Rendell employer gets state contract

| Tuesday, Dec. 6, 2011

HARRISBURG -- Republican Gov. Tom Corbett's administration hired a New York-based investment banking firm that employs his Democratic predecessor to consider which parts of state government could be privatized.

Former Gov. Ed Rendell, whom Corbett succeeded in January, is a part-time adviser to Greenhill & Co., a global firm that advises corporations, institutions and governments on mergers, acquisitions, financing and restructuring. Corbett inherited a $4.2 billion state deficit, which lawmakers closed in the state budget without raising taxes. But revenue still lags.

A spokesman for Greenhill and a spokeswoman for Rendell on Monday said he is not involved in the Pennsylvania project.

Gary Miller, a spokesman for Corbett, said Rendell's involvement in the firm had no bearing on the decision to hire Greenhill.

"Gov. Corbett decided to go with the company he thought would work most aggressively for taxpayers," Miller said.

The firm will work with a privatization commission that Corbett created.

Matthew Brouillette, president of the Commonwealth Foundation and a commission member, said Corbett gave the group a "broad mandate" to look anywhere in state government for potential savings through leasing of assets or private management -- with the exception of privatizing the employment of prison guards.

But Democratic Rep. Joseph Preston of East Liberty says privatization has become a cliche. It's a panacea that proponents tout, he said, and often falls apart when people examine details. Yet Preston isn't totally opposed.

"You have to have a mixture," he said. "Sometimes a public-private partnership would be beneficial."

Corbett thinks government hasn't used the idea enough.

"Many people may not recognize it, but privatization has been successful in government for many years. From snow removal services to social services, private job-creators have been doing work that government bodies simply could not do without an increased cost to taxpayers and a drop in efficiencies," Corbett said in September when announcing his commission.

"Too often, debates over privatization fail to recognize this simple fact: it's already working to the benefit of taxpayers," he said.

The state will pay Greenhill $150,000 for three months, and negotiate any fee beyond that time period, said Eric Shirk, a Corbett press aide.

Bloomberg News said the company will help convert assets and services to cash. The company will work with the privatization task force to study the possible sale, lease and private management of state assets.

Corbett advocates selling the state-run liquor system. Pennsylvania Financial Management recently completed a study that concluded auctioning wholesale and retail store licenses could yield $1.6 billion. That study cost $275,000, Miller said.

"How many firms do they need to do that?" said Preston.

It's not clear to what extent Greenhill will work on liquor privatization; the project proposal from the governor's office said the firm would not work on that issue.

Corbett's privatization task force was first told not to include liquor issues, but Corbett recently signaled he wanted it to do so because it's unlikely the Legislature will resolve that matter before the end of the year.

Greenhill hired Rendell in February for advice on infrastructure deals. He is "focused on expanding Greenhill's client advisory activities, with respect to public-private partnerships, infrastructure projects and advising governments on a wide range of financial matters," company spokesman Jeffrey Taufield said.

Rendell tried to lease the Pennsylvania Turnpike and received one bid for $12.8 billion in 2008. Lawmakers reacted coolly to the idea of a long-term lease or sale.

The turnpike apparently is not included in assets Corbett wants to examine, an official said.

The Pennsylvania project manager for Greenhill, Robert Collins, worked for Morgan Stanley on Rendell's proposal to sell the highway.

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