12.8 billion to lease the Pennsylvania Turnpike for 75 years, is now more likely to be able to move ahead with the largest U.S. infrastructure privatization deal in history. Although the Pennsylvania state legislature has yet to approve the deal, Pennsylvania Governor Ed Rendell said the rejection of the I-80 tolling application makes privatization of the Pennsylvania Turnpike a priority, and he has urged the state legislature to quickly approve this measure. In a recent report the WSJ concludes, “A green light in Pennsylvania could bolster the political will of officials in other states trying to hash out similar deals. That in turn could jump-start projects in waiting, from Florida ’s Alligator Alley to Chicago ’s Midway Airport.”
Since 2005, eight states have enacted legislation enabling officials to sell or lease highway or transit infrastructure, bringing the total to 25 states, according to the U.S. Department of Transportation. Meanwhile, Wall Street firms have already raised as much as $160 billion and see investments in infrastructure as a prime growth area, reports the WSJ. Now, amid the growing push for public-private partnerships or P3s, executive search firm, A.E. Feldman, says infrastructure finance jobs are opening up for candidates with backgrounds in investment banking as well as experience in analyzing and executing structured financings. The most sought after candidates are those with experience in infrastructure transactions and civic engineering. Additionally, legal jobs exist for attorneys with expertise in global project development and complex financial transactions.
Privatization to Advance U.S. Infrastructure Projects
Citigroup is part of the consortium, which has won a bid to lease the Pennsylvania Turnpike for 75 years. In return for their $12.8 billion upfront payment, tolls would increase by 25% next year and then would be capped at either 2.5% or inflation, whichever is higher. Abertis says the contract, if approved by the PA state legislature, would make it the largest infrastructure operator in the world with assets in the United States, France, the UK, Latin America and Spain.
Privatization may be the most efficient way to advance the infrastructure projects to completion, according to PA Turnpike CEO, Joe Brimmeier. “We need to look at all options, including alternatives like P3s,” he says. “Timely completion of these projects is important to the region’s economy, and we believe private involvement could accelerate construction, particularly since there’s very limited funding available for new transportation projects at the state and federal levels.”
Proponents of P3s say the lease approach could provide financial relief to state governments struggling with foreclosures, ballooning pension obligations and reduced tax bases, according to the WSJ.
Senate Moves to Avoid Crippling Highway Delays
Right now, in a move to avoid crippling delays to federal aid for road and bridge projects around the country, the Senate recently voted to put $8 billion into the highway trust fund, according to the AP.
The decision came just two days after Transportation Secretary Mary Peters said the trust fund would go bankrupt by October. The fund is made up of money drivers pay through federal gas taxes and is the main source of funds for transportation construction projects.
Research recently released by the U.S. Department of Transportation (DOT) shows that, since last November, Americans facing rising gasoline prices, have driven 53.2 billion less miles than they did versus the same period a year earlier - topping the 1970s’ total decline of 49.3 billion miles. The rapid shift away from gas-guzzling vehicles means consumers are paying less in federal fuel taxes, which go largely to help finance highway and mass-transit systems.
“This nationwide trend on the part of state and local governments is further proof that innovative approaches to financing and managing transportation are increasingly attractive compared to traditional tax and spend methods,” Secretary Peters said. “States and local governments across the country are recognizing public-private partnerships are an effective means to deliver transportation projects.”
A.E. Feldman’s infrastructure finance division is constantly researching industry trends and developments. To inquire about existing and future job opportunities in project and infrastructure finance, the lines of communication are open. Contact A.E. Feldman’s President, Mitch Feldman, and the firm’s expert recruiting team here.
