Citi, Spanish group team up for high bid on turnpike lease
The lease deal also would let the private operator increase tolls by 25 percent in January, and in future years by either 2.5 percent or the consumer price index, whichever is greater.
By MARK SCOLFORO
The Associated Press
5/19/2008
HARRISBURG, Pa. — A Spanish company and a unit of Citigroup Inc. teamed up to submit the largest bid for the right to lease the Pennsylvania Turnpike for the next 75 years.
Barcelona-based Abertis Infraestructuras, Abertis investor Criteria CaixaCorp of Spain and Citi Infrastructure Investors offered $12.8 billion, beating their nearest competitor by $700 million, Gov. Ed Rendell said Monday.
Rendell described himself as "strongly in favor of it." But the Legislature must approve any deal, and one leader in the Democratic-controlled House said he was not impressed with the bid.
"To be quite candid, the number is less than overwhelming," said Majority Whip Keith McCall, D-Carbon. "It's certainly not dead on arrival, but it's something we do need to discuss with the entire caucus."
The Democratic governor has pursued the plan to have a private entity operate and maintain 500 miles of the turnpike system to raise billions for Pennsylvania's transportation needs.
He predicted the Abertis-Citi deal would generate an average of $1.1 billion a year in the first 10 years — income from the investment of the lump-sum lease payment — for roads, bridges and mass transit.
The lease deal also would let the private operator increase tolls by 25 percent in January, and in future years by either 2.5 percent or the consumer price index, whichever is greater.
If the deal goes through, the state would almost certainly abandon a plan to introduce tolls to Interstate 80 that are expected to generate about $500 million a year. The tolls were the primary component of a law passed last summer that is expected to produce about $940 million annually for transportation needs.
Repealing those tolls has become a priority for many people and businesses along the highway, as well as the lawmakers who represent them.
Abertis directly manages more than 2,000 miles of toll roads in other countries; it also manages a toll bridge in Puerto Rico and airport facilities in California, Florida and Georgia.
McCall said he was concerned that the turnpike lease, unlike the I-80 tolls, did not provide a dedicated funding source for the state's cash-starved mass transit systems.
"It's a very, very big deal and it affects all 67 counties," McCall said.
Rendell spokesman Chuck Ardo said McCall was "one step ahead of the process," and that decisions about how to allocate the lease proceeds will be made later on.
"This is a governor who has steadfastly fought for funding for mass transit throughout his tenure in Harrisburg," Ardo said. "It's not likely that, at this point, he would forget about mass transit needs."
The Abertis-Citi bid is good through June 20, but the bidders said they intended to be flexible since legislative action in the next month is not likely.
"We'd like to see it done this fall," said Citi Infrastructure Investments partner Michael B.G. Froman.
Rendell said the two losing bidders were teams consisting of Goldman, Sachs & Co. and Transurban Group of Australia; and of the Macquarie Infrastructure Group of Australia and Cintra of Spain. Goldman-Transurban's final bid was $12.1 billion; Macquarie-Cintra's was $8.1 billion.
The state has not yet received federal approval to put tolls on I-80, and Rendell said Monday that he was continuing to pressure turnpike officials to speed up the process.
But Carl DeFebo, a spokesman for the Pennsylvania Turnpike Commission, said it will likely take several weeks or months to get the additional information requested by federal regulators.
The turnpike's operating revenue in the fiscal year that ended last May was $608 million.
The turnpike commission predicts that the I-80 tolling law will generate nearly $84 billion over 50 years for the state transportation department.