P3 is short for Public/Private Partnership which is an agreement between a public agency and a private company. It may take many forms, but typically, the private entity accepts the responsibility of operating an asset (such as a toll road) or undertakes the construction of a project on behalf of the public entity. Under the agreement, the private entity assumes some of the responsibilities and risks associated with the asset or project. If the P3 takes the form of a long-term operating contract (also known as a concession or franchise agreement) the private entity assumes the risks and rewards of being the business owner. For example, the private entity, after paying operating and debt service expenses, could retain any of the net revenue generated by the asset. In most cases, the concessionaire finances 70 percent or more of its "bid price" with borrowed funds, pledging future revenues of the asset it is leasing to the lenders.
Partnering with a private entity to help with the development of transportation infrastructure is a way to shift construction, financing and operating risk to the private sector. P3s can also be valuable for delivering projects with tight schedules and complex design and construction. However, privatizing a stable, highly-rated and well-managed enterprise like the PA Turnpike simply to generate an upfront cash payment adds little value. There is no meaningful transfer of risk from the government to the private entity, and the government generally can raise funds much more cost-effectively itself.
Any privatization of the Turnpike would require the General Assembly to repeal Act 44 and enact new legislation authorizing a long-term lease of the Turnpike to a private entity. Though Act 44 has not been repealed, bills have previously been introduced for debate. The intent of these bills was to support the privatization of the Pennsylvania Turnpike (H.B. 2593), or to create
Public-Private Partnerships (S. B. 1158) for transportation.
In June 2008, H.B. 2593 was introduced to authorize the 75-year lease of the Pennsylvania Turnpike by Abertis for $12.8 billion. Following extensive debate and two days of hearings, the state House Transportation Committee did not vote on H.B. 2593.
The state Senate approved S.B. 1158 authorizing Public-Private Partnerships for transportation, but specifically excluded the Pennsylvania Turnpike. That bill was not voted out of the House Transportation Committee.
Due to the expiration of all proposed bills on November 30, 2008, Act 44 is the only remaining legislation enacted to provide needed transportation funding for Pennsylvania in the future.
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