By Edward Kopko
CEO & Publisher
Asking the Feds to Fix Penn Station is the Wrong Solution
Recently, Andrew Cuomo sent an SOS letter to Donald Trump. He pleaded with the Federal Government to allocate funds to fix and renovate Penn Station. Apparently, Cuomo missed the irony of asking the Federal government to fix a problem whose responsibility lay squarely with state and local agencies.
While it is true that Penn Station is not your ordinary regional commuter station, that fact does not absolve the agencies that have mismanaged and let it fall into a state of disrepair from some responsibility. Penn Station serves 600,000 commuters daily, and as such it is the largest commuter rail station in the entire western hemisphere. It is run by three public entities, Amtrak, the Metropolitan Transportation Authority, and New Jersey Transit.
The long and short of it is that Penn Station is old, ailing, and needs major renovations. Rather than come together to create a local funding mechanism, Cuomo went to Washington, hat in hand, to beg for transportation dollars. Had the 2016 election gone differently, he may have had a good chance of shifting the burden of a local station onto the backs of the entire country. As it is, commuters will continue to be frustrated by waiting times and sub-par quality facilities.
In the 1990s, the Pennsylvania Station was renovated to improve the appearance of its waiting and concession areas. It was also meant to improve its façade and sharpening the stations audio and visual information systems. The 90s renovation cost was approximately $315 million.
Private Funding is Ready and Waiting to do the Job
What is amazing in this situation is that the solution is at hand. Venture capital and private equity are searching for good and useful projects. Penn Station would be an absolute gem of an investment.
If Cuomo would open the door, and his mind, to a public private partnership, PPP, the money would simply pour in. And this is not a controversial pie-in-the-sky idea. Japan is famous for the quality, speed, and price of the Tokyo railway. What few know is that it is almost 100% privately owned. Even more, it is owned by approximately 20 separate entities, but sensible regulations and cooperation makes using the Tokyo rail and subway far more seamless than most city and county transportation services in the United States.
With the right incentives, and it wouldn’t take much, Cuomo could offer the people of the Northeast not just a renovated Penn Station, but a completely renovated system, just like Tokyo’s only newer and shinier.
World Bank Stresses Public Private Partnerships for Infrastructure
PPP isn’t a new-fangled idea thought up by the kooky right. It has become standard practice almost everywhere in the world. Of course, it can be done wrong, think of Russia selling off assets at pennies on the dollar, or it can be right as in the new Jordanian Airport.
PPP isn’t a new-fangled idea thought up by the kooky right
Jordan Airport? As if anyone knows or cares, right? Jordan Airport just happens to be one of the favorite talking points of World Bank President, Jim Yong Kim. The reason is that over the past few years the World Bank has gotten into the game of PPP in a big way, so big in fact that Kim says he is reluctant to do projects that cannot attract a significant amount of private funding. In the case of the Jordan Airport, the World Bank provided some seed money and laid the ground rules for how the project would be financed and managed, then private money stepped in to build the project on government granted land.
This is a win-win-win, call it a triple win. Private capital realizes a reasonable rate of return, the government of Jordan got a sorely needed airport with no cash outlay, and the people of Jordan receive a portion of revenue generated into perpetuity, which under agreement set by the World Bank, must be spent on human development and social benefit.
Kim claims that one of the most important benefits of bringing private money on board is that it helps him and the World Bank to determine the future viability of the project. If private money doesn’t see any opportunity at all, then the project may well be misguided or need to be reworked in some of its basic assumptions.
Has Andrew Cuomo Heard of the World Bank, KKR, Carlyle?
So what part of this virtuous circle has escaped Cuomo’s attention? Has he never heard of the World Bank, KKR, Carlyle? Is he aware that the World Bank, generally regarded as backward, inefficient and sclerotic has not only opened its doors to PPP, but made PPP one of its ‘make it or break’ criteria for future projects?
Carlyle, KKR and many others have infrastructure funds looking for investments. Money is everywhere.
Cuomo seems to be afraid that the slightest move towards PPP will be met with cries of “asset stripping.” And he is probably right. But that is where he needs to dig deep, find what little courage wasn’t dissipated in sending his SOS, and take to the bully pulpit.
It is Cuomo’s job to explain to his constituents that a new day is upon us. The 19th century is over, even the 20th century is over…even China has place for private equity in their infrastructure projects. If Japan and Jordan can make it work, Penn Station can to.
Why Cuomo Shouldn’t Rely on Trump for Infrastructure Projects
Instead of sending embarrassing pleas of desperation to Donald Trump, who also most assuredly has a deaf ear to this matter, Cuomo should reach out to private interests. My gosh, if there is any town better situated to take advantage of private equity than New York, please show it to me.
Not only is New York home to great wealth, it is also a place of tremendous local pride and some of the most philanthropic people on earth. The fact that many don’t want to turn over even more tax dollars to the local and regional government has less to do with selfishness than with the nagging suspicion that most of that money will be poorly spent and siphoned off to any number of useless cronies.
Give New Yorkers an opportunity to invest in their transportation in an efficient, honest and transparent manner, while earning a small but reasonable rate of return, and they will leap at the chance.
A properly structured PPP for Penn Station would benefit all of the people of the entire region. It would be a tremendous benefit to everyone, daily commuters, i.e. working people most of all.
Cuomo needs to quit begging for hand-outs and begin structuring a PPP that will benefit the people and citizens he has been elected to represent. America is tired of poor infrastructure. There is plenty of money. We need Bold Leadership to unleash it and less finger pointing.