There’s a very interesting story lurking within Len Gilroy’s column, “Another One Bites the Dust.” Gilroy tackles the idea that privately financed public-private partnerships are a bad deal for motorists because the private sector can’t avail itself of tax-free bond financing like state and municipal governments can.
In the last few weeks, the Pennsylvania Turnpike Commission issued $177 million in tax-exempt bonds at a 4.89 percent interest rate. Transurban, the major investor in the
Bottom line: Transurban has a lower cost of capital than the Pennsylvania Turnpike Commission.
How did Transurban get such low financing? Writes Gilroy: “Because private investor-operators can tap into both federal tax-exempt financing vehicles and robust global capital markets, they can structure sophisticated financial arrangements at highly competitive rates that can neutralize the public financing’s supposed advantages.”
