Investment bank Greenhill & Co. (GHL) today announced that it has hired Ed Rendell as a senior advisor focused on “public-private partnerships, infrastructure projects and advising governments on a wide range of financial matters.”
At first blush, it makes perfect sense.
Rendell just finished up his second term as Pennsylvania governor, before which he spent eight years as Philadelphia’s mayor and another ten as its district attorney. He also has national political pull, having served as chairman of the Democratic National Committee, and recently agreed to join NBC News as a political analyst. If anyone should understand the issues and players involved in public/private partnerships, it’s someone like Rendell.
If you delve a bit deeper into Rendell’s resume, however, you realize that his boldest attempt at a public/private partnership was an abject failure.
In late 2006, then-Governor Rendell began working on a plan to temporarily privatize The Pennsylvania Turnpike, a 532-mile highway that stretches from New Jersey to Ohio (and once included such roadside attractions as the House of Pigeons). The state was in need of money to repair dilapidated bridges and roads, and leasing out the Pike was seen as an alternative to legislation (Act 44) that would have filled the funding hole by turning I-80 into a toll road (an unpopular move among commuters and one uncertain of gaining federal approval).
So Rendell began soliciting bids from infrastructure investors and received three bites. The winner was a $12.7 billion offer from Citigroup (c) and Spain’s Abertis Infraestructuras, in exchange for a 75-year lease.
Rendell touted the deal as a huge win for Pennsylvania. Not only did it represent 13% more total funding than Act 44, but would cost Pennsylvanians 30% less (since they wouldn’t be paying I-80 tolls).
Unfortunately, the Pennsylvania legislature wasn’t nearly as enthusiastic — particularly given earlier promises that the deal might attract bids in excess of $25 billion. Neither was the state’s Turnpike Commission, which launched a noisy lobbying campaign against the plan. And then there was that whole matter of a foreign entity being in charge of an essential roadway. This wasn’t quite the Dubai Ports World controversy, but xenophobia did play its part.
While state officials dithered, the American and European economies worsened, particularly the credit markets, which were essential to the Albertis and Citi bid. By the end of September 2008, it became clear that the $12.8 billion would be impossible to finance. Citi and Albertis pulled their offer on October 1.
Then ensuing federal stimulus would help repair some of Pennsylvania’s bridges and roads, but it couldn’t quite wipe the egg off Rendell’s face for the privatization failure.
So now Rendell has a chance to help Greenhill’s clients succeed where he once failed. Perhaps he learned some valuable lessons that will carry over. At the very least, he knows that such projects are anything but easy.