01/8/07 - Posted from the Daily Record newsroom
Report: NJ toll road privatization risky

BY ADAM L. CATALDO
BLOOMBERG NEWS
New Jersey officials, who are considering selling toll roads to raise money, should make sure any deal generates funds for future capital projects and leaves the state with a strong transportation financing system, a report by the Regional Plan Association said.

The report said New Jersey will have to attain a ''new level of accountability" with the public before agreeing to enter any contract. Among the risks are exposing drivers to unfair toll increases, a lower level of service and using revenue to fund short-term needs like tax cuts instead of transportation, the nonpartisan group said.

''The benefits are unquestionably a potentially large price to the state," said Alexis Perrotta, the report's author and a senior policy analyst with the association, a nonpartisan policy group whose board includes such business and civic leaders as former New Jersey Governor James Florio. ''That is straight-up revenue."

State officials and lawmakers are weighing the possible sale or long-term lease of several assets, including toll roads, as a way to fund future capital projects and pay down the state's record $30 billion of debt. UBS AG was hired to advise New Jersey on possible sales. In November, the state released a report from UBS that said the state's three toll roads -- the New Jersey Turnpike, the Garden State Parkway and the Atlantic City Expressway -- as well as the lottery have the most revenue- generating potential from a sale.

Indiana last year made a $3.8 billion deal for a 75-year lease of its 157-mile (253-kilometer) toll road with Cintra SA and Macquarie Infrastructure Group. That followed Chicago's decision to enter into a 99-year lease for its 7.8 mile Skyway with another Cintra affiliate and Macquarie for $1.83 billion.

Deals Considered

New Jersey is one of several states, including Pennsylvania and Oregon, considering transportation privatization deals.

The association focuses on transportation, growth and economic competitiveness issues in the New York City metropolitan area.

In its report, ''Proceed With Caution: Ground Rules for a Public Private Partnership in New Jersey," the association doesn't come out for or against a toll road privatization. The benefits of any transaction will be based on what kind of agreement the state negotiates, it said.

Perrotta said she briefed state Treasurer Bradley Abelow and transportation commissioner Kris Kolluri on the report last week. Abelow is a former executive with New York-based Goldman, Sachs & Co., and both men were appointed by Governor Jon Corzine, Goldman's former chief executive officer.

''They are taking it slow and that is definitely the right approach," Perrotta said. ''They are not necessarily going forward with any kind of deal that nobody knows about."

'Open Discourse'

Abelow in a statement said he welcomed the association's ''well-reasoned" recommendations.

''From the earliest stages of our process, we have invited dialogue with multiple stakeholders," Abelow said. ''Upon developing recommendations concerning state assets, we believe strongly in a full and open discourse over what public/private partnerships may serve New Jersey's best interests."

The report said the state should disclose the amount and schedule of any possible toll rate increases and give the public an opportunity to comment. Any agreement should have performance, maintenance and environmental standards, and the public should be told about what could happen if the road's operator defaults, the association said.