The Governor has announced his intention to sell Indiana’s Toll Road to a foreign company for the next 75 years in exchange for $3.85 billion. Apparently this will pay for transportation construction for the next 10 years. What we do for the 65 years after that, I don’t know. Just poking around at the INDOT site, a trip along the length of the Indiana Toll Road costs a normal passenger vehicle $4.15. Under the proposed deal with the Spanish/Australian consortium, that toll will be raised to $8 through 2010. In 2010, the toll can be raised at least 8% and at least 2% per year after that. That means a toll of at least $35.25 by the time the lease expires.
I’m against selling off Indiana’s infrastructure. It’s just not a good idea to eat your seed corn. Mitch Daniels reminds me of one of those kids who gets set up with an annuity through a lawsuit from when they were a minor. They see an ad on daytime television from a company that will pay a lump sum purchase on the annuity. The kid is being ripped off, the company’s only paying 50% of what the annuity is worth, but he doesn’t care, he just wants a pocket full of money right now so he can buy that bitchin’ Camaro he’s had his eye on.
Another way to look at it, I suppose, is as an admission of failure by the Governor. He is telling us that this foreign consortium can achieve billions of dollars in efficiencies that his administration cannot manage. I figure there are three ways for this consortium to make money off of this: raise tolls, decrease maintenance, and increase efficiency. I haven’t heard the Governor talking about increased tolls or decreased maintenance, so he must think they can recoup their billions through efficiencies that he can’t.
(Of course, I think this is hogwash — I think the consortium will raise tolls beyond that which the State has the nerve to do directly and will skimp on maintenance. But the logical implication of what the Governor has said and what he hasn’t said leads to the conclusion that his administration does not have the competence to realize these billions without selling off our roads to foreigners.)
Update: Niki Kelly writing for the Fort Wayne Journal Gazette has a good article entitled “Toll Road bid $8.5 billion: Daniels pushes for quick action; others urge study”.
Critics point out that Daniels has had quite some time to craft his message on this; meanwhile, legislators are expected to digest not only the enacting legislation but also the 200+ pages of the contract and its associated schedules. They’re expected to do this quickly and to make a decision on whether to mortgage the Toll Road for the next 75 years as well as to whether to approve a bill that appears to have the effect of giving the Governor authority to mortgage much of the rest of Indiana’s transportation infrastructure.
Another item I noticed is that the foreign consortium who will be buying the Toll Road has relatively short concessions in the rest of the United States — 8 miles in Chicago, 4 miles in Detroit, 13.6 miles in Washington, D.C. The Toll Road runs the length of the state making it in excess, I believe of 150 miles.
I think an interesting figure to have would be to compare the dollars paid per mile per year. Assuming a 140 mile toll road at 75 years, the amount to be paid is about $362,000 per mile per year. By contrast, the 8 mile Chicago stretch was a $1.83 billion lease for 99 years which translates to $2.3 million per mile per year.
I couldn’t find information on the other holdings, but found this admittedly biased news release from a labor newspaper discussing labor issues involving the foreign consortium at the Detroit-Windsor tunnel.
On April 24, 29 Detroit-Windsor Tunnel workers were locked out of their jobs after refusing to accept a 3.5 percent wage reduction, a two-tier wage plan to drive wages down further and a $40 co-payment on prescriptions.
. . .
Macquarie Global Infrastructure Trust, an Australian financial institution, manages the tunnel for a huge profit. Their website boasts that operating costs (less than 15 percent) make up only a â€œsmall portionâ€ of the overall costs that are offset by toll income that is expected to be increased. The trust fund suggests that the way they will make more profits is by stripping the tunnel of its financial assets and then selling it.