PhillyDeals: Builders extolling private highway projects

Private construction companies hope to slap tolls on I-95, U.S. 422, and other crowded freeways.

They're using the antitax, spending-cut mood gripping voters and state capitals, after three years of recession, to push for private highway, bridge, and building projects. Companies would replace governments in financing these projects up front, and collecting tolls from users, to reap future profits.

A proposal gaining steam in Harrisburg would set up a "Public-Private Transportation Partnership Board," appointed by the governor and state legislators, to decide what to build and which builders to hire.

Advocates acknowledge this could cost more, over time, than having the government borrow the money and build the projects through tax-free bonds.

But since the driving public, not the cash-strapped government, pays tolls, they're betting Gov. Corbett will join California, Virginia, Florida, and others ceding public roads to private builder-operators.

Members of the proposed project-picking board "are supposed to have professional experience in transportation, finance, or law, to get away from cronyism," says lawyer Frank Rapoport, partner at McKenna, Long & Aldridge L.L.P. and a backer of the proposal.

But an amendment by Senate Transportation Committee Chairman John C. Rafferty Jr. (R., Montgomery) would allow him, his committee's top Democrat, and their House counterparts to sit on the board even if they aren't experts.

Won't that make it look as if politicians are picking projects they personally like?

"That's the general belief," Rafferty agreed. "But there will be experts on that board, from the governor's appointees." The amended bill was passed by Rafferty's committee last week. A House version gets a committee vote March 3.

Ex-Gov. Ed Rendell and New Jersey Gov. Christie last year called for private owners and tolls to replace the free I-95 bridge over the Delaware at Scudder Falls. The Delaware River Joint Toll Bridge Commission is expected to choose whether (and whom) to hire later this year, says Bijan Pashanamaei, Scudder Falls project manager for AECOM, a California engineering firm doing preliminary work at the site. Rendell is now a part-time investment banker pushing similar projects.

"Public-private partnership enablement in Pennsylvania would be a great thing" for Exton-based Bentley Systems Inc., chief executive officer Greg Bentley told me. His construction-software firm reports $500 million in yearly sales, more than half of that in China, India, and other fast-growing countries, where he says private projects are common.

Bentley says private companies can use state-of-the-art software to design, build, and maintain projects more quickly and efficiently than Pennsylvania's step-by-step procurement rules allow.

Pennsylvania could change its procurement rules without ceding powers to private companies, Bentley acknowledged. But "public-private" projects are expected to be more profitable for builders, which will help attract more private investors, he added.

Why, I asked, should builders, not the public, enjoy lower costs? Over time, "if you had more public-private partnerships, then there would be competition for the work, and you'd end up with the government and the taxpayer getting a better deal," Bentley suggested.

Private road projects haven't always worked out. Hal Reinfeld, a Philadelphia retiree, told me last year about a privately managed South Carolina highway that never attracted the expected ridership or tolls, leaving him and other bondholders with losses.

Trucking-industry pressure has defeated previous efforts to privatize and toll Pennsylvania roads and rail projects, Berwyn lawyer Richard E. Kurtz, senior partner at Woodcock Washburn L.L.P. and a former SEPTA board member, told me.

But Rapoport says Corbett, at least, "has got religion about tapping private money for these projects." Rapoport expects the bill to pass, "and in a couple more years we'll be looking at using these [to put] courthouses and state colleges" and other public facilities, and their funding, in private hands.