Following other states, New York may lease assets

[October 03, 2008]  ALBANY, N.Y. (AP) -- Gov. David Paterson is proposing that New York join a growing number of states in leasing assets to private contractors to trim costs and provide long-term, steady revenue.

Under consideration for leasing could be everything from state highways and bridges to the lottery, golf courses, parks and beaches.

Paterson said this week he is creating a commission to study public-private partnerships and come up with specific recommendations by January, in time for his first State of the State address and state budget proposal.

Investment bankers have already shown interest in leasing some assets, part of a nationwide trend. Among them is the lottery, which state officials have said could bring in $4 billion up front to the state and $200 million a year after that for higher education.

Nationally, Wall Street investment houses have courted more than a dozen states to lease state lotteries to private investors. The Illinois House last month approved a plan to raise $10 billion for building roads and schools by privatizing its state-run lottery for half a century, with the Senate scheduled to vote on the measure this fall.

While leasing toll roads is more common in Europe and Asia, a handful of states have experimented with the notion.

In June 2006, an Australian-Spanish partnership paid $3.8 billion to lease the Indiana Toll Road and $1.83 billion to lease the eight-mile Chicago Skyway.

That same month, an Australian company bought a 99-year lease on Virginia's Pocahontas Parkway, and Texas officials decided to let a Spanish-American partnership build and run a toll road from Austin to Seguin for 50 years.

More recently, New Jersey legislators have debated letting private firms operate toll lanes on the New Jersey Turnpike, while last month a private partnership withdrew their $12.8 billion bid to lease the Pennsylvania Turnpike for 75 years after the Legislature there was slow to take them up on the offer.

Several other states have leased the operation of sea ports and airports. The private firms hope to improve management and marketing to increase profits. In exchange, the states want to guarantee a reliable return and avoid rising costs for maintenance and potentially for payroll.

One possible target for leasing is the 53-year-old Tappan Zee Bridge, which spans the Hudson River north of Manhattan and will soon have to be replaced at a cost estimated around $9.3 billion. The bridge's toll is scheduled to rise to $5 from $4 next year.

Sean Patrick Maloney, a top aide to Paterson, emphasized that the Democrat isn't seeking to sell any state assets.

"I believe the private sector can be a source of innovation, allowing us to increase the value, efficiency and safety of assets like our aging infrastructure system," Patterson said.

Public employee unions will get a say in the process. Unions whose members could find themselves working under a private contractor have voiced the most serious opposition to such public-private deals.

Some note privatization doesn't have an established track record in New York.

"I think what you have to do is avoid a fire sale of state assets, whether you call it a sale or a 99-year lease," said Democratic Assemblyman Richard Brodsky of Westchester, whose authorities committee would likely have to approve the deals. "This is a week in which we're considering spending $1 trillion to bail out Wall Street. What magic do they bring?"

Paterson is also giving the commission a tight deadline: the 11-member commission will report to him and the Legislature in 90 days, in time for the start of the budget process. A final report is due in 180 days, before the end of the 2009 legislative session.

Privatization isn't always successful. Lawmakers in Illinois, Indiana and Texas rejected lottery lease proposals over the past two years.

In New York, state-owned Stewart International Airport in Newburgh was operated by National Express Group. But the company moved two years ago to get out of its 99-year lease as business declined. Stewart is now run by the Port Authority of New York and New Jersey.

[Associated Press; By MICHAEL GORMLEY]

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