By Terrence Dopp

Dec. 14 (Bloomberg) -- Pennsylvania Governor Ed Rendell, who begins his second term in January, said plugging a $1.7 billion shortfall in transportation funding will be his biggest challenge in the coming year.

The Democrat said within three months he will give lawmakers three options to fix the state's road fund: raise taxes, borrow, or lease the 537-mile (864-kilometer) Pennsylvania Turnpike.

``I'll make the recommendations,'' Rendell told reporters during a year-end interview in his Philadelphia regional office yesterday. ``The big driver in terms of money is going to be transportation. And obviously we'll have to make that decision.''

Rendell, 62, in a wide-ranging interview, also spoke of his hope to end an interstate dispute with New Jersey over dredging the Delaware River, his plan to expand health care to 1.5 million uninsured Pennsylvanians, the race for Philadelphia mayor and attempts to gain more control over the Pennsylvania Liquor Control board.

Looking back at the past year, Rendell said he counted statewide support in his re-election bid as proof the former Philadelphia mayor has moved beyond a regional politician. He also cited as successes legislation that will increase the state's minimum wage to $6.25 an hour next month and $7.15 by July, from the current $5.15; and his ``Cover All Kids'' health- care initiative.

The governor easily defeated Republican Lynn Swann, a former Pittsburgh Steelers wide receiver, in November, maintaining Democratic control of the nation's sixth most-populous state.

Road Funds

Pennsylvania needs an estimated $1.7 billion in funding for mass transit and repairs to roads and bridges. Converting the Pennsylvania Turnpike, which stretches from the Ohio border to the Delaware River, to a for-profit venture is one of several options under consideration. The state is scheduled to open bids Dec. 22.

``The Pennsylvania Turnpike is the granddaddy of them all because of mileage and ridership,'' Rendell said. ``It's the big enchilada of monetization and leasing.''

Earlier this month, Rendell said the state received informal bids ranging from $2 billion to $30 billion. A bid of $2 billion would likely be overlooked, Rendell added, but at $10 billion and above the interest would be peaked.

Similar transactions in Indiana and Chicago brought in more than $5 billion combined. Macquarie Infrastructure Group and Cintra Concesiones de Infraestructuras de Transporte of Madrid, Spain, the firms whose joint bids won the leases in Chicago and Indiana, are among those to express interest in the Pennsylvania roadway, Rendell said.

Pennsylvania neighbor New Jersey has hired UBS AG to study its efforts to examine the lease of development rights at commuter rail stations, selling the New Jersey Turnpike and its $2 billion state lottery. UBS in a report said nationwide governments have 70 potential privatization projects in the pipeline and urged the Garden State to bring a ``pioneer project'' to the market quickly.

To contact the reporter on this story: Terrence Dopp in Trenton, New Jersey at at This email address is being protected from spam bots, you need Javascript enabled to view it .