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Rendell pressing to lease turnpike

He acknowledged that tolls will increase under private management, but he said maintenance will be better.

Gov. Rendell said he expects a turnpike lease deal by this fall.
Gov. Rendell said he expects a turnpike lease deal by this fall.Read more

Gov. Rendell hopes to have the Pennsylvania Turnpike in private hands by this fall, he said yesterday as he campaigned in Philadelphia for support for his proposals to raise $1.7 billion for mass transit and for highway repairs.

Rendell said a privately run turnpike would have fewer employees and higher tolls, but he said toll increases might be smaller than critics suggest.

He declined to divulge the contents of the 48 "expressions of interest" the state has received for privatizing the turnpike, but said about one-third of the firms were interested only in serving as the state's financial adviser in any turnpike deal.

The companies that have expressed interest include the former employers of both Rendell and New Jersey Gov. Corzine, New York investment banks, Philadelphia law firms, construction giants, international developers and a prominent think tank.

To generate $965 million a year for repairing Pennsylvania bridges and highways, Rendell proposes to lease the turnpike for about $12 billion. To raise about $760 million a year for SEPTA and other mass-transit agencies, the governor wants a 6.17 percent tax on oil company profits.

He said draft legislation will be sent to the state legislature within a few weeks.

Rendell hopes to have a turnpike deal in place by fall, so the state could start reaping the billions, he said. A new oil tax likely would take longer to put into effect because of anticipated legal opposition from oil companies.

Rendell, on the fourth day of a seven-city statewide swing, met yesterday with Philadelphia-area transportation, business and labor leaders and said the deciding votes for transportation funding "may come from here" - the five Southeastern Pennsylvania counties. He urged the local leaders to lobby legislators to pass a transportation-funding plan, even if it's different from the governor's proposal.

"We have to do something. . . . Doing nothing is simply not an option," Rendell said in the session at the Delaware Valley Regional Planning Commission. "The longer we defer, the more expensive it will be."

In contemplating a lease of its turnpike, Pennsylvania is following the lead of several other states. The Indiana Toll Road was leased last year for 75 years for $3.8 billion, and the Chicago Skyway in 2005 for 99 years for $1.83 billion.

The value of the Pennsylvania Turnpike has been estimated anywhere between $2 billion and $30 billion. Rendell said most estimates fall between $10 billion and $14 billion. A $12 billion lease, he said, could generate about $965 million a year.

To recover its investment, a private company would expect to raise tolls regularly. In Chicago and Indiana, large initial toll hikes are to be followed by annual increases tied to inflation indexes.

In Pennsylvania, one of the 48 "expressions of interest" in leasing the turnpike came from the Turnpike Commission, which operates the turnpike now. The commission proposes to borrow $4 billion over 10 years to generate about $400 million a year for highway and bridge repairs statewide. The debt would be repaid from revenue from the state gasoline tax and driver license and registration fees.

To aid mass transit, the Turnpike Commission proposes to impose surcharges of as much as $1 on vehicles exiting the turnpike in the Philadelphia, Pittsburgh, Harrisburg and Scranton/Wilkes-Barre areas. The fee is designed to raise more than $150 million a year for transit agencies.

The Turnpike Commission proposal also calls for tolls on I-80, starting in 2011.

Rendell yesterday gave short shrift to the Turnpike Commission plan, saying it would not raise enough money and would be less efficient than a private operator. And Rendell said he opposed putting tolls on roads that are now free.

He was also critical of the Turnpike Commission's reputation for nepotism in hiring: "They've got a lot of cousins and uncles and aunts working there." A private operator, he said, would have fewer workers and benefits.

Patrick J. Eiding, president of the Philadelphia Council of the AFL-CIO, warned Rendell that turnpike workers would need to be protected if the governor wanted labor's support.

"We're trying to work together and get this done . . . but you're going to need help from labor," Eiding said. "If we're going to be the ground troops, we have to be sure people aren't going to be thrown out."

Rendell said the turnpike-lease legislation would have some protections for labor and limits on toll increases.

"The private sector has an incentive to maintain the roads and keep tolls relatively low because they want ridership," Rendell said.

On the proposal to fund SEPTA and other mass-transit agencies with a tax on oil company profits, Rendell said it was "poetic justice" to have highly profitable oil companies pay for transit. And he said the legislation would impose fines on oil companies if they attempted to pass the tax along to consumers.

But he acknowledged a lawsuit from oil companies was likely.

"We hear menacing talk. . . . They're getting ready to fight," Rendell said. "It's a fight worth fighting."

He said his legislation would prevent oil companies from avoiding taxes by shifting assets to other states' jurisdictions. He said the seven largest oil companies pay only about $70 million in taxes to Pennsylvania now.

If the gross-profits tax on oil companies is approved, he said, he would seek to borrow money for SEPTA and other mass-transit agencies to tide them over the anticipated legal challenge.