Wednesday, July 18, 2007

TTC lobbyists pool war chests, plot PR offensive on Washington

Firms Forming Pro-P3 Lobbying Group


by Humberto Sanchez
The Bond Buyer
Copyright 2007

WASHINGTON — A Wall Street investment bank and two foreign firms seeking to invest in U.S. transportation infrastructure are backing an effort to form a lobbying group that will promote public-private partnerships to lawmakers in the wake of concerns raised about whether these deals are in the public interest.

The group, identified as the Coalition for Strengthening America’s Infrastructure, has been provided “seed funding” by Goldman, Sachs & Co., Macquarie Bank Ltd., Transurban Group, and the American Association of State Highway and Transportation officials, which represents the state transportation departments in Washington, according to preliminary promotional documents obtained by The Bond Buyer. The documents did not disclose how much money was provided.

Peter Loughlin, with Loughlin Enterprises LLC, a lobbyist and attorney who is putting the coalition together, declined to comment for this article other than to say that the coalition is still in the formative stage and that the group’s membership has not been fully determined.

The firms involved in the effort also were reluctant to talk about the creation of the new lobbying group. A spokesman for Goldman declined to comment. A spokesman for Macquarie said the bank has not provided seed money, but has been involved with the group-forming effort. And a spokeswoman for Transurban said that while the company provided an unspecified amount of funding, it stipulated that the payment was for Loughlin to explore the formation of the group and not to fund the group’s operations.

AASHTO did not return a phone call seeking comment and sources said it has backed out of the coalition because not all of its members support P3s.

Group organizers hosted a “kick-off meeting,” titled “A Call To Action” on June 22 in New York City where former New York Gov. George E. Pataki, one-time U.S. House Majority leader Dick A. Gephardt, former Colorado Gov. Bill Owens, and the prior acting U.S. Department of Transportation Secretary Maria Cino all spoke in favor of P3s, according to sources.

They were unavailable for comment.

The coalition would broadly “focus on education and advocacy” and “pursue an agenda … that ensures public-private partnership solutions remain available as a financing and delivery tool to enhance our nation’s transportation system,” according to the promotional documents.

The group would also “work towards removing legislative and regulatory barriers that restrict the full utilization of public-private partnerships and opposing any efforts to impose additional restrictions on public-private partnerships,” the documents said.

In addition, the coalition would support increased federal transportation funding to state and local governments, but “with public-private partnerships positioned as viable, available, and sound alternatives.”

Another goal of the group is to counter criticism from Congress and Americans for a Strong National Highway Network, a group formed in February to oppose highway privatization deals. Members of the P3 opposition group include the Owner-Operator Independent Drivers Association, which represents small business truckers, and the American Trucking Association.

OOIDA executive vice president Todd Spencer, said the “motivation” of the investment and toll development firms involved in P3s “is economic” and added, “That is their job to do that, I suppose ... but our lawmakers, the people we put into positions of responsibility, they shouldn’t be buying into that nonsense.”

However, Spencer conceded that there is a place for some P3s among available financing tools. Those P3s would build new road capacity, instead of taking over existing roads, and provide assurances that road users get a reasonable return.

The formation of the new P3 coalition also comes as Congress prepares to begin drafting broad transportation legislation that expires Oct. 1, 2008. The new bill is expected to be the legislative vehicle for any federal P3 curbs that might be imposed.

Goldman Sachs, one of the backers of the new P3 coalition, has been a leading voice advocating the use of P3s by state and local governments. The firm both advises state and local governments on P3 deals and also seeks to invest in the transactions. However, Goldman has said that its advisory and investment units are separate and do not interact to prevent conflicts of interest.

The New York investment bank advised Indiana and Chicago in their P3 deals, which have been disparaged by some lawmakers.

Under the Indiana transaction, which closed last year, the state leased the Indiana Toll Road for 75 years to a private consortium in exchange for $3.8 billion. Chicago leased its 7.8-mile Chicago Skyway in a 99-year deal for $1.83 billion that closed in 2005. In both instances the private partner is responsible for operating and maintaining the roads over the life of the lease in exchange for collecting the tolls over the same period.

The creation of the P3 lobbying group comes as federal lawmakers have criticized P3s in a series of P3 hearing in recent months. Rep. Peter DeFazio, D-Ore, chairman of the House Transportation and Infrastructure Committee’s highways and transit subcommittee, lambasted the Indiana deal for benefiting the private partner more than the state. By one estimate, the deal would bring in $11 billion over 75 years to the private partner, much more than the $3.8 billion payment received by the state. He also criticized the Chicago transaction, in part, because the city planned to use its $1.8 billion payment to cover operating expenses rather than as a reinvestment in its transportation infrastructure.

The P3 supporters “have a right to advocate for their company’s gain and I am here to advocate for the public interest, which sometimes involves [P3s] and many other times would be better done through a fully public arrangement,” DeFazio said in a brief interview yesterday.

DeFazio and full committee chairman Rep. James L. Oberstar in May wrote to all 50 governors, leading state lawmakers and state departments of transportation warning them about entering into P3 deals, particularly those that lease existing roads to a private company for a long period of time in exchange for a large cash payment.

Sydney, Australia-based Macquarie Bank, another backer of the coalition, invests in road infrastructure through its Macquarie Infrastructure Group subsidiary. MIG is part of the private consortium that won the concessions for the Indiana Toll Road and the Chicago Skyway.

Coalition supporter Transurban is a toll road developer based in Melbourne, Australia. The firm is involved in a $882 million P3 deal that would build 36 miles of high-occupancy toll lanes down Interstates-395 and 95 in Northern Virginia, which may be financed partly with bonds. The firm was also picked by Virginia in May to take over Pocahontas Parkway in Richmond for 99 years, including operations, maintenance, and collection of toll revenue, in exchange for $525 million.

Other possible members of the coalition include the departments of transportation in Indiana, Colorado, Texas, Missouri, Virginia, and Utah, as well as Chicago, the law firms of Nossaman, Guthner, Knox, Elliott LLP, and McGuireWoods LLP, and the consulting engineering firm Hatch Mott McDonald, according to the documents.

Firms that participated in the group’s June 22 meeting included Spanish infrastructure firms Abertis and Cintra; law firms Chadbourne & Park, Mayer Brown Rowe & Maw LLP, Orrick, Herrington & Sutcliffe LLP and Hunton & Williams LLP; investment banks DEPFA Bank, Royal Bank of Scotland, and Lehman Brothers; and the construction firm, Kiewit. Macquarie, Goldman and Transurban also participated.

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