Fact-checking the "sale" of the Turnpike to "the Portuguese"
Ben Ober responds to a xenophobic screed against "selling the Turnpike to the Portuguese" - though no one is proposing a sale and no one from Portugal is involved.
The July 25 opinion piece “Don’t sell the Pa. Turnpike to the Portuguese ,” by Clifford A. Rieders, is filled with factual errors, spotty logic and xenophobic rhetoric in a vain attempt to paint the Turnpike lease as a disaster scenario.
For starters, the author rails against selling the Turnpike to the Portuguese. Gov. Rendell’s proposal is not a sale but rather a legally binding lease. The lead company — a multinational operator with American financiers — is based in Spain. Under the proposed lease, Pennsylvania would receive a $12.8 billion upfront payment, and the bidder would receive 75 years of operating rights.The author errs again when he writes that a private operator would raise the tolls sky high. The lease agreement prevents Pennsylvania Transportation Partners (PTP) from raising tolls more than inflation or 2.5 percent per year, whichever is greater. Under Act 44, the Turnpike Commission is planning to raise rates by 3 percent per year, with no limit on toll increases at all.Yet another error emerges when Mr. Rieders suggests that the lease is outsourcing our government to some other country. Leasing the Turnpike is the opposite of outsourcing. Outsourcing is moving American capital and jobs overseas. When a foreign company brings international capital into the U.S., creating new jobs and services in the process, there is a different word to describe the situation: insourcing.Pennsylvania is at a critical juncture in deciding how to fund its transportation infrastructure. Issues of this magnitude deserve more than factual inaccuracies — they merit honest discussion and engagement with facts. Indeed, Mr. Rieders and others would benefit from a visit to TurnpikeFacts.com before simply regurgitating the talking points of the Turnpike Commission.
4 comments:
What you say may be true (probably not because it is obvious that the Commonwealth Foundation is being funded [probability funding coming from Pa. Transportation Partners] to support a lease), however underneath all of the foundations defenses, in support of a lease; the business deal just seems insufficient. $12.8B seems way to small, almost like the state is getting ripped off. Think about this (keep in mind these data are in total annual net fare revenues), over the past five years the average annual revenue brought in by the PTC was approximately $420M. Now if you do the math over a time span of approximately 30 years, the partnership will have handled (total cash flow) its initial investment of $12.8B. In addition, this does not account for toll increases, which will rise quite frequently. Taking into consideration the toll increases the Spanish group (about 60% of the consortium) will meet its initial investment of $12.8B in a shorter time span, say 25 years. Moreover, the strength of the American dollar can only go up, thus cheapening the lease deal even more. What does this all mean? Well, it means that after, lets say 30 years, the group will be left with 45 years of profit. Please keep in mind these figures are not totally comprehensive, in that I didn’t account for operating costs, maintenance, ect. However, I believe the basic blueprint of my premise proves that the deal is just incredibly underbid.
You make a number of claims that are inaccurate.
First, your argument that "the deal is just incredibly underbid" is erroneous on several levels. The primary one is the fact that many international consortiums bid on the Turnpike. The process in which no bidder knew the offer of the other bidders actually served to maximize the amount the state would receive. Indeed, the process ended up bumping the final bid by hundreds of millions of dollars over the initial bids. By comparison of other such deals, not only is the offer in line but the $12.8 billion would be the single largest concession in history.
Further, your calculations (by your own admission) do not take into account "operating costs, maintenance, ect." So your calculations on the "profit" of the company is based on it spending ABSOLUTELY NOTHING. Not only is this impossible (how else do you run the toll road), but the lease contract requires additional investment by the company of more than $5 billion.
Finally, how much of the PTC's $420 million was delivered to the state? ABSOLUTELY NOTHING. In fact, the PTC has been living off of $120 million in subsidies from the state (see http://cfpolicyblog.blogspot.com/2008/05/turnpike-lease-to-save-taxpayers-87.html) which would mostly go away with a lease.
You should also do the math on Act 44. We did. And the difference is a loss of $37 billion to the taxpayers (see http://www.commonwealthfoundation.org/newsreleases/how-lose-billions-dollars).
One last comment regarding your initial assertion of some sort of quid pro quo that puts our research and analysis in question. Since we were founded 20 years ago, the Commonwealth Foundation has supported free-market policy change. We were pushing for public-private partnerships, including the lease of the Turnpike, long before there ever was a PA Transportation Partners.
We also have a strict policy against taking funding from anyone who seeks to exert influence or control over our policy work. We're not guns for hire. We reject funding from those seeking to use us as shills. (Just one piece of evidence showing our independence is our public differences in the assumed rates of return on investment on the lease payment. We are sure that Gov. Rendell and the PA Transportation Partners are not that happy with us that we pointed out a 12% rate assumption is too optimistic.)
The Commonwealth Foundation has garnered credibility over two decades because of our principled stands, not because we are just like the hundreds of other lobbying firms in town that will say whatever needs to be said for the right price. Our principles are not and never have been for sale. You may not like our policy positions--and we encourage vigorous debate over them--but we hope you weigh the merits of our arguments rather than resort to the talking points of our policy opponents (i.e., the Turnpike Commission) that merely attack the messenger because they can’t counter the message.
Please publish the correct number.....12.8 billion minus the Turnpike's debt of close to 4 billon (if not larger)leaves the State with approximately 8 billion to invest. This website is such "Hogwash". I wish you would come clean with how much you were paid to lobby against the Turnpike. You must be on crack if you think the state is going to get 12 percent return on their investment, especially in this environment of the financial markets. So stop trying to blow smoke up the citizens of Pennsylvania's tailpipes to achieve your lobbying payment. Your arguments are in vain, and your numbers you present to the public suck just as bad as your lobbying efforts. The deal is flat out wrong for Pennsylvania... Period! You should be ashamed of yourself to even live in this state, because what you are doing is totally UN-AMERICAN.
Actually, the correct numbers can be found throughout our websites ... here's just the latest: http://www.commonwealthfoundation.org/newsreleases/how-lose-billions-dollars (the PTC debt is $2.3 billion, btw).
We agree that 12% is unreasonable. That's why we testified before a House Committee that a 7.5% return is more realistic.
As for lobbying, we're not hired guns (see the post above yours). We only use voluntary contributions from people who support free-market public policy reforms.
Please do point out the errors in our analysis. We don't understand your technical terms like "you must be on crack", "suck", and "blow smoke".
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