By Linda O’Flanagan
In a stump speech for private investment in public infrastructure, Patrick Foye has vowed his Port Authority “won’t be the last dumb guy left standing at the party when all the private guys have left.ˮ
Speaking during a private dinner hosted by accounting firm EisnerAmper last week, the PA executive director said New York is sitting on a goldmine of private investment in the form of its bridges, roads and tunnels.
“The GWB toll revenues are predictable,ˮ he told senior finance executives and investors from some of the city’s leading firms during the dinner at Cafe Metro in the Grand Central Terminal complex.
“We have all these transportation infrastructure assets which are perfectly suited to institutional investors. These are perfect assets to finance on a long term basis.ˮ
While he stopped short of saying the PA is on the verge of leasing out its bridges and tunnels, Foye said New York — and the rest of the country — needs to find a way of paying for its dated infrastructure, and soon.
“Governments at every level are broke or under unbelievable financial strain,” he said. With billions of dollars of work needed on the region’s roads, tunnels and bridges, Foye said the government isn’t in a position to offer any more handouts.
Instead, Foye said, the country is on the verge of a Public Private Partnership phenomenon being driven by fiscal reality.
Public Private Partnerships, abbreviated as P3, are already mainstays of public works projects in Europe, South American and Canada and, given the amount of infrastructure work need in the US, Foye predicts they have a “significant future” here.
While crediting government programs such as the Transportation Infrastructure Finance and Innovation Act (TIFIA) and MAP 21 (Moving Ahead for Progress in the 21st Century) for prioritizing transportation issues and providing credit assistance, the Port Authority boss said his mandate is to take a private approach to running his slice of the government.
Noting that the program is not one-size-fits-all, Foye said the PA board, like any public sector agency, has to carefully analyze each project to make sure that it’s not compromised if private investors pull their money out or, as he put it “make sure they are not the dumb guy left at the party when the private guys have left.”
But touting the $1.4 billion Goethals Bridge replacement as a P3 model for the rest of the country, he said, “If a project like this works in New York, it will be a signal to investors that New York and New Jersey are open for private investment in infrastructure.”
That P3 will be the first of its kind in the region and the biggest in the nation. Other projects that could be earmarked include the Gowanus Expressway, Terminal A at Newark Airport and the aging LaGuardia airport, a facility buckling under the strain of visitors.
New York Building Congress, long a P3 proponent, has said the trick to getting it right is to adopt best practices from other areas while tailoring a program that responds to the complexities of building in the New York region. “Moving forward, it is important for government to demonstrate its ability to create Public Private Partnerships that are transparent, short on bureaucratic red tape and long on cost-containment and private-sector innovation,” said the NYBC.
“We must ensure that roles and responsibilities are clearly defined and consistent, and we must move with a sense of urgency.”
Former PA executive director Chris Ward is also an advocate and, after moving to international construction company Dragados, said billions of dollars in private investment is available for infrastructure development in the U.S.
“It’s the way governments do infrastructure in Europe,” Ward told the Commercial Observer following his departure from the PA last fall. “It’s about selling creative solutions to government to get projects done. We need to be able to build roads and bridges and infrastructure in a way that guarantees a reliable schedule and saves money. There’s not enough government resources any more to get projects done any other way.”
Under the P3 Goethals plan, the PA commissioned a developer to design, finance, build and maintain the bridge. The authority will then repay the builder over a period of up to 40 years. The scheme holds the builder responsible for any cost over-runs and penalizes them for delays.
The predictable and long term nature of bridge and tunnel toll revenue makes P3s well-suited to institutional investors, although Foye stressed the PA’s focus was on safeguarding the public nature of the transportation assets and it would continue to control the tolls.
Indeed, he said the authority is focused on divesting itself of non-core real estate assets like the Essex County (NJ) Resource Recovery Plant, a waste-to-energy facility that cost the agency an estimated loss of $5 million over the past two years.
By selling off other money pits, such as a waste plant in Newark that eats up $40 million a year and the Teleport business campus on Staten Island, Foye said the Port Authority was on its way to reforming the agency and creating a “value added” environment for international trade and commerce.
He said the Port would complete its involvement in the World Trade Center rebuilding, but that “nationally significant project represents the end of our real estate development, certainly on that scale.”
