(AP) — The Indiana Toll Road lease may have paid off in the short term,
but a new study concludes it's a bad deal for taxpayers in the long run.
received $3.8 billion for leasing the toll road to a private consortium
for 75 years. The money from the 2006 deal helped pay for major repairs
and improvements on state highways. Indiana maintains ownership of the
road, and the ITR Concession Co. gets the revenue and has to pay for road
Gilmour, a government professor at the College of William and Mary in
Williamsburg, Va., says the state took an upfront payment at the cost of
millions of dollars in revenue from rising toll rates that would have gone
into the state treasury in later years.
transactions have important consequences for intergenerational justice
because they enrich current citizens and governments at the expense of
future citizens and governments by transferring future revenue to current
budgets," Gilmour says in his report.
state-commissioned study in 2006 determined that if the toll road remained
under public control, the net value of tolls over 75 years would be $1.92
billion. The state got $2 billion more than that from the lease.
says that study assumed toll road rates would increase at about the same
rate as they had in previous decades, The Elkhart Truth reports (http://bit.ly/RkXHGL
). That's not a valid assumption, he claims in his report which appears in
the November/December issue of Public Administration Review, a journal put
out by Indiana University's School of Public and Environmental Affairs.
current fiscal climate, states are demanding more from their toll roads,
and it is likely that Indiana would have, too," he writes. He goes on to
note that Daniels had increased tolls on the toll road prior to the lease
offering to make the lease more valuable, "showing that raising tolls is
not impossible or politically suicidal."
Under its deal
with the state, ITR Concession Co. has been able to increase tolls each
year since 2010 within certain guidelines, which will be loosened in 2016.
After that, Gilmour expects tolls to "keep rising at a brisk pace" to
allow the company to make a profit.
officials say the report is flawed in a response in Public Administration
the Indiana Department of Transportation chief of staff, defends the deal,
saying taxpayers won't have to pay for more than $4 billion in toll road
infrastructure costs because they'll fall to the operator instead of
Indiana, and ITR Concession Co. has already invested more than $300 in
improvements. He maintains that those factors weren't considered by
notes benefits credited at least partially to road improvements financed
by money from the deal, including a new Honda factory near Greensburg that
employs 2,000 people and an Amazon.com complex in southern Indiana that
provides more than 1,000 jobs.
And, he says,
the toll road lost money in three of the last five years it was under
"Prior to the
lease, the road had generated a total of only $254 million for other
purposes over its entire history," Woodruff says.
maintains there are better alternatives than the method used by Indiana,
such as structuring the deal to provide payments to the state over the
entire term of the lease instead of just at the beginning. Or, he says,
the state could simply have raised tolls on its own.
"It is easy to
see why current politicians view asset leases with up-front payments as
wonderful, allowing them to spend today without raising taxes or appearing
to incur debt," Gilmour says. "In short, the ITR lease is a great deal for
current residents of Indiana, but it offers little to those who will live
in Indiana in future decades."
from: The Elkhart Truth,