The NJ Turnpike May Soon Take The Privatizing Exit
Friday, November 24, 2006PAUL KANGAS: The New Jersey Turnpike could become the next pay-for-use roadway to go private. Leasing public structures to private companies is a way for cash strapped states and municipalities to raise money. And as Diane Eastabrook reports, a privatization bonanza could soon be under way.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: For 50 years, Chicago's skyway generated millions of dollars in tolls annually for the city, but not anymore. Nearly two years ago, the city leased the skyway to a private consortium of owners who now maintain the nearly eight-mile roadway and pocket all tolls. But in return for a 99-year lease, Chicago received a whopping $1.8 billion. Attorney John Schmidt negotiated the landmark deal for the city.
JOHN SCHMIDT, ATTORNEY, MAYER, BROWN, ROWE & MAW LLP: In the case of the city they were able to shore up the city's finances in a way that really has made Chicago probably financially the strongest major city in America.
EASTABROOK: The skyway has paved the way for more and even bigger privatization deals. Earlier this year the state of Indiana signed a 75- year lease for its cross-state toll way. The price tag: $3.8 billion. At a time when Federal funds are shrinking and the need to improve and expand infrastructure is increasing, many experts say privatization is the answer.
ROBERT POOLE, DIR., TRANSPORTATION STUDIES, REASON FOUNDATION: If you're talking about the need to build significant new facilities, a new bridge, widen an interstate for 200 miles, you're probably talking about billions of dollars to get (ph) projects and the gas tax just doesn't produce and deliver those sorts of sums for specific new projects.
EASTABROOK: Australia-based Macquarie Holdings is a lessee on both the Chicago skyway and the Indiana toll way. While placing public structures in private hands has been common in Europe and Asia for decades, it's still a novel concept in the U.S. Macquarie admits that is why the idea is still greeted with some suspicion.
DJ GRIBBIN, DIRECTOR, MACQUARIE HOLDINGS: The concerns that people raise are what is going to happen to the tolls? We all understand that private companies are motivated by shareholder return. My gosh, they're going to just jack tolls up through the roof. And tolls are governed by the concession agreement, so the lease that we have with government restricts the degree to which we can raise tolls on that facility.
EASTABROOK: Experts say Chicago has managed the money it received from the skyway lease wisely, investing some of it, spending the rest on projects and services. But they question whether other local governments or states would act as conscientiously.
DAVID SCHULZ, CIVIL ENGINEERING PROFESSOR, NORTHWESTERN UNIVERSITY: You'd have to be extraordinarily careful not to squander all of the money. And my personal feeling is I think you ought to reserve that money for transportation infrastructure purposes, highway and transit.
EASTABROOK: The skyway lease has worked so well for Chicago, the city is now negotiating a lease on its parking garages. And even more deals are on the drawing board with the city looking to privatize its marinas and Midway airport. Diane Eastabrook, NIGHTLY BUSINESS REPORT, Chicago.
