Pennsylvania Governor Corbett signing P3 bill

July 6, 2012

2012-07-05: Pennsylvania is becoming the 33rd state to have a law enabling public private transport projects. A public private transportation partnership (PPTB or P3) bill long championed by Rick Geist, chairman of the state house transport committee was passed unanimously in the state senate last weekend and by a large majority (117 to 79) in the state house this week.

It is due to be signed into law by the Governor Tom Corbett shortly. The bill was known as House Bill 3 (HB3.)

Geist is quoted in a statement: "My legislation will open the door to unprecedented investment in Pennsylvania's infrastructure at a time when it is desperately needed and will create a multitude of jobs in the engineering and construction industries, both of which have been mired in a prolonged downturn."

Advocates cite a state transportation advisory committee (STAC) reporting in May 2010 that assessed a need for $3.5 billion a year extra, an amount which grows, in funding for transportation in the state. Most of it is for rebuilds of highways and bridges. The report rated most of the existing revenue sources as having limitations and recommended greater use of tolling through P3s and eventually of mileage based fees.

HB3 was an important part of advancing the STAC recommendations as a concerted effort should be able to gear P3s up to several $-billion of projects per year if state and local officials are serious about using this method of financing, and if the Feds don't create obstacles.

A Fiscal Note from House Appropriations staff formally reported: "The legislation has the possibility to generate significant revenue or reduce expenses for the Commonwealth (state) if public-private transportation agreements are entered into." (Tom Rodrigo, June 30 2012)

The law allows any government entity at state or local level to enter into a P3, but all P3s - named public-private transportation partnerships (PPTPs) must be approved by a Public-Private Transportation Partnerships Board composed of:

- the state secretary of transportation

- state budget secretary or designee

- a Governor's appointee

- appointee of president of the senate

- appointee of minority senate leader

- appointee of the house speaker

- appointee of the minority leader of the house

The legislature can block an approval by the PPTB Board if it acts within 20 calendar days or 9 legislative days. This power to block a PPTP only applies to facilities owned by the state.

Every transport facility in the state is open for a PPTP except the Mainline of the Pennsylvania Turnpike, unless that is specifically permitted by new legislation. Privatization of the whole Turnpike system was proposed by former Governor Ed Rendell (Dem) in 2007 and a concessionaire (Abertis) selected for an upfront fee of $12.8 billion, but enabling legislation was defeated in the legislature, and the deal fell through.

The Turnpike was excluded from the new PPTP law - except for the concessioning of the extension components of the Turnpike - to remove it as a sticking point.

PPTPs may be initiated by the private sector or by public entities owning transport facilities.  In all cases the concessions must be open to competitive procurement with a RFP and the concessioning owner must apply an open best value analysis to the bids. Concession terms may be up to 99 years.

The states DOT will have a monitoring and supervisory role.  

Any transport modes may be the subject of PPTPs and they may cover any combination of new capacity, rehabilitation, modernization, operations. Revenues are to belong to the concessionaire, but the concessionaire may pay with upfront payments or a share of revenues.

Projects involving some state or federal funding are OK. Ownership of the facility is to remain with the public entity and they must be turned back to that public entity in good condition at the end of the concession.

Rick Giest who is 68 this year is a former engineer - he worked for EADS - who was elected by the 79th District around Altoona in central Pennsylvania in 1978 and has been a transport advocate for 17 terms. The past 18 years he has headed the house transportation committee.

He was recently defeated in the Republican primary by a younger Tea Party candidate and is retiring from politics at the end of the year.

He said in a statement today: "Without a doubt, this is one of the most gratifying days of my tenure in the House. To see House Bill 3 gain such broad bipartisan support, complete its long journey through the legislative process, and now be poised for enactment into law is tremendously satisfying."

"Providing a safe and reliable transportation system is one of the core functions of government. Pennsylvanians' safety and mobility, as well as Pennsylvania's economy, depends on it. I envision P3s playing a vital role as we tackle that challenge."  

BACKGROUND: Pennsylvania with 12.7m people (2010 census) is #6 in a ranking of US states by population, but it is a slow growth state - up only 3.4% or 420k since 2000.

(The US as a whole grew 9.7% 2000 to 2010.)

Pennsylvania is close to Illinois #5 in population (12.83m) and Illinois is growing even slower. Both will on present trends by overtaken by Georgia (18.3% 2000 to 2010) and North Carolina (18.5%) in the early-2020s.

Pennsylvania has most of America's fifth metro area by population, Philadelphia, 5.97m in 2010, though by now it has almost certainly been overtaken by Houston TX for #5. Houston metro area was 5.95m in 2010 but had grown 26% 2000-2010 whereas Philadelphia grew only 4.9% in the decade.

Pittsburgh metro area has been in decline since a peak of 2.77m in 1960 and now has 2.36m. The decline since 2000 (2.43m) was 3.1%, but it is still 22nd ranking close in size to Tampa, Baltimore, St Louis, Denver, Portland, San Antonio, Sacramento, Orlando, Cincinatti, Cleveland, Kansas City, Las Vegas.

The state's third metro area Harrisburg, state capital, 549k is #94.

The state's topography is rugged adding to costs of roads. As the socalled 'keystone' state it has large volumes of east-west and north-south traffic on its major routes.

MEDIA CRITICISM: The biggest newspaper in the state the Philadelphia Inquirer carried an absurdly negative statement on the legislation by transport reporter Paul Nussbaum who wrote that the PPTP bill "would not make a dent in the state's $3.5 billion-a-year shortfall for transportation."

That would only be true if no projects resulted from the legislation - if the legislation produced zero P3 $s. Every project successfully gotten through the PPTP process would be that many millions of dollars less dependent on taxes, fees and public borrowing.

So if in 2013 $2 billion of projects are funded by PPTPs the funding "shortfall" will be reduced from $3.5 billion to $1.5 billion. The simplest arithmetic!

As the house appropriations staffer wrote the legislation has potential to "generate significant revenue or reduce expenses..."

We emailed Nussbaum asking how he could write so categorically that P3s would make no dent in the $3.5b funding shortfall.

He did not deign to reply. And the Inquirer has carried no correction.

Bills and fiscal notes:

Philadelphia Inquirer's negative nonsense:

TOLLROADSnews 2012-07-05

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