Privatization Backlash

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At the direction of New Jersey Governor Jon Corzine, the state has been studying the possibility of privatizing various public assets to pay down its mounting debt for close to a year. Among the assets potentially on the table was the state’s 148-mile turnpike, a long-term lease on which, some analysts believe, could fetch more than $20 billion. Back in January, Jim Ridgeway and I explored the growing toll road privatization trend, and found it, in many cases, to be a dicey proposition that was being pushed by investment banks, particularly Goldman Sachs, where, incidentally, Corzine once served as chairman.

Under fire from New Jersey residents and state lawmakers—when I drove the Turnpike a couple weeks ago I saw a billboard blasting the privatization option—Corzine said yesterday that he won’t seek to privatize the state’s roads. “New Jersey’s roadways will not be sold; and they will not be leased to a for-profit or foreign operator,” he said in a statement.

Coincidentally, or maybe not, Corzine made this statement on the same day that the Spanish toll road operator Cintra (which, with its partner, Macquarie Infrastructure Group, currently holds leases on the Chicago Skyway and Indiana Toll Road), lost its bid to overhaul and operate a highway in Texas to a public entity. As Reuters notes, this development could “stall road privatization plans in other states.” This could prove seriously problematic for a number of companies, including Cintra and Macquarie, who have positioned themselves to take advantage of toll road opportunities in North America. Nor does this bode well for the investment banks, including Goldman, that have raised multibillion dollar infrastructure investment funds on the assumption that a private highway boom was imminent.

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