New York Gov. Paterson Creates Commission to Study Leasing State Assets

Earlier this year, I wrote in our Annual Privatization Report 2008 that the ascendancy of Gov. Paterson in New York did not improve the prospects for privatization relative to his predecessor, Eliot Spitzer. I’m glad to report that I may have been at least partially wrong. I don’t think the prospects for competitive contracting for government services have improved much, but at least on the infrastructure front, Gov. Paterson seems to be taking the lead of Mayor Daley, Govs. Rendell and Kaine, and other prominent Democrats by exploring the opportunities presented by public-private partnerships:

Facing billions of dollars in deficits, New York Gov. David Paterson wants to explore the notion of leasing some of the state’s assets. Paterson said he will sign an executive order on Thursday establishing the New York State Commission on State Asset Maximization to study potential public-private partnerships. The executive order will establish an 11-member panel, chaired by Charlotte Hitchcock, Paterson’s deputy secretary for labor and financial regulation. The Commission will be required to submit a preliminary report of their recommendations to the governor and state Legislature within 90 days, with a final report due within 180 days. “Public-private partnerships are not the only answer, but we need to honestly assess whether they can be part of the solution. 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, and I look forward to receiving the Commission’s recommendations,” said Paterson.

From Newsday:

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. [. . .] 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.

And from 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.”

This sounds like a very positive step forward in a state that has historically been the most resistant to privatization and PPPs. We’ll be following this closely. Reason’s Annual Privatization Report 2008 Reason’s Privatization Research and Commentary