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RPT-NY eyes privatizing to help with fiscal crisis-Gov
September 30, 2008 / 7:57 PM / 9 years ago

RPT-NY eyes privatizing to help with fiscal crisis-Gov

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NEW YORK, Sept 30 (Reuters) - New York state will study maximizing “the value” of its assets via public-private partnerships so that it can keep making long-term investments in roads and bridges despite a budget crisis, Gov. David Paterson said on Tuesday.

A new commission will be created on Thursday, which will issue its initial findings in 90 days, and more detailed recommendations in 180 days, the Democrat said in a statement.

Paterson again said he was not considering the sale of any state assets, adding the new study would examine how to ensure “adequate government oversight, protection of public employees and regulation of user fees; use of non-compete clauses; and prevailing wage and labor standards.”

All of these issues have proved controversial in a number of states that have used privatizations.

In Texas, for example, the legislature enacted a two-year moratorium for much of the state after critics said Republican Gov. Rick Perry’s program, the nation’s biggest, enriched private developers at taxpayers’ expense.

In New Jersey, Democratic Gov. Jon Corzine’s turnpike privatization plan died, partly because its series of sharp toll hikes proved deeply unpopular.

New York’s new 11-member commission, led by Charlotte Hitchcock, the Deputy Secretary for Labor and Financial Regulation, will consider which assets could be privatized and how deals have been done in the United States and overseas.

The governor will appoint the members, with the speaker, the senate majority leader, the comptroller and the attorney general each recommending one individual.

“With commodity prices spiking to historic highs -- asphalt is up 183 percent per ton over the past three years and steel is up 42 percent over the past two years -- identifying new ways by which the State finances and delivers infrastructure projects is paramount,” Paterson said in a statement.

The state has been scrambling to address its deteriorating finances. On Monday, Democratic Comptroller Thomas DiNapoli said Wall Street’s melting profits could cost the state $3.5 billion in tax revenues by March 2010 -- triple the governor’s latest estimate.

It was only last week that New York finally decided to replace the Tappan Zee Bridge, one of the busy Hudson River crossings, after a decade of debate. A new bridge, plus new lanes for rapid bus and rail service, would cost $16 billion, and privatization is an option, state officials say.

Paterson did not mention the state lottery, which former Democratic Gov. Eliot Spitzer had said could be privatized as a way to raise $3 billion for state colleges and universities. A Paterson spokesman had no immediate comment on the lottery.

Chicago sparked interest in public-private partnerships three years ago by leasing its main commuter link, the Skyway toll bridge, to Cintra, CCIT.MC (FER.MC), and an arm of Australia’s Macquarie Group Ltd (MQG.AX).

Municipal analysts faulted Chicago’s deal, saying no asset can be properly valued for such as lengthy lease -- 99 years -- which also locked taxpayers out of any of the extra revenue.

Analysts also say privatization should only be used for new and thus more risky projects. The list of states using this method includes Virginia and Florida.

Pennsylvania lawmakers have blocked Democratic Gov Ed Rendell from privatizing the turnpike with Spain’s Abertis (ABE.MC) and Citigroup (C.N).

Other banks and private companies that have raised money for these deals or served as advisors includes: Goldman Sachs (GS.N), Morgan Stanley (MS.N), the Carlyle Group [CYL.UL] and a Credit Suisse CSGN.VX-General Electric (GE.N) venture. (Reporting by Joan Gralla; editing by Tom Hals)

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