P3 legislation clears House budget panel despite lawmaker's attempts to bar tolling from Brent Spence Bridge

02/24/2015 02:03 PM

FRANKFORT — Legislation that would allow the state to collaborate with private companies in financing capital projects cleared the House Appropriations and Revenue Committee Tuesday.

The 26-4-1 vote on House Bill 443 came after Rep. Arnold Simpson unsuccessfully offered four floor amendments focused on the reconstruction and rehabilitation of the Brent Spence Bridge in northern Kentucky, specifically banning the use of tolls to pay for the project.

A similar provision against tolls on the bridge between Kentucky and Ohio doomed a bill vetoed by Gov. Steve Beshear last session. Beshear called the tolling language in last year’s legislation on public-private partnerships, which was adopted through a Simpson floor amendment, “imprudent” because it eliminated a potential funding mechanism for a specific project.

Simpson, D-Covington, said asking northern Kentucky residents to pay tolls in financing the estimated $2.3 billion bridge project on top of paying federal gasoline taxes would be “unfair.” He has filed 10 floor amendments to HB 443 pertaining to the Brent Spence Bridge project.

“The process we have in Frankfort is predicated upon a very simplistic notion: We all as Kentuckians, we elect our state (representative) and our state senator,” he said. “Not one of the northern Kentucky delegation is supportive of this particular endeavor. We’re all politicians in a sense, and I can’t believe that we all would be blind to the will of the people.”

But Rep. Leslie Combs, HB 443’s sponsor, said the legislation already handles some concerns of northern Kentuckians, noting that the bill requires any project connecting Kentucky and Ohio would need to be authorized by the General Assembly.

“The point is this is not the time for that amendment,” said Combs, D-Pikeville.

The bill would give the Kentucky Transportation Cabinet a much-needed tool to fund infrastructure projects as the federal gasoline tax remains flat since 1993, said Mike Hancock, cabinet secretary.

The tax’s buying power has diminished 48 percent in some 22 years, he said, noting Indiana financed its share of the Louisville bridges project through public-private partnership.

“Kentucky is the only state in our region and one of only 16 nationwide who do not have P3s in our toolbox,” Hancock said, referring to the nickname for public-private partnerships, “and so we need that tool.”

But other states have implemented more cautious public-private partnership laws, particularly in infrastructure projects, said Joe Meyer, head of Northern Kentucky United Against Tolls.

The Brent Spence Bridge, if financed through a public-private contract, would be “the single most expensive and complex transportation new build, P3 project undertaken in the nation.”

“And that’s a lot of risk for an inexperienced state,” he said, noting he has no issue with public-private partnerships other than those financing transportation initiatives.

HB 443 would allow the Finance and Administration Cabinet to draft regulations on the ventures, which would be available to private entities through competitive bidding, by Dec. 31. The General Assembly would have to approve projects costing $10 million or more, and all public-private partnership contracts would be reviewed by the Government Contract Review Committee, according to the legislation.

Combs said the bill does not go as far as she would like as it excludes local governments from the public-private arrangements, and although some agencies have already undertaken similar funding plans with private entities, Combs said state law does not specifically allow such contracts.

The University of Kentucky has already partnered with the private sector in recent dormitory construction, with the school financing the project through student housing fees, and Gov. Steve Beshear announced in December a partnership with Australian firm Macquarie Capital to build a fiber optic network and expand broadband Internet access throughout the state.

Still, others had reservations about the risks associated with such a funding mechanism.

Rep. Jim Wayne said he wanted stronger protections for the state if businesses in public-private partnerships cease operations during the agreements.

“If we’re in a project relationship with a corporation that goes bankrupt, there’s a question about who then is left holding the bag, who then is liable for the bonds or the capital payments that are due,” he said. “That’s my concern here because it’s not really an equal partnership. The commonwealth can go bankrupt also, but we have many, many more assets than any corporation, construction company or whatever would have.

The Louisville Democrat also noted the difference in goals of government and private industry.

“The government’s motive is the common good,” Wayne said. “That’s what we’re trying to protect and promote. The corporation’s motive is profit, so we have different missions.”

Kevin Wheatley

Kevin Wheatley is a reporter for Pure Politics. He joined cn|2 in September 2014 after five years at The State Journal in Frankfort, where he covered Kentucky government and politics. You can reach him at kevin.wheatley@charter.com or 502-792-1135 and follow him on Twitter at @KWheatley_cn2.


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