Toll Road lease full of holes

February 16th, 2006

toll roadYesterday, the South Bend Tribune printed a guest column I wrote regarding my concern with provisions in the proposed contract to lease the Indiana Toll Road:

Contract to lease the Indiana Toll Road is full of holes
MICHIANA POINT OF VIEW
STATE REP. RYAN DVORAK

Governor Daniels’ plan to lease the Indiana Toll Road as part of his “Major Moves” road funding proposal has been greeted with a great deal of public concern. Many of my constituents have expressed their disapproval of the idea, and have asked for the details to be explained more clearly.

After dealing with the plan in the Legislature, I also have serious concerns. Now that we have been able to read the Toll Road contract, many potential problems have become obvious.

First, one section of the contract specifically refers to the deal as a “sale.” This designation is necessary for Cintra-Maquarie* to take advantage of tax breaks they will receive as part of the deal. Cintra-Maquarie is the Spanish/Australian financial consortium that has bid to operate the Toll Road. No one knows how much these breaks will cost taxpayers in the end.

Second, the Governor has stated that Cintra-Maquarie will be required to spend $4.4 billion in maintenance over the course of the 75-year contract. That is not true. The contract says that Cintra-Maquarie is responsible for maintenance, but nowhere is the $4.4 billion figure mentioned. In fact, no dollar amount is set forth in the contract.

Third, the Governor has stated that the operator will be held to strict maintenance standards, and even the amount of time in which a dead squirrel must be removed is spelled out. But that is not true either. The contract does spell out criteria for maintenance, but there are no provisions for monitoring maintenance quality, and no penalties for failing to meet the standards.

Fourth, the Governor has stated that he personally put a provision in the contract that would require a 90% “Buy Indiana” guarantee from the operator. But that is also not true. The contract only refers to a 90% Buy Indiana “goal” on the part of the operator. There is no provision for monitoring that goal, and no penalties for non-compliance.

The financial payout from the contract is $3.8 billion dollars. That is unquestionably a huge sum of money. However, it needs to be weighed against the potential revenue the Toll Road could generate over the course of 75 years.

The Governor has already committed to doubling tolls – whether or not the contract is signed. That means the annual income from tolls will be about $160 million.

The contract allows the operator independently to increase tolls even further every year. Assuming a potential annual increase of 5% - which is allowable under the contract – the Toll Road would generate $121 billion over the course of the 75-year deal.

That means we are being asked to sell $121 billion over the long term for $3.8 billion up front.

The problem is, we have no objective way to determine if that is even close to a good deal. Cintra-Maquarie has spent months analyzing their proposal. They have had teams of accountants and actuaries poring over the Toll Road and our financial records. They know that they will be getting a good deal.

Indiana has paid at least $20 million to Goldman Sachs to serve as “advisors” in this process, and millions more to out-of-state law firms. Unfortunately, whatever recommendations or analysis the Governor received is unavailable to the public. It is even unavailable to the legislators who have been asked to vote on the legislation.

The legislation itself is another problem all together. HB 1008 not only allows the Governor broad authority to sell the Toll Road, but also to potentially create new private toll roads all across the state.

The public and the Legislature have only had a few weeks to examine this proposal, and almost no access to any of the financial information.

In Harris County Texas, the local government there is considering a similar privatization plan for their roads. However, that one county alone has set aside a million dollars and six months for a public study of the proposal.

Indiana residents deserve the same level of transparency, and the same financial responsibility.

Most people would agree that raising money for infrastructure improvements is critically important for our state. However, we should also be able to agree that such a long-term, potentially risky program deserves more scrutiny.

* “Cintra-Maquarie” is spelled correctly here - it was misspelled in the Tribune.

Entry Filed under: Transportation

3 Comments Add your own

  • 1. Masson’s Blog - A C&hellip  |  February 16th, 2006 at

    […] This whole process has been bass ackward. Solicitation for bids first, followed by a request for authority to do what they requested bids for, with the whole process done in secret. Meanwhile, the Governor has misrepresented what the terms of the proposed lease actually are (no requirement specifying at least $4.4 billion in maintenance, no enforcement mechanism for maintenance standards, only a 90% Buy Indiana “goal” rather than a requirement.) All of this the Governor is trying to ram through the legislature with heavy pork for waivering Republicans in affected counties. […]

  • 2. Dean Blackshaw  |  February 16th, 2006 at

    Why aren’t there headlines all over the state saying, “Governor Daniels Lies to Public on Toll Road Privatization!”?
    If a private citizen committed an act such as this, they would be metaphorically lynched by the Media.

  • 3. Lisa Smith  |  February 16th, 2006 at

    Thank you for your insight and research! We need more legislators willing to do the math and take on Daniels to fight the wholesale giveaway of our public assets!

    Kudos!

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