Gov. Paterson looks to lease state assets

By The Associated Press

Tuesday, September 30, 2008 11:28 PM EDT

ALBANY — New York Gov. David Paterson wants to lease state assets that could include the Thruway, the Tappan Zee Bridge, and the lottery to private contractors to trim costs and provide long-term, steady revenue.
Fair game would be private management of the state’s many golf courses, the toll highway network, parks, beaches and bridges, including the 53-year-old Tappan Zee, which spans the Hudson River north of Manhattan and will soon have to be replaced at a cost estimated around $9.3 billion.

Paterson said Tuesday he is creating a commission to study public-private partnerships and come up with specific recommendations by January, in time for his first State of the State address and state budget proposal.

Investment bankers have already shown interest in some assets, part of a nationwide trend. Among them is the lottery, which state officials have said could bring in $4 billion up front to the state and $200 million a year after that for higher education.

In a conference call with reporters, the new commission’s executive director, Samara Barend, described “bringing in private sector capital while maintaining public sector oversight.”

Nationwide, Wall Street investment houses have courted more than a dozen states to lease state lotteries to private investors. Several more have leased the operation of highways, sea ports and airports. The private firms hope to improve management and marketing to increase profits. In exchange, the states want to guarantee a reliable return and avoid rising costs for maintenance and potentially for payroll.

Sean Patrick Maloney, a top aide to Paterson, emphasized that the Democrat isn’t seeking to sell any state assets.

“Creating this commission is another important step my administration is taking to ensure that New York continues to make the crucial long-term investments we need to sustain economic growth and secure a valuable quality of life for our citizens,” Paterson said in a statement.

“I believe the private sector can be a source of innovation, allowing us to increase the value, efficiency and safety of assets like our aging infrastructure system.”

Public employee unions will get a say in the process. Unions whose members could find themselves working under a private contractor have voiced the most serious opposition to such public-private deals.

But some note privatization doesn’t have an established track record in New York.

“I think what you have to do is avoid a fire sale of state assets, whether you call it a sale or a 99-year lease,” said Democratic Assemblyman Richard Brodsky of Westchester, whose authorities committee would likely have to approve the deals. “This is a week in which we’re considering spending $1 trillion to bail out Wall Street. What magic do they bring?”

Creating a commission may seem like a way to shelve an issue or relegate it to a dull report that’s never read. But recent state commissions have made significant steps toward a program of hospital closings and a proposal to cap property tax increases.

Paterson is also giving the commission a tight deadline: the 11-member commission will report to him and the Legislature in 90 days, in time for the start of the budget process. A final report is due in 180 days, before the end of the 2009 legislative session.

Privatization doesn’t always work. Lawmakers in Illinois, Indiana and Texas rejected lottery lease proposals over the past two years.

In New York, state-owned Stewart International Airport in Newburgh was operated by National Express Group. But the company moved two years ago to get out of its 99-year lease as business declined. Stewart is now run by the Port Authority of New York and New Jersey.

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