Details of Pennsylvania Turnpike lease announced - bids by end April

April 16, 2008
By Peter Samuel

By October or November "America's First Superhighway" over 800km (500 miles) of storied tollroad and the one of the big four state tollroad networks in the US (the others: NY, NJ, IL) could be under day by day business management - IF the Pennsylvania Governor Ed Rendell gets the authorizing legislation needed.

I-80 will not be tolled if the Turnpike is leased. The state will terminate the effort of the Turnpike Commission to get a federal permit to toll the presently free interstate across the middle of the state, the Governor's office said.

Also the toll rate terms would bind the concessionaire to a maximum toll increase regime of 25% initially and annual indexation, approximately the increases the Turnpike Commission has said it will follow, but with a contractual mandate. The Turnpike Commission, by contrast, is not subject to any toll rate limits.

Under the concession union employees must be offered equivalent jobs and labor contracts honored for their term. There is no protection for non-union employees or management.

Quick schedule

The Rendell administration has set the terms for 75 year lease/concession on the state Turnpike with the following quick schedule:

- final binding bids due around the end of this month (April)

- winning bid could be announced within 24 hours

- authorizing legislation to be submitted to legislature when winning bid announced

- bids to be valid for 90 days (end July) to give the legislature time to pass or reject enabling legislation

- if legislation passed signing of lease contract to follow shortly afterwards

- financial close and turnover of the Turnpike to the concessionaire within 90 days of contract signing

This rapid timetable is made possible by calling for bids on a finalized lease document.

Hoping for about $16b

The Governor's office today released the general terms of the lease/concession contract on which bids are being sought. The announcement was made by the governor's deputy chief of staff Roy Kienitz.

He said the expectation is the concession will bring somewhere in the neighborhood of $16b.

The state DOT is holding talks with interested bidders, he said.

Kienitz conceded there is a major challenge still in getting legislative support for a deal: "We have some support but whether it's a majority is the question."

The nature of these deals is such that international companies would play the major role, Kienitz said, but there was "no reason" to restrict overseas participation. The turnpike would remain in state ownership and control through the provisions of the concession contract.

Major features

Major features of the concession are:

Concession term - 75 years

Concession to cover - East-West Mainline (I-276/I-76/I-70), Northeast Extension (I-476), Western Expansions (excluding Mon-Fayette Expressway/Southern Beltway) and related administrative and maintenance buildings

Concession fee - a single upfront payment on financial close and takeover of the business and operations

No non-compete clause - the contract provides no protection for the concessionaire by way of restrictions on extra competing capacity and no compensation for reduced toll revenues resulting

Default that is not cured will result in concession termination without compensation

Dispute resolution - a progression from informal negotiation through mediation, arbitration an finally the state courts

Toll rate caps - the concessionaire would be allowed to increase toll rates by 25% January 1, 2009 and an annual adjustment the greater of 2.5% or the rise in the Consumer Price Index

Safety standards - the concessionaire will be required to operate the Turnpike to standards specified in some 500 pages of operating and safety specifications

Capital improvements - the concessionaire will be required to complete capital improvements planned by the Turnpike Commission and finance others needed to maintain high standards of service

State right to demand non-profitable modifications it pays for - the state has the right to demand modifications that aren't part of the concession requirements if it pays for them or compensates for reduced revenues

Access, inspection and auditing rights

Labor contracts - the concessionaire will have to honor labor contracts that are in place for their term and will offer jobs at current levels of pay and conditions to PTC employees in good standing

Non-union employees will be on their own

Benefits for PTC employees - employees of the PTC whop are hired must get benefits at current levels

Policing - must at least maintain policing at current levels

Emergency service access must be unobstructed

Service plazas go to the concessionaire

6 page fact sheet available here

http://www.tollroadsnews.com/sites/default/files/LeaseTerms.pdf

COMMENT: The Pennsylvania Turnpike Commission is likely to fight this tooth and nail because the survival of the whole evil empire of patronage and deals for the connected and the compliant is at stake.

The Turnpike Commission's major patron in the legislature has been Senator Vincent Fumo, a notoriously corrupt politician who is due to stand trial in US Court on 139 counts of fraud, conspiracy and obstruction.

Marc Stier, a Philadelphia union official and Democrat candidate who actually opposes a Turnpike concession recently conceded:

"We... have to recognize that from the top (the Turnpike Commission) to bottom (the toll takers), the Turnpike is a massive pit of patronage.

"Whenever an important office holder or party official loses an election and needs a well paid sinecure, the Turnpike Commission is there for them.

"Whenever some ne'er do well son or daughter or friend of a friend of a politician needs a job, the first place he is likely to look is to the Turnpike. Almost anyone can take tolls, after all.

"It is not necessarily a pleasant job. But it is not exactly a high skill job... it pays well."

See: "Is Senator Fumo Indispensible?" at

http://blog.stier.net/2008/04/16/is-senator-fumo-indispensible/

TOLLROADSnews 2008-04-16

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